Businesses worldwide have to react in agile and decisive ways to meet the challenges due to the pandemic. As time moves on, now is the time for financial businesses to seek out and seize the burgeoning opportunities emerging in the financial crisis recovery
. The action of recovery involves conducting a review and then collecting data and taking insights on the lessons learned from the pandemic. After that, financial firms can prioritize actions to enhance their business value and build strategic resilience in the future.
Despite certain plans of action to overcome the economic impact of COVID-19, the rebound is anticipated to be uneven across the globe, as developing economies lag behind. Yet, global financial growth is expected to accelerate to 5.6% by 2023.Accelerations from holders of major economies such as China and the United States will be significant.
So, how are financial businesses overcoming the economic crisis post-COVID-19? How are they planning for the future economic setup? What are the steps they are taking to deal with the crisis?
Let’s read ahead about it.
Dealing With the Crisis
During the pandemic, it was a scenario where not all financial services firms leveraged their plans to overcome in analogous ways. The global market study shows that about a quarter of financial services firms relied on their surviving business continuity plans to manage through the crisis. Rather, only 16% of finance firms used modified plans to deal with the crisis. And their plans worked well.
But now, surprisingly, the firms that couldn’t do well in handling the global recession are doing well now. And thus, they found some of the most common gaps at the backend. The gaps were in the ability to anticipate responses in the plans, which were specific to the pandemic.
The ability to leverage technology usage, stringent operational controls, and practicing digital capabilities were some of the major gaps that resulted in a major mishap for several financial firms. Let’s see some highlights of how firms saw failure in their plans.
According to Deloitte’s survey:
59% of financial businesses did not include pandemic-specific actions
34% of financial businesses found gaps in addressing technology
16% of financial businesses found gaps in stakeholder communications
16% of financial businesses lacked plan alignment
9% of financial plans were outdated
10% of financial plans were not actionable and impractical
Customers also mentioned technology challenges, especially when it came to dealing with surged demand for loans as a result of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
But, with that in mind, here’s an outline of some of the scenarios emerging in favour of financial businesses and firms.
Firms Are Developing Emergency Plans
Several financial firms are now creating contingency plans in anticipation of an uncertain global economic recovery. The plans are to manage the crisis through disruption and focus on strategies and operational activities. These plans are now under action, which is now more strategic in nature.
Of the plans, firms are mostly planning or operational contingencies over the next six months of 2022. According to Deloitte’s reports, almost 40% of firms expect a need for the same.
Digitalization of Communications & Interactions
Moving forward, what financial firms have learned is to include digitalization in communications and interactions with clients and customers as a part of crisis management. Digitalization will enhance existing resilience plans.
Many other firms believe that digitalization
is one of the priorities for better coordination, more comprehensive documentation and stimulating more frequent compliance-focused finance exercises. Assessing requirements for critical workloads and reassessing the global financial crisis recovery is also top-of-mind.
For example, TODO1/iuvity’s solutions will have the digital financial experience powered by Modyo integrated with TODO1/iuvity’s Open Service Platform by the end of 2022. TODO1 is a leader in powering essential digital financial institutions in Latin America. The services have served more than 21 million digital customers in the past twelve months.
This partnership is aligned with our goal of working with exceptional talent to build state-of-the-art products. We are excited to join forces with Modyo to continue being at the forefront of user-centric technologies that empower businesses to better serve their customers."
Felipe Uribe, CEO of TODO1
Let’s understand how firms identified digitizing clients’ interaction and communication as a top priority.
Deloitte’s study says,
40% of financial firms are rethinking and digitizing client interactions
42% of financial firms have technology upgrades
24% of financial firms are using digital to redesign plans and operations
11% of financial firms are revising third-party partnerships
Financial firms, along with technology, are anticipating increasing capabilities around upgrades in operations, systems, internal and remote communications, and client interactions. Firms also anticipate doubling the speed of technological transformation over 2025. These initiatives include increased investment in cloud technology, data center evolutions, smart tool use to improve business agility, communication, analyses of data
, reporting, onboarding, servicing automation. All of these (including more tech tools) will aid firms in responding to a range of potential future developments.
For example, ixFintech has come up with a successful integration of privacy identity authentication and post-quantum computing security into ixWallet. The initiative is to safeguard users' identities against cybersecurity risk. In Q1 2022, the company also aims to launch ixPoint, its first-ever reward point scheme, as well as the first asset-backed TeaCoin.
With those priorities in place, financial institutions now have the opportunity to develop an integrated monitoring process. The process collectively captures data from various other systems across organizations, such as physical security, fraud, threat, cyber and other issues.
Redesigning of Controls
Many financial firms have learned from the economic impact of COVID-19 that controls will need to be redefined to function
with a remote workforce. As the aftermath of COVID-19 has forced the finance industry to operate its services remotely, this step counts under the priorities that businesses are focusing on shifting. So, the most critical controls, such as process, preventive controls, and fraud control, mainly rely on improved workflow tools with the help of technology and digitalization. These controls are considered with the help of visual risk-sensing and machine learning capabilities.
If you own a financial business and are looking for a real-time action plan to recover from the global financial crisis, then the above-mentioned steps will assist you in managing your business well. Still, some tips for financial crisis management could be added along with those steps.
Tips to Manage the Financial Crisis
Always Arrange an Emergency Fund
Being prepared for all types of circumstances aids in managing a crisis, even if it is a pandemic. So, having an added emergency fund to your business’s account will avoid any disaster that might occur at any time. Emergency funds will help you get through various liabilities such as utility payments, rents, payroll, vendors, taxes, and many other financial roles.
Manage Debts Effectively
It is necessary for you to manage your debts effectively. But how? You can keep track of the repayment of debts. To manage or repay the debt on time, you can build a separate fund account that would cater only to the debt amount. In this way, you’ll be able to track, manage, and get the right information on the amount to repay.
Monitor the Money Flow
If you monitor the flow of money in your financial business, you will be able to recover from the harsh economic impact of COVID-19 faster. Keeping a check over expenses—profit and loss would certainly help you overcome a crisis.
While the entire financial industry is recovering, this is the time to document the lessons learned and emerge stronger than before. If you are still struggling, you can use the plans for quick recovery from the impact of COVID-19 on your financial business.
Frequently Asked Questions
What is a financial crisis?
A financial crisis occurs when a firm’s assets decrease significantly in valuation. As a result of this, firms face hindrances and troubles in meeting their needs and requirements.
How do businesses affect the economy?
Firms create employment opportunities for themselves and willing employees. So, entrepreneurial activities such as the introduction of new products, methods of business, and production processes influence productivity and thus boost competition among their peers, which affects the economy.
How can businesses help the economy recover?
Businesses can drive economic stability and growth significantly. They can do it by providing valuable products, services, and tax payments that directly contribute to the economy. These aspects then lead to more jobs, and thus, strengthen the global economy.