The Management Consultancies Association (MCA) warns in a new report, The New Landscape for Financial Services, that many financial services firms are poorly equipped to respond effectively to extensive new regulation emerging in the sector.
The MCA also calls on the authorities to move as quickly as possible to secure an improved and stable regulatory environment, as this is a key ingredient needed for the return of trust and confidence to the sector.
The New Landscape for Financial Services identifies the key challenges facing financial services firms in the wake of the Turner Review, the recent government White Paper, the Walker Review and other recent initiatives, and recommends how firms can respond.
Alan Leaman OBE, the MCA’s Chief Executive, said:
“Many financial services firms are poorly equipped to respond to the new wave of regulation. Many lack good governance, processes and key skills. IT systems are critical, and will need updating to meet the future reporting requirements of the organisation and the regulator. And financial institutions must, while undertaking all this work, ensure that standards of customer service continue to rise.”
“Matters have been made worse by the recent tug-of-war between the UK regulatory authorities which has harmed the sector and Britain’s reputation. Political uncertainty, with the possibility that a new government might reopen many issues, means that firms must plan for further change as well as immediate reform. Our plea is that the authorities move as quickly as possible to secure an improved and stable regulatory environment; this is a key ingredient if trust and confidence are to return.”
The MCA developed the report with a team of senior financial services experts from its member firms across the consulting industry. Key areas include:
- Getting governance right – ensure the voice of risk is represented in the boardroom.
- Developing risk mitigation structures – elevate the role of the risk professional; employ non-executive directors with relevant financial experience; rethink pricing of internal capital and products, and pay structures.
- Improving data-management capabilities – involve the CIO from the outset; employ systems which can configure information at the click of a button to meet the organisation’s and regulator’s needs.
- Achieving the right skills mix – identify the new skills required by the regulatory agenda; tailor recruitment and training programmes to match these.
- Dealing with the regulator – involve the regulator early; ensure that an individual is responsible for and has oversight of all of the firm’s interactions with the regulator; ensure that the regulator receives “one version of the truth”.
- Coping with new competitors – insulate your brand from the damage created by the financial crisis; invest in innovation; focus on customer’s evolving needs.
- Remaining both cost efficient and compliant – understand which parts of the business add the most value; ensure that projects are properly co-ordinated; focus on outputs; rebuild trust.