Regulatory forces are the most obvious driver of change in financial services. There is no doubt that the Mortgage Market Review, Basel III, the Independent Commission on Banking, the Retail Distribution Review and other regulatory factors have added substantial cost and complexity to running bank operations.
Add in the pressures faced by financial services companies' customers, weighed down by recession and instability, and it hardly seems necessary to seek out additional projects for organizations to tackle.
There is one problem. Many of the natural responses to such pressures are missing from the sector. Take M&A activity. Throughout periods of change, banking and insurance mergers (and sometimes demergers) have forced organizations to re-examine how they work. But with financial services M&A in the doldrums - and many organizations now part-owned or financed by the state - those naturally evolutionary forces are more muted.
(Bear in mind, many financial institutions might have hoped to sell divisions rather than address potentially thorny integration or rationalization projects. If buyers cant be found, addressing their infrastructure in a way consistent with group approaches becomes critical.)
Of course, many banks are still undergoing important changes, responding to market pressures, new technologies and shifting strategies. Lloyds, for instance, is part way through a long-term journey of simplification - prompted, in part, by its previous acquisitions - which includes massive supply chain savings. But for many institutions, there's less pressure to examine every aspect of their business to see how well it fits together.
But true transformation - the kind of change that will allow financial services players to refocus on growth rather than simply watching the cash - needs a holistic approach. It demands that every process is examined and questioned, whether its how transaction risk is managed or the robustness of a small software supplier.
Only then can management have confidence that every piece fits together in pursuit of their broader strategic aims. When the change is all external, businesses are always vulnerable. When an organization is proactively engineering change from within, it stands a much better chance of exploiting and profiting from those external forces.
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