There is a chronic lack of growth in the financial services market. Marketing and product-development budgets continue to be squeezed as tough trading conditions persist and spending on compliance reaches unprecedented levels.
Resources that would normally be dedicated to propositions and growth projects are instead being spent on complying with Solvency II, the Foreign Account Tax Compliance Act and the Retail Distribution Review (RDR), as well as pensions reform and auto-enrolment. For some companies, this is compounded by labour-intensive remediation projects designed to head off regulatory sanctions.
Conventional programme approaches, where organisations ring-fence spend on the sponsorship and delivery of compliance, separating it from the funding required for growth and development, can make matters worse. It creates inefficiencies and means opportunities to get ahead of the competition are lost.
If financial services companies are to prosper in the current economic climate and derive more value from regulatory change programmes, they need to prioritise activities that deliver tactical and strategic advantage, improve their implementation planning and aim more than just the regulatory minimum.
Prioritise activities that deliver tactical and strategic advantage
First, financial services executives need to optimise delivery of compliance and development projects. While many portfolio-management functions are still grappling with developing an effective capability and dealing with competing resourcing requests, the best have nurtured an effective capability that influences others around them to prioritise the activities that deliver tactical and strategic advantage. Often, the activities that should be prioritised will be included within current and forthcoming regulatory changes.
Improve implementation planning to successfully deliver the necessary requirements
Second, the cost of failure as evidenced by recent high profile IT changes and the scale of the changes that must take place within fixed timescales requires means that for some, a greater focus on implementation planning and readiness is required. Now more than ever, financial services executives need to have full confidence in their programmes’ ability to deliver all the necessary requirements and to do it ‘right first time. RDR, for example, introduces new share classes, requires companies to make changes to fund structures and requires pricing tables and payment engines to be changed. Consider then that this work needs to be replicated across most products that an organisation wants to sell after December 2012. Time is incredibly tight for those organisations that haven’t yet progressed through into the final delivery stages of their plans.
Aim to deliver more than the regulatory minimum
Finally, executives must counteract the tendency for sponsors to reduce risk in their projects by restricting the scope and looking within vertical silos only. If executives believe there is truth in the expression ‘you get what you measure’, they should ask themselves whether the objectives they have given their sponsors and delivery communities will deliver more than just the regulatory minimum. By challenging sponsors to adopt a broader perspective and identifying revenue and profit-growth benefits within regulatory change initiatives, financial services companies can reap dividends.
PA has extensive experience helping organisations obtain enhanced value from their regulatory change programmes. We have helped major clients in the banking and insurance sectors to define effective programmes across the regulatory, marketing and distribution functions, and have worked with leading regulators in the UK and worldwide to shape their operations and enhance delivery.
To find out more about obtaining value from regulatory change programmes contact us now.