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Across the financial services sector, many chief financial officers (CFOs) have put their growth plans on the back burner to focus on cutting costs and meeting regulatory requirements. Now that the economic climate is starting to pick up, the question is whether the effort they have put into these initiatives will help to drive growth.
In this article from The Economist Intelligence Unit, CFOs from three financial services firms reveal how the changing regulatory climate has affected their business strategies and where they are now finding opportunities for growth.
Across the financial services sector, many chief financial officers (CFOs) have reluctantly put their growth plans on the back burner in order to focus on two new imperatives:
Now that the economic climate is starting to pick up, the question is whether the effort they have put into these initiatives will help to drive growth.
Mark Rennison, CFO for the Nationwide Building Society, says the economic crisis and downturn did not force the mutual lender to alter its customer-centric business strategy, but that the aftermath has forced the company to re-prioritize in order to meet new regulatory standards.
As the industry emerges into a more favorable economic outlook, the corporation is taking the opportunity to make braver and bolder decisions about how to use capital—including making investments in new technologies to improve customer relationships, and to provide access to products and services across multiple channels.
Another organization focused on complying with new regulations is the Swedish bank, Svenska Handelsbanken. The bank’s CFO, Ulf Riese, believes that the work Handelsbanken has done to gather statistical data to meet regulations could be helpful in terms of giving the market a way to benchmark the bank against its peers in a much more granular way. When Riese talks to investors and analysts, he says the clarity and consistency of Handelsbanken’s strategy pays dividends.
Schroders, an asset management firm, has also performed well throughout the downturn. Their CFO, Richard Keers, says that Schroders has built better operational risk models and stress-tested them to meet regulatory requirements.
Keers says that Schroders has been investing throughout the crisis, keeping costs under control and focusing on organic growth. Still, he says the business is facing revenue-margin pressure—making it necessary for the firm to develop more efficient and robust processes.
The financial companies mentioned in this article all had a relatively “good crisis.”
If the regulatory reforms introduced since 2008 have encouraged their rivals to take a more rigorous, data-driven approach to strategy, investment and capital allocation, then this can only be a good thing. This approach should help them to grow and prosper, now that the economy is improving.
But with a higher degree of transparency around the performance of the business, when it comes to allocating investments and deploying capital, Nationwide Building Society CFO Mark Rennison suggests it’s critical that CFOs use the right assessment criteria and make an appropriate return, “not just in financial terms, but in terms of benefit for our customers.”
This requires a careful balancing act. “Finance must absolutely participate in that debate and challenge what people are doing, but we must not dominate the debate,” says Rennison. “Customer service is our differentiator, and our regulators expect us to deliver ‘good outcomes’ for our customers anyway. So, while we want to drive financial discipline, we need to have an integrated approach to strategy.”
May 28, 2014
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