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The Great Digital Reboot

Are you Ready for The Great (Digital) Reboot?

The COVID-19 pandemic, while a massive upheaval, also represents a significant opportunity for digital transformation as NNAs, LOUs, CSDs, and Exchanges prepare to go back to work. The reality is, work will never be the same, and moving from legacy work processes to digital is no longer just a "nice to have" - it's critical to your ability to restart, regain profitability and engage in the next wave of growth. 

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At first glance the impact of the COVID-19 pandemic looks very similar to the financial crash of 2008. Businesses shut down, many forever. Millions of people out of work. And no clear end in sight. Some parts of the global trade and commerce ecosystem haven’t experienced this level of collapse since the post-war years or the great depression of 1929. The World Trade Organization (WTO) expects global trade to fall by as much as 32% this year, with the International Monetary Fund predicting that global GDP will contract by almost 6%. To put this in perspective, the global GDP contracted by about 3% during the global financial crisis of 2009.

But dig a little deeper and you will see that financial markets, while battered, have been far less impacted than other industries. Stock markets around the world are stable and climbing. Interest rates remain at record low rates - in some cases less than zero. Financial liquidity is at an all-time high, buoyed by cash injections at the national and world bank level. The U.S. Treasury Department plans to borrow nearly $3 trillion between April and June to bankroll the federal response to the coronavirus pandemic, with much of the money earmarked for small businesses and individuals to help them stay solvent. In the EU, the European Commission has on unveiled a proposal to bring to €750 billion ($826 billion) the firepower of the “recovery fund” that will be created within the European Union budget to help member countries recover from the crisis. Clearly governments and banks alike have learned from the last financial crisis and recognize the need to keep money moving through all levels of the economy.

It’s no surprise then that financial institutions are already working towards a "Reboot" - coming back online as quickly as possible, with as much capacity as possible. The biggest challenge - and opportunity - for businesses will be how to work around the limitations of social distancing. Any business activity that involves human labor will be fundamentally changed in the post COVID-19 world. 

What does this mean for you and your business in the year ahead? Well, if you are among the 12% of financial organizations that are considered to be digital leaders, then congratulations are in order - the next 6-18 months could be a boon for your business. If you’re like the majority of financial institutions with a mixture of digital and legacy or manual processes however, it will require some significant work to stay competitive and set yourself up for growth in 2021. While your fully digital core operations should see just a minor dip due to social distancing, other activities - such as issuing LEIs and ISINs - will be more heavily impacted. These functions are already slow and cumbersome; customers will shift their business to more agile (read: digital) financial institutions rather than deal with legacy processes that demand significant manual input and are heavily reliant on the use of email, spreadsheets and pdfs. This is simply not sustainable in a world where people expect results in hours - and increasingly want to conduct the entire transaction without meeting in person.

Whatever the state of your digital readiness, now is the time to take a cold hard look at your operations - especially labor intensive activities - and consider how you will increase capacity and velocity in a world where social distancing is the norm. With the Great Reboot you have the rare opportunity to optimize your processes to increase worker safety now, and for the overall health of your business in the long term. Speed is your friend, workers are your challenge, and cost is a relatively minor player in the equation. 

In our conversations with LOB leaders and senior executives, we’ve heard these guidelines repeated time and again:

  • Move quickly to secure funding for initiatives that can deliver topline growth, reduce OpEx, and most especially reduce risk to your workers. In almost all situations this means investing in technology and tools that facilitate remote or distanced work; that significantly simplify and automate routine process; and that provide incremental value in the form of data quality, speed of operation, or accountability and risk mitigation. 
  • Without being mercenary, this is the time to kill projects that are not delivering results. Whatever the reason - be it design, execution or adoption - you need to focus your resources on the highest performing initiatives. In all likelihood you’re already under pressure to cut costs, and this is the year to take the write-down and move on. 
  • If you have a project underway with solid potential but is behind schedule or over budget, you need to seriously consider your options - kill it, adjust scope or timeline, or bring in additional specialized resources to get it back on track.
  • Invest in your workers: rather than just using COVID-related emergency funds to train employees how to do their existing jobs in a socially distant way, use this opportunity to “up-level” their roles and prepare them for the higher value tasks they’ll be doing once the legacy systems or activities are optimized and digitized. 

This pandemic has forced all of us to deal with challenges and expectations we never imagined we would encounter in our working lives. And yet we survive, and even thrive. As you enter the next phase, of Recovery and Reboot, the challenges and expectations will be equally daunting. You are laying the foundation for how your organization will evolve in the next decade and beyond. But you have a roadmap, of sorts. As we saw with the financial crisis of 2008, institutions that moved quickly and aggressively to take risks, challenge the status quo and adopt new ways of working emerged stronger, bigger, more profitable and more resilient. 

Let the reboot begin!

 

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