Tag: COVID-19

How Changing Demographics and the Pandemic are Influencing Wealth Management | Blog

Millennials and Gen Xers currently account for a majority of the earning population worldwide. As a result, the largest demographic cohort looking to manage wealth or create retirement income is shifting from baby boomers to these population segments (see the exhibit below), which are generally more involved, aware, and digitally oriented than preceding generations. The new investor generations demand information at their fingertips, anytime, anywhere – something impossible to achieve with traditional wealth management methods.

Exhibit: estimated shift in wealth from baby boomers to Gen X and millennials from 2016 to 2046

estimated shift in wealth from baby boomers to Gen X and millennials from 2016 to 2046

The impact of COVID-19 on wealth management

The COVID-19 outbreak has brought some key challenges in wealth management to the forefront. First, it has highlighted gaps in traditional wealth management methods, accentuating the pressing need for digital transformation. COVID-19-induced restrictions have severely impacted agent availability and as well as customers’ ability to visit advisers. Firms that can leverage digital tools to balance business continuity challenges with customer expectations will be able to differentiate themselves from others in the current climate.

Second, revenue erosion resulting from the COVID-caused recession, combined with an increase in business costs, may drive consolidation in the industry, as smaller firms will find it difficult to stay afloat. We are already seeing a shift in asset classes’ preferences. High Net Worth Individuals (HNWIs) and Ultra HNWIs (UHNWIs) will be impacted, as the wealth managers’ diverse portfolios are impacted. More than half of respondents to a UBS Group AG survey of wealthy investors said they feared not having enough liquidity in the event of another pandemic, and a similar percentage expressed worry about leaving sufficient money to their heirs.

What wealth managers need to do

Wealth managers need to increase their focus on services such as workforce management, operations continuity, customer communications, digital, goal-based planning, and portfolio impact advisory to persist through the current challenging situation. At the same time, they shouldn’t lose sight of the perpetual risks to business, such as cyberattacks, money laundering, and other security threats. Wealth management firms will need to ensure – even in the absence of physical interaction and with limited agents – that leadership maintains the confidence of both customers and employees.

Digital will remain the overarching theme to address these challenges. In recent times, Business-Process-as-a-Service (BPaaS) for back-office operations and robo-advisory have gained traction, though the solutions’ scale and magnitude continue to remain low. While BPaaS helps firms bolster their critical operations,  technology leverage can be increased further via more digital products, automated cybersecurity systems, smart portfolio creation, trade analytics, and trade simulations for efficiency improvements, productivity gains, bandwidth creation, and customer satisfaction in the next normal.

As wealth management firms look to achieve these objectives, they will require support to quickly and efficiently adopt digital, set up the required infrastructure, move workforce interactions to virtual mediums, revamp operations and traditional workflows to minimize human intervention, and hedge location-based risks. They will have to carefully prioritize tasks and implement digital step-by-step, so as not to abruptly overhaul traditional methods and processes. For this, they could opt for off-the-shelf products or customized solutions, or choose an external provider to do it all.

To tide themselves over the crisis and prepare for what’s to come, we recommend that wealth management firms:

  • Instill confidence in their clients and employees and shield themselves against other risks to survive this unprecedented situation. It will also be vital to take additional precautionary measures to maintain investor confidence. Given investor loyalty to certain firms, it would be useful to focus on maintaining the customer base rather than acquiring new customers
  • Align themselves with and adopt emerging digital industry trends, including robo-advisory, automated workflows to close sales, remote due diligence, and subscription-based advice models
  • Ease the pressure on their bottom lines by focusing on reducing cost-to-serve; automating their middle and back offices could serve as a starting point
  • Continually assess their investment philosophies; while COVID-19 is a crisis like no other, firms must draw lessons from previous crises to diversify their assets and maximize their investments in passive funds that make reasonable margins

At present, digital transformation is no longer a strategy to cater to a specific customer segment but the very means to survive. It will help meet customer experience standards and preferences in relationship management, query resolution, and communication. For employees, digital tools will enable more robust decision-making and goal-based planning for portfolios, as well as help monitor them real-time to enable faster turnarounds and higher returns.

