Although capital markets have largely weathered the Covid-19 storm, the pandemic has exposed stress points which will be a main focus for regulators and banks in the future. To prepare, financial institutions should start laying the groundwork now in terms of reconfiguring their business models, according to a new report from consultancy Capco – Capital Markets in 2021, 7 Key Themes.
The paper highlights seven key areas that need to be addressed. First on the list is the reassessment of IT infrastructure to ensure its fit for purpose and modernised to leverage opportunities presented by cloud, artificial intelligence and data analytics.
Greater attention also needs to be paid to growing revenue and market share. Instead of waiting for the pandemic to recede, the paper notes that firms need to currently tackle shifting revenues, optimisation of capital deployed, quality of client service and rising infrastructure costs.
In addition, the focus should be greater on the value of digital capital markets. The paper says the successful adoption of the digital toolkit requires changes to delivery models along value-stream lines, as well as a significant reskilling of the workforce for both delivery and ongoing service provision.
Making data work for enterprise should also be a priority. Harnessing integrated and quality datasets is key to derive value from enterprise data and enhance competitive differentiation, automation and operational resilience.
Regulation will be an ongoing burden but effectively managing this could provide a competitive edge. The paper points out that firms should view regulatory change initiatives as an opportunity to differentiate themselves from their peers.
Banks should also re-evaluate their next generation location strategy. “Remote working will allow some banks to further reduce their real-estate footprint in metropolitan centres, but location strategies will continue to evolve as organisations optimise along cost, expertise and growth lines,” the paper says.
Last but certainly not least is the increasingly material shift to the cloud as the dominant compute and storage model. The paper notes that maximising these benefits in a safe, resilient and secure manner demands appropriate care and attention.
“This is the moment to reassess and reimagine operating models through new technologies and new ways of working, tapping into the cost and risk benefits offered by automation, digital enablement, data insights and next-level operational resilience,” says Owen Jelf, Global Head of Capital Markets at Capco.
He adds, “The winners who emerge from the pandemic will be those global markets players that recognise and embrace the opportunities to transform how they operate. The year ahead will be characterised by an acceleration of transformation efforts to remediate deficiencies that have largely been obscured and made less prominent during the prolonged bull market of the last decade.