3. Imagine the beyond: Megatrends
In the longer term, technological advancements will be the single key driver of change. That is why it’s critical that FIs imagine the future beyond the immediate and even medium-term. The Megatrends framework helps to do just that, by highlighting some potential topics that will shape the future.
Primary forces (technology, globalization, demographics and environment) drive the Megatrends (pdf) that may significantly impact the next three to 10 years. While such a timeframe makes projections less certain, financial services companies need to examine how these megatrends might impact societies, economies and the wider global order. For example, a future behavioral economy, which uses data to influence decisions, could impact how FIs use AI and risk moling, and the ethics involved.
Leaders need to fully understand the impact across a range of megatrends to ensure their planning is based on the future environment.
Managing volatility well — a competitive advantage
You can’t always predict the future. But you can be better prepared for it. It’s not enough to know about the various forces of change; decision-makers need to understand how different phenomena affect each other in an interconnected, interdependent world.
For example, what impact does the future hold on current plans around transformation to better serve customers and cut costs? What actions are needed to ensure prudential strength scenario under different possible scenarios? With so much effort going into the drive to net zero, what planning has been done around the impact of geopolitical change?
In adapting to current and future volatility, FS institutions need to constantly consider what changes are required to their strategy, financial management, propositions, people and operating models. Only then can they formulate strategies and contingencies that will enable their organization to thrive — whatever the scenario.
This article is co-authored by Saleem Malik, EY UK Financial Services Restructuring Leader; Shalini Shan, EY UK Financial Services Strategy Leader; and Nomit Kalidhar, Partner, Banking & Capital Markets, Ernst & Young LLP.