3 minute read 15 May 2020
COVID-19 crisis – Implications for the financial services

The financial world after COVID-19: A view from CIO lens

By Radhika Saigal

EY India Financial Services Advisory Partner

Radhika has over 20 years of experience across the BFSI and technology industries where she has led complex digital transformation programs driven by operational excellence and efficiency improvement.

3 minute read 15 May 2020

Covid-19 is likely to cost world economy $1 trillion and has put tremendous pressure on already struggling financial sector. In the aftermath of the crisis, the financial services sector will have to implement various unique strategies to reduce operating expenses.

CIO’s focus is on self-sustained ROI driven cost optimization for running the bank while enabling growth, scalability and uptime requirements for new virtual world. Simultaneously the ways of working are being transformed for facilitating 'change the bank' aligned with new customer needs. Virtual working has accelerated the zero-touch IT services and need for leveraging technology for self- recovery & maintenance while on other hand, client interfaces are being enhanced to facilitate digital interactions. Amidst this focus is on reducing cost through infrastructure rationalization, optimizing application landscape and reducing underutilized outsourcing spend. Remote working and enhanced digital interactions has also added onto the cyber security risk which is being prioritized to prevent economical and reputational damage of cyber security lapses.

While running the business as usual of a bank is crucial, the Chief Information Officers (CIOs) are aligning the workforce and budgets to support the new business demand. Technology is becoming an integral business driver and organizations structures have to be moved from functional silos to product-oriented structure to reduce the time to market for meeting new customer needs. Transformation of organization to be virtually agile supported with DevOps transformation is enabling the new ways of working where technology is coming to forefront like never.

With customers as well as employees moving to virtual world, the digitization of customer facing operations as well as back office has accelerated. More than 30% of current work being done by humans in a bank can be done by machines. The money saved through cost optimization is being leveraged for digitization. It is a wakeup call for employees as 60 to 70% of workforce needs up-skilling to be able to support CIOs in their journey of reviving Financial Services Industry.

Key Highlights:

  • Run the Bank Cost Optimization

    Focus is on strategically reducing RTB spend to free up valuable $ for transformational CTB initiatives. Key to success is self-sustained ROI driven cost optimization

    • Infrastructure Cost Optimization: Focus is on rationalizing infrastructure while taking into consideration the growth, scalability, uptime and change in business demand
      • 15% infrastructure cost can be reduced by migration to cloud
      • Artificial Intelligence and Machine Learning is being leveraged for self-healing / self-recovery of infrastructure. Zero-ops infrastructure management is enabling reduction of workforce cost
    • Application Portfolio Rationalization: Focus is on making the application landscape lean based on relevance and cost
      • 20% applications are sparingly used or has duplicate functions.   
      • 30% licences procured is not used / required
    • IT service Management Optimization: With workforce moving to remote working, zero touch IT services is the new normal
      • Min 50% reduction in incidents and 75% reduction in incident resolve time can be easily achieved through digitized ITSM
    • Cyber Security Enforcement and Optimization: Remote and digital operations are increasing risk to cyber security. Prevention is non-negotiable must!
      • 68% business leaders are acknowledging increased risk over remote working and digitization
      • $28 Billion is worldwide forecasted spend on cybersecurity by financial service by 20211
  • Change the Bank Optimization

    Aligning ways of working is crucial to support business demand in-line to customer needs in post COVID world
    • Agile Transformation: Changing organizations from functional silos to product-oriented structure. Virtual agile is the new normal.
      • 75% decrease in time to market is achievable which is the need to adapt to new customer behaviour
      • 45% saves on “cost of change” is possible through agile transformation
      • 33% increase of employee satisfaction is an important outcome of agile
    • DevOps Transformation: Integration between Development and Operations  is crucial to accelerate software delivery to enable agile organization. As organizations put more emphasis on automation, it is imperative to adopt Continuous Integration (CI) and the Continuous Deployment (CD), that provides the capability to rapidly develop, test and deploy software.
      • 63% improvement in quality of code deployment can be achieved by devops transformation
      • 55% increase in collaboration is an important outcome of dev-ops transformation
    • Workforce Optimization: New virtual workforce has initiated new dimension of optimizing workforce and location. Post COVID world will create an enormous degree of labour displacement.  Firms today will require far fewer people with very different capabilities, and will need to manage this transition of skills and operating locations effectively.
      • 30% to 50% cost optimization potential through right workforce strategy implementation
    • Benchmarking and Improving Developer Productivity: Focus is on measuring and improving technology output for every $ spent along with improvement in quality and enhanced customer experience.
      • Integrated mechanism for measuring utilization and efficiency of technology development and corresponding impact on Finance, ROI and Operational Excellence is a key for cost optimization.
      • Focus is on leveraging measured benchmark to derive actionable improvement which is sizable instead of slow organic improvement

     

  • Enabling Virtual and Digital workforce

    Remote work will be a persistent norm, and the organizational capabilities will need to shift to enable productivity within the new work model, while reducing operational cost and improving controls

    • 30% of current bank work can be performed by machines. Bots, AI/ML and new API driven architecture is reducing operational work which was human touch intensive. This focus is further accelerated
    • 60-70% workforce needs upskilling to be effective in new digital world. 

Summary

While on one hand the diminishing margins are under additional stress and on the other hand the customer needs are changing, and ways of working is becoming completely remote and digital. This has put CIOs on the driver seat to steer the Financial Services out of survival crisis. The key focus of CIO is cost optimization for ‘run the bank’, rapidly steering the ways of working for facilitating ‘change the bank aligned with new customer needs’ and enabling a virtual and digital workforce.

About this article

By Radhika Saigal

EY India Financial Services Advisory Partner

Radhika has over 20 years of experience across the BFSI and technology industries where she has led complex digital transformation programs driven by operational excellence and efficiency improvement.