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Lessons from COVID-19: A framework for operational resilience and sustainability

13 Jan 2021

This article reviews financial services lessons from the pandemic and explores ways firms can fortify their operations against future disruptions and black swan consequences.

The world continues to reel from massive and synchronized economic upheaval as a result of COVID-19. This historic, unforeseen disruption lay bare financial institutions’ operating challenges and inefficiencies. Most organizations quickly focused on short-term strategies to resume and maintain safe operations. Ultimately, however, I believe it will be Resilience by Design through a robust, disruption-proof operational framework that will enable the most long-term benefits and business sustainability.

This article reviews financial services lessons from the pandemic and explores ways firms can fortify their operations against future disruptions and black swan consequences.

Pandemic sparks disruption-readiness learning and strategies

Digital transformation

As lockdown conditions limited personal interaction as early as Q1 2020, the shift to digital channels was swift, particularly for financial services providers. More than a third of consumers (36%) migrated to providers with better digital services.

Challengers and neobanks had the upper hand thanks to agile, technology-led models that allowed them to swiftly roll out new offerings and meet customer needs adeptly. They were able to sustain their business with low-cost, hyper-personalized products and services. Similarly, incumbent banks that had implemented a digital platform were armed with the necessary survival tools.

  • UK challenger bank Starling launched a Connected Card feature to allow approved users to pay for goods for those in quarantine.
  • At the height of the pandemic, remote staff answered 80% of customer service calls for Mumbai-based Axis Bank and, in July 2020, the firm unveiled Automated Voice Assistant AXAA, an AI-powered bot that handles customer calls in multiple languages.

Shifting to asset-light models

One of the toughest obstacles organizations faced was managing fixed costs and physical infrastructure. Only 20–30% of a bank’s cost basis is flexible, which makes it difficult to update cost structures as requirements quickly change.

Within an open FinTech ecosystem, opportunities exist for banks to build asset-light and cost-optimized operating models. Firms that leverage such models can laser focus on their core competencies while establishing external partnerships for other activities across the value chain – what Capgemini has defined as Open X, a seamless exchange of data and resources to continually improve customer experience.

  • German all-digital challenger bank N26 is asset-light but data-heavy. It managed to show double-digit growth even during COVID times, majorly due to a decrease in cash transactions.
  • French telecom provider Orange leveraged its ecosystem to partner with FinTechs Franfinance, and Moneythor – as well as BigTechs, including Google Cloud – to provide secure contactless payments and personalized, omnichannel UX.

Building cyber-resilience

With the increasing load on banks’ IT networks and the rise in remote working, a robust, attack-proof network is essential.

Cloud services reduce IT costs and bolster the efficiency of computing resources. The cloud can boost cyber-resilience by working continuously under adverse conditions and recovering rapidly from incidents with minimal business interruptions.

Business cloud technology company Infor partnered with Singapore-based DBS Bank to enable greater transparency into complex supply chains and provide quicker and more cost-efficient financing to corporates.

Cloud solutions are essential for digitization and can manage data and enable safer, faster, and better remote working.

Workforce transformation

Redefining roles and appointing specialists to critical task teams are vital in today’s anything-can-happen world. As yesterday’s status quo is relegated to business history books, now is the time to upskill and re-skill the financial services’ talent pool.

  • Larger firms can redistribute work via an internal project marketplace to encourage team diversity, skills development, and crisis-handling know-how.
  • As banks’ digital footprint expands, a digitally agile workforce with a growth mindset and a scope of continuous learning is the need of the hour.
  • As a hedge against today’s global uncertainty and economic fluidity, a dedicated risk/crisis management task force of experienced employees can concentrate on risk mitigation and a pre-emptive action plan.

At the peak of an unforeseen crisis, very few factors may be controllable. However, strategically implemented operational resilience initiatives can help stabilize internal processes and keep organizations up and running.

Indeed, surviving pandemic after-shocks is essential, but firms must not lose sight of the bigger picture – building a modern core infrastructure that supports a robust and disruption-proof operating model.

While I recommend investing in workforce transformation and a digital, asset-light infrastructure that is cyber-resilient, what disruption-proofing steps have you taken to safeguard your firm’s operating model?

If you would like to discuss the topic further, please contact me via social media.

The author would like to thank Richa Bubna, Shivani Joshi, and Tamara Berry for their contributions to this article.