Call Centers Show Bright Spot In COVID-19 Crisis | Blog

We just came out of one of the best economies in history, but we now face a recession brought on by the COVID-19 pandemic crisis. Even if there were a V-shaped curve to the recovery, it would not change a looming huge factor going forward: cost reduction is more important than ever before. Although lower cost was not the significant driver in creating value in the digital world, COVID-19 adds a new wrinkle to transformation because it exposed the underlying support for business processes. It set the stage for what is now an overwhelming impetus for companies to take on the risks of changing the way they do business.

Read more in my blog on Forbes

Scaled and Sustainable: How to Plan Your Global Business Services WFH Strategy | Webinar

60-minute webinar delivered live on Tuesday, June 23, 2020

Download and view the presentation

The future is now for Work From Home (WFH). While WFH is not a new concept, COVID-19 has dramatically changed the way global leaders look at the need for, and benefits of, WFH. As a result, scaled WFH is inevitable in the global services industry, even after COVID-19-related restrictions ease.

In this webinar, we will share insights you can use in developing your global business services (GBS) WFH strategy including:

  • Convictions on the future state of WFH adoption
  • Business case for scaled WFH adoption
  • Best practices for integrating WFH into delivery models

You’ll get answers to questions such as:

  • What is the business case for scaled WFH in a post-COVID-19 world?
  • How do you determine the scale and scope of work for WFH adoption?
  • What are the key elements of integrating WFH into the GBS delivery model?
  • What talent and operating model changes are needed to build a remote workforce for the future in GBS?

Who should attend and why?
This session will help leaders across organizations evaluate impact and uncover opportunities:

  • Global Business Services / Shared Services Center / Global In-house Center Executives
  • IT Executives
  • Strategic Outsourcing and Vendor Management Executives
  • Service Provider Executives

Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live presentation) containing the link to the slides and on-demand playback.

Presenters
Rohitashwa Aggarwal
Practice Director
Everest Group

Shirley Hung
Vice President
Everest Group

Eric Simonson
Managing Partner
Everest Group

SLAs Constrain Improving Productivity | Blog

Three years ago, I wrote some blogs stating that Service Level Agreements (SLAs) are dead. Unfortunately for businesses, SLAs are still around – they’re like zombies. Companies realized for many years that SLAs don’t work. They are not just ineffective; they constrain companies from getting to their goals for services. But, like zombies, they did not die. Why? Because there was nothing better to use in governing service agreements. Until now. In this blog, I will explain what works better than SLAs, and why.

In digital service models, companies need to move to a new set of metrics. Metrics that focus on productivity. Metrics that focus on velocity. Fluid metrics that allow companies to adjust the target to a changing reality. Metrics that accurately affect pricing. Metrics that do not lock companies into old contractual vehicles that no longer work.

Read more in my blog on Forbes

Manage Productivity With Employees Working From Home | Blog

As economies open up after the initial COVID-19 crisis that forced people to work from home, we see companies exploring the prospect of integrating the work-from-home model as a part of their operations at least for an extended future and probably permanently. But there is a fundamental question that they must resolve about this model: How can we ensure employees will operate at a high productivity level going forward?

