According to a recent survey by AutoRek, a perfect winter storm of factors – including skills shortages, outdated manual processing systems, increasingly complex trades and new regulations – has resulted in setbacks for business managers. assets and assets, reconciliations representing the greatest challenge. , explains Murray Campbell, consultant at AutoRek.
And that’s not the only problem facing companies in the sector: more support with factors such as operational resilience and prudential regulation are essential.
It’s a big mountain to climb – but there is an answer. If they put automation at the top of their agenda, companies will be in a good position to win.
When it comes to processes, inefficiencies have long been an expected and accepted part of the package. But the rise of remote work and layoffs over the past two years has further exacerbated these issues — so much so that they can no longer be ignored. In fact, more than a quarter of companies said their budget for making operational improvements had increased significantly due to the pandemic.
As a result, many companies are turning to digital transformation to help close the circle of improving data integrity and reporting: up to 95% of companies we spoke to now have an annual budget dedicated to process automation.
Additionally, many businesses are also accelerating other digital technologies such as intelligent automated dashboards for customer and customer management and integrating cloud analytics as the next significant enhancement to their business.
Sailing in the regulation slalom
While the pandemic has certainly accelerated change, the need for businesses to implement automation long predates the past two years.
The ever-changing and rapidly changing regulatory landscape has been a long-standing challenge for businesses, with nearly half of respondents citing the volume and scope of regulations as their biggest regulatory challenge. To underscore this point, our research found that one in four companies do not consider themselves well placed to meet the new requirements of the IFPR, which came into effect on January 1 this year.
Meanwhile, Brexit has added administrative burdens to financial trade, as the EU and the UK government have yet to implement the promised reduction in financial services regulation inherited from the EU.
All of these factors have converged in recent years to drive the growing demand for digitization and automation of financial services operations. Almost all finance organizations plan to invest in automation to mitigate regulatory risk and bureaucracy over the next two years – 40% having earmarked over £500,000 a year for this effort.
Interestingly, there is a relatively even distribution of planned investments in operational resilience, prudential regulation, MiFID II transaction reporting and CASS operations. This split reflects the fact that digital transformation is no longer an optional add-on but a fundamental requirement for reputation management, risk mitigation and maintaining customer trust.
Automated reconciliations will be central to this effort, providing consistently accurate financial records and regulatory reporting while reducing administrative overhead.
The internal talent chasm
Amid increased demand for automation, the financial services industry faces significant shortages of the technical and digital skills needed to implement it. 38% of companies identified the lack of sufficiently qualified personnel as the biggest challenge they face in operational processes.
A lack of in-house expertise also presents challenges for businesses when it comes to effectively navigating a vast automation market and finding solutions that fit their size, customer base, and services. Custom solutions are essential to help seamlessly integrate new technologies into existing systems, processes and policies.
Outsourcing will leave competitors in the dust
There has been a boom in fintech innovations in recent years, creating a new imperative for traditional businesses to keep pace with emerging technologies. A significant proportion of businesses recognize a growing threat from fintech start-ups and the ever-increasing need to focus on disruption to maintain their order flow.
Even the best in-house solutions will quickly become obsolete as the pace of industry innovation accelerates. To combat this, businesses need up-to-date digital skills to future-proof systems against continued market disruptions.
In an environment of rapid innovation and rapid regulatory change, legacy systems and digital skills gaps will leave businesses exposed and vulnerable to increased bureaucracy, risk and compliance issues.
But, for those who can understand these issues and are proactive in finding solutions, there is a significant competitive advantage to be gained.
By embracing outside expertise and drawing inspiration from technologies implemented in other industries, companies can find themselves in contention for Olympic gold – not only protecting their own operations for the future and ensuring loyalty of their customers, but also by positioning itself as the supplier of choice for potential customers. future customers.
By Murray Campbell, Consultant at AutoRek