New research has found that for the first time in the modern financial services-era the majority of business leaders are eager to have the chief financial officer (COO) play a leading role in driving business model change.
The Economist Intelligence Unit (EIU), on behalf of Broadridge Financial Solutions, conducted a securities processing survey of 414 professionals including investment managers, wealth managers and capital markets professionals globally. More than 40% of survey respondents hold C-level positions, including 19% who are CEOs.
In pursuing operational excellence, leaders will invest today for the new norm that has come about as a result of regulation, the survey finds.
The survey highlights the elevated role of the COO is linked to the fact that the majority of institutions (77%) are altering their business models as a result of recent changes in regulation and market structure, says the survey.
Among the leading set of companies surveyed, 83% of executives view their COOs as “fully engaged” in the company’s strategy and planning process and 85% rated them as “very effective” at making improvements that drive business value.
More than two-thirds of respondents cited new regulation and governance requirements (35%) or changes in market and industry structure (32%) as the primary forces driving business transformation – ahead of globalization (17%) and technological advances (13%).
Timothy McConnell, managing director at Broadridge, describes the research findings as a call to action.
“It’s a front to back understanding of risk in the firm, and a mutualization of capabilities and a call to action to transform the business.
“ROE levels are low due to regulatory pressure. The mutualization of operations and technology provides a competitive platform to meet regulatory requirements,” says McConnell.
Providing an example, McConnell highlights notes that hedge funds have Form PF requirements including regulatory reporting and many of them are looking to a third party outsourcer to provide the scale across the marketplace. “Clients are offloading settlement of trades,” he says. “It’s about readiness and operational excellence driving the thought processes of people overseeing operations. It’s not just the CIO or a concern of the corner office. We’re seeing diversity and seniority of those concerned. It’s about scalable processing.”
In order to boost ROE, McConnell notes firms would reduce head count, exit markets and right-size.
“Now it’s more about transformation. The market infrastructures are changing and it’s about how third-party providers can help with non-discretionary spend and cuts.
“Operations now has a seat at the table. It’s about what is needed for the organization to grow there is a need to rely on the business value.
“In 2009 firms wouldn’t look to outsource — now it’s about scale and mutualizing and there isn’t a company today that does not have that conversation. We settle $5 trillion of notional settled every day, which validates the trust those COOs have in us. It’s about de-risking the system. The market is looking for a utility – four out of six banks in Canada use us and 17 out of 21 primary dealers the U.S. are also looking for transformational technology solutions.”
Other key survey findings include:
- Executives rate risk management as the most important overall strategy in their organization’s response to global challenges
- There is an expectation, especially among C-suite executives, that operational leaders will initiate proposals to advance the organization’s strategic goals.
- Firms with strong adaptability performance are more likely to say they will focus on a broad spectrum of operational activities.
- Building automated processes that integrate risk management, audit trails and compliance processes is the most effective strategy for adapting to more intense regulatory and governance requirements.