Read more in my blog on Forbes

Will COVID-19 Amplify Acqui-hiring and Help Companies Win the War on Talent? | Blog

COVID-19 is truly turning out to be the black swan event of our lifetimes – it will have profound near- and long-term consequences on talent markets around the world. The International Monetary Fund (IMF) recently noted that COVID-19 could contract the global GDP by 3 percent in 2020, causing the GDPs of 170 countries to shrink and making it the steepest downturn since the Great Depression of the 1930s. As discussed in our recent blog, Will COVID-19 Ease the Relentless War for Talent?, talent shortages will become even more acute and the supply-demand gap for emerging skills will further widen as companies undertake rapid digital transformation and adapt to the “next normal.” Against this backdrop, some firms are seeing this time as an opportune time to acqui-hire – or acquire startups primarily for their talent. We have been here before. Acqui-hiring tends to spike during and after economic crises. The early 2010s saw a flurry of acquisitions by Silicon Valley giants including Facebook, Google, and Microsoft, aimed at acquiring hot skills. We believe there will be a similar acqui-hiring surge in 2020, with multiples firms announcing plans to acquire emerging skills and accelerate their efforts to build niche capabilities.

Why do companies acqui-hire?

Mark Zuckerberg once said, “Facebook has not once bought a company for the company itself. We buy companies to get excellent people.” This sentiment highlights the premium companies place on good talent. Companies acqui-hire to leverage multiple advantages such as access to highly-skilled talent, reduced time-to-hire and training efforts, developing niche capabilities, and launching a business model. Facebook has plans to hire 10,000 additional FTEs in its product and engineering teams to tackle high utilization after the pandemic abates and to combat misinformation in advance of the U.S. presidential election in November. Amazon and Google are aggressively hiring product, design, and engineering talent. Apple CEO Tim Cook recently stated that the company plans to hire aggressively, just as it did after the 2008 financial crisis. With multiple startups facing reduced valuations due to the economic downturn, it is highly likely that a significant chunk of this demand for talent will be addressed through focused acqui-hiring. Additionally, we expect leading Indian service provider players supporting global services delivery, like Infosys, TCS, and Wipro, to accelerate their acquisition efforts to gain strategic capabilities and grow business inorganically. And Walmart Labs has announced plans to hire over 3,000 FTEs for its India centers, aiming to strengthen its India COE by hiring new talent and acquiring relevant startups. We are already seeing many acqui-hiring deals in 2020, a few of which we describe below. While not all were triggered by the COVID-19 aftermath, we expect the business and economic repercussions of the pandemic to accelerate this trend.
  • Google recently acqui-hired Superpod, an app that allows users to post questions and quickly receive answers from experts, to boost Google Assistant’s capabilities.
  • Tata Group-owned Titan Company, a traditional watchmaking firm, recently acqui-hired HUG Innovations to strengthen its smartwatches and wearables division, and plans to set up a development center in Hyderabad to cater to hardware, firmware, software, and cloud technology.
  • KPMG India acqui-hired Shivansh Solutions, an SAP consulting and implementation services provider, to augment its technology implementation practice, retaining Shivansh’s directors and the core team of SAP consultants.
  • Leading tech-enabled logistics marketplace, LetsTransport, recently acqui-hired and onboarded the team of a web and mobile app development startup, Pixlcoders, to strengthen its supply chain, technology, and applications divisions.
  • Alphonic Network Solutions, a leading mobile application development company, recently completed the strategic acqui-hire of Roaring Studios, a digital startup to augment its web and mobile app development.
As these deals indicate, acqui-hiring presents a great value proposition for companies to access highly motivated ready talent, augment existing offerings, and develop new capabilities. It also proves lucrative for startups, especially those that might be struggling with funding during an economic downturn. We are already seeing early signs of funding scarcity, with industry analysts reporting that total startup funding in New York City is down 48 percent from year-ago levels since the lockdown started in mid-March. Acqui-hiring can be a win-win for everyone. However, to ensure acqui-hiring success, companies must address critical factors beyond the usual legal and contractual due diligence.

What makes acqui-hiring work?

To make acqui-hiring work, companies must:
  • Explore cost-benefit trade-offs – While multiple acqui-hire opportunities may exist in the market, assess their strategic near- and long-term priorities, and shortlist startups that align with their firms’ objectives and address crucial talent-supply demand gaps.
  • Assess culture fit –Ensure that the acqui-hired talent, who usually possess an entrepreneurial mindset with a constant need to create, has the capacity to adapt to a systemized, rules-based corporate environment.
  • Evaluate employee attitude –Make sure that the relevant skills are accompanied by the right attitude to avoid potential attitude issues.
  • Ensure smooth integration – Properly manage the integration process to eliminate in-house talent’s apprehensions about, and potential resentment toward, acqui-hired team members.

