Many financial services firms have struggled to keep pace with the onslaught of regulatory, conduct and compliance related issues during the past five years. Instead of investing in new products and solutions, or systems to improve productivity and increase profitability, firms are continuing to invest hundreds of millions of dollars in projects related to Global Structural Reform (GSR) – regulations that were introduced after the financial crisis to re-shape financial institutions and make them more resilient.
GSR-related regulations continue to be introduced at a rapid pace, and often by jurisdiction, creating increased challenges for internationally active banks and insurers. Accenture’s 2015 Global Structural Reform Study– based on a survey of 131 banking, insurance and capital markets institutions across the globe – found that the sheer volume of GSR regulations and the complexity of changes they demand is driving significant investment in talent and technology as institutions organize their responses.
More than half (56%) of large financial services institutions surveyed expect to invest at least $200 million on projects to overhaul how they do business to address GSR regulations this year, with nearly one third expecting to spend at least U.S. $500 million. While institutions are investing heavily, they are primarily focused on meeting regulatory requirements and not yet focused on the more strategic implications of structural reform.
To better achieve some balance from the pressing regulatory concerns while deriving strategic value from GSR investments, financial institutions should follow three key principles:
- Organize a long-term response. While there will always be elements which need to be delivered to regulatory timelines, institutions need to think end-to-end across regulations and geographies, and be holistic in assessing and communicating the effects of regulatory actions across the business and operating model. By streamlining their response, firms can avoid multiple, competing projects and identify areas for smart investments. Nearly all survey respondents (96%) said that defining a clear strategy and objectives is important to driving an effective response to GSR.
- Unlock potential in a new ecosystem. In defining the response to regulatory needs and solutions, institutions will need to also assess where they can find potential value in business changes and investments. They need to closely consider which businesses they want to be in and which they want to exit. Once regulatory changes have been implemented, the investments are made; if institutions want to maximize the impact from the investment, the time to act is now.
- Demonstrate value to key stakeholders. Broad, comprehensive stakeholder engagement is a key principle in mobilizing a strategic response to GSR. As firms move past initial compliance, internal and external stakeholder support and engagement will be critical in defining a new operating model and executing the strategy for the long term.