The way forward

The economic aftereffects of COVID-19 will surely create some paradoxes. While on one hand startups may be challenged and job markets ravaged, on the other hand this time could present an opportunity to re-strategize priorities, revitalize operating models, build capabilities, and acquire the right talent. We believe companies that proactively realign their workforce strategies and tactically utilize acqui-hiring will emerge stronger and more resilient. Companies looking to acqui-hire as way to address emerging talent challenges must undertake the following steps to ensure effective outcomes:
  • Review the global workforce strategy and identify relevant talent supply-demand gaps
  • Identify and evaluate potential acqui-hire options
  • Undertake comprehensive legal and contractual due diligence
  • Develop a comprehensive roadmap for integration with the existing operating model.
We’d love to hear your thoughts on acqui-hiring as an effective talent acquisition strategy. Please share with us at: [email protected] or [email protected].

Is COVID-19 Accelerating Responsible Investing in the Financial Services Sector? | Blog

Climate risk discussions and regulations had been gaining great momentum in the past six months as there had been increasing pushes from regulatory bodies and central banks to start stress testing climate risk scenarios. While the discussions have been somewhat back-burnered due to the pandemic, they will begin again in earnest during the post COVID-19 recovery period. And they will jump to the top of financial institutions’ (FIs) risk management agendas, instead of continuing to be considered a CSR activity.

Why COVID-19 will accelerate ESG reporting

Given the erosion in investment value across asset classes over the last couple of months, investors are looking to get better returns, and Environmental, Social, and Governance (ESG) funds have performed better. Indeed, a Morningstar analysis of 206 responsible investing funds found that 70% of these equity funds outperformed their peers in Q1 2020.  As the social component of ESG brings to focus companies’ relationships with their employees and customers, the governance aspect will also gain attention. Dedicated risk committees and boards of directors will set the tone for firms’ communication and branding strategies. Another driving force will be the rising influence of millennial investors. As they move toward more socially responsible investing, firms that achieve high ESG scores will be the preferred choice for these investors. FIs won’t want to miss out on this growing segment and will look to align their portfolios accordingly to be an attractive investment opportunity. This change will spur the ESG reporting initiatives at these institutions and lead to evolution of the industry ecosystem as well.

Evolution of the industry ecosystem

FIs have ramped up hiring as they build their sustainability teams and task forces. Credit rating agencies and data firms like Moody’s and S&P have started to acquire climate risk analytics firms to enhance their coverage of ESG data reporting. Stock exchanges around the world are launching multiple ESG indices to measure listed companies’ commitment to ESG. Asset management firms are gradually incorporating ESG factors into their investment strategies while announcing divestment from industries that are considered problematic from an ESG reporting perspective. We are also seeing an uptick in the demand for sustainability consultants at financial services firms, with more than 15% year-on-year growth as demonstrated by job postings for sustainability roles in the financial services industry.

Current challenges for financial institutions

No clear framework has yet been institutionalized for FIs to start reporting their climate disclosures. Only broad frameworks exist that can serve as a baseline for them to start initiating stress tests and checking their exposures. Further, they face two major problems with consolidating and analyzing the right data sets. One is identifying the right data sources and the kind of data needed for analysis. The other is defining the methodology they should use to analyze these data sets. FIs’ existing analysis models and scenarios have been built with a timeline of five to 10 years. But incorporating climate risk into them requires scenario planning that looks 15 to 25 years into the future and into past data records as well. So, what are the implications for FIs as climate talks and green investing discussions gain momentum?
  • Uptick in demand for data science teams and AI/machine learning themes FIs will need to set up extensive data warehouses and data lakes to analyze large and complex data sets to make efficient decisions. AI and machine learning themes will help in identifying correlations and anomalies in the comprehensive company data. There will be a rise in demand for AI programs and NLP algorithms that can help in assessing these data points.
  • Talent conundrum for executing sustainability initiatives In addition to the technology talent needed to tap into the data sets, there will be demand for sustainability consultants, ESG portfolio managers, and analysts who can act on the data insights. FIs will need to tap young talent from premier institutions and grow in-house talent to scale the talent landscape for sustainability initiatives.
  • Incorporate ESG data from partners into risk management FIs will have to embed ESG analysis into various facets of risk management like credit risk calculations and use it to identify and quantify the impact of emerging risks. The need for comprehensive climate risk data is fueling the emergence of ESG ratings data by start-ups and credit ratings firms like S&P. Partnering with one of these vendors will provide access to these scores that FIs can incorporate in the broader analysis.
  • Investments in communication and branding initiatives Given the rise of millennial investors who prefer to align their investments with their values, FIs will need to substantially invest in building a socially responsible brand to bring forth the right narrative. Thus, FIs will need to review their portfolios to align with ESG values and bring in the right industry leaders to drive the sustainability agenda.
  • Increased interest in service providers’ carbon footprints Increasing pressure on FIs for responsible and green investing will soon start to impact their sourcing decisions. Outsourcing and vendor management teams should start to assess their vendor portfolios on sustainability considerations like green procurement policy, waste management, carbon management, etc.

Everest Group’s take

Purpose-built platforms that are digital and cloud-ready for FIs to cost effectively scale their ESG strategies are currently in their nascent stages. There’s an urgent need to fill this gap. There’s no single source of truth for the ESG data and the methodology to analyze it. FIs are unsure which data scores to utilize in their analysis and are increasingly setting up in-house ESG platforms to analyze ESG data and manage the end-to-end product value chain. This is a greenfield opportunity for vendors to gain first-mover advantage in this dynamic scenario and onboard FIs onto their platforms. The current health crisis has only reinforced the need for sustainable investing, and governments have mobilized efforts to stress test their financial services sectors. As supply chains across the world are disrupted, investors are looking for safe havens in the form of companies that can weather such crises. FIs need to act fast to capture market share from the new generation of investors and tap into returns from ESG funds or risk being disintermediated in the long run. What’s your take? What technology and data analytics challenges have you faced in your ESG journey? Please write to us at [email protected] or [email protected] to share your experiences, questions, and comments.

How COVID-19 Will Impact IT Services in the Banking and Financial Services (BFS) Industry | Blog

The BFS industry started 2020 in a cautiously optimistic mood, hoping for a rebound in global economic growth. But then the COVID-19 outbreak swept the world into a state of emergency. The current challenge is far greater for BFS firms than was the Great Recession, as they need to crack the code of how to deal swiftly with both demand- and supply-side shocks. In this scenario, banks face a dual mandate of:
  1. Playing a central role in stabilizing the economy
  2. Ensuring business continuity to maintain normal operations

Breaking down the impact of COVID-19 on the BFS IT services market

To illustrate the variation in pandemic impact across different BFS lines of business (LoBs), we analyzed the severity of impact and speed of recovery for each line. Our assessment of severity of impact involved modeling factors such as the COVID-19 revenue and profitability impact from both a near-term (3-6 months) and a medium-term (6-12 months) perspective. We gave more weight to the medium-term impact as the near-term uncertainty makes the modeling of impact very difficult. And we mapped impact severity against the speed of recovery by gauging the time it will take for these LoBs to bounce back to the pre-crisis state; this is a function of the health of these business segments before the crisis, as well as expected changes in customer sentiment and buying behavior once the crisis is over. Our analysis found that BFS LoBs cluster in four zones, each of which exhibits unique characteristics and will face a distinct set of technology and IT services implications. Taking it counterclockwise from the bottom right quadrant:
  1. Aggressive cost take out – Lying on the bottom right, the LoBs in this zone will face the highest degree of impact; we also expect their pace of recovery to be painfully slow. To aid in their recovery, these LoBs should rethink their operating models and get back to basic principles: focus on the core business of provisioning financial services, think of delivering more value to customers, and move away from non-core elements like engineering or IT services innovation.We expect to see heightened asset-heavy deal activity in this segment, as these LoBs will need cash to invest and rejuvenate growth in select focus segments. And they’ll be looking for financial engineering support through activities such as takeover of legacy assets, shared services carve-outs, and even signing of long-term integrated technology plus operations support engagements that are centered around specific business outcomes.
  2. Modernization –This zone at the top right comprises LoBs that we expect to rebound faster to pre-crisis growth levels. From an IT services standpoint, we expect these LoBs to focus on cost savings in the near-term by seeking price cuts on rate cards and pausing some change initiatives. However, soon enough, these segments will get back to modernization initiatives. Hybrid cloud will play a critical role, as these LoBs will place significant emphasis on digital enablement to fuel their long-term growth.
  3. Growth – Odd as this may sound, we expect these business segments to benefit from the crisis in the near term. For example, as governments across multiple geographies have announced relief packages for small businesses that are facing unprecedented economic disruption, banks are needed to facilitate these SBA loans. Financial services firms that have proactively invested in creating a scalable infrastructure and stronger business continuity plans are better positioned to take advantage of this opportunity by generating significant fee income. Enterprises with large LoBs in this zone will also be on the lookout for inorganic expansion and take advantage of the reduced evaluations. Enhancing customer experience, driving product innovation, and improving agility to quickly respond to market demands will be the key investment themes.
  4. Transformation – This zone comprises LoBs that will recover most slowly from this crisis. Hence, these business segments need to rethink their business models and diversify their revenue mix to sustain themselves in the long term. For instance, retail/consumer transaction banking will face profitability challenges due to reliance on interest-based income, and some of the fee-based commoditized businesses, like retail wealth management, have been under stress due to downward fee pressures. As a result, enterprises with large LoBs in this zone will look to transform themselves and invest from a long-term growth perspective.
  COVID 19 impact vs. response matrix across BFS lines of businesses

Implications for BFS enterprises

At an industry level, we expect BFS firms to completely focus on running the business initiatives in the near term. Our research suggests that banks have put nearly 60 percent of change projects on hold. Most of these suspensions are temporary and will restart once the crisis abates; however, we believe that the prioritization and nature of these change projects will mutate due to a shift in business priorities and budgets. As an immediate response to the current situation, designing and executing customer assistance programs should be the top priority for BFS firms. In the medium term, the firms’ focus should gradually shift to modernization of legacy systems that slowed down banks’ agility and ability to respond to this crisis. Post COVID-19, BFS firms will need to reimagine their products, pricing, and channel strategies to fulfill evolved customers’ expectations. Our recommendation for BFS enterprises is to cautiously evaluate their exposure across each of their LoBs and carve out a holistic IT strategy that takes into account not only the near-term implications, but also their long-term business philosophy. Please share your views on the impact of COVID-19 on the BFS industry segments with us at [email protected] and [email protected].

Capturing Business Advantage After The COVID-19 Crisis | Blog

The crashing global economy caused by the COVID-19 pandemic now wreaks havoc on businesses. But the pandemic eventually will end, and there will be compelling opportunities at that time. As I explained in my prior blog, companies need to take steps now that enable them to accelerate through the pandemic curve so they can grab opportunities when the pandemic ends. In this blog, I’ll detail how to establish the necessary infrastructure that enables surviving a recession and thriving after the pandemic. This infrastructure is a top priority. The pandemic is causing a pause in commercial activity for the next few months. But once the pause is over, the underlying fundamentals for moving to digital at scale are still positive. And it will happen quickly at that point – for companies that have the infrastructure for high velocity and productivity. Read my blog on Forbes

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