Be ready to adapt to post-Covid-19 pandemic reality, says Kearney
As SA waits for clarity from government on the regulations for level 3 of lockdown, Hentus Honiball, a partner at global management consulting firm Kearney, said the financial sector needs a road map with clear signposts to recovery.
He described Covid-19 as a “black swan event ”—a metaphor that describes an event that comes as a surprise, has a major effect and is often inappropriately rationalised after the fact.
“It is disrupting social and business activities across the world with unknown consequences and durations.”
Kearney said a UN World Economic Situation and Prospects mid-2020 report estimated the global economy would contract by 3.2% — with a R170 trillion loss in the next two years, wiping out nearly all gains of the previous four years. This would be the sharpest contraction since the Great Depression of the 1930s.
“The financial services industry is doubly exposed to the pandemic, said Honibal. “First, in their own business model, and then through the risk of clients defaulting, or new claim patterns and investment income challenges.”
He said the safety, productivity and connectivity of employees, and giving back control to clients and stabilising operations, are essential.
“The three key pillars of the response should rest on safeguarding employees, engaging and supporting clients and business, and adapting a company’s operating models.”
Kearneys research, said Honiball, points to three plausible scenarios: a quick recovery; accepting that 2020 is gone but things will be fine after 18 months of downturn; and lastly, a long-term recession.
“Financial institutions should urgently start working on postpandemic threats and opportunities. Lessons learnt from the 2008 financial crisis should be used to guide these measures.”
Preparing for the three scenarios should involve:
Transforming the organisation’s workforce and talent management processes; Accelerating digitalisation of customer-facing processes to enable exchange-to-exchange selfservice;Leading new value propositions and developing new products and services that address needs that still have to be quantified; Increasing process automation to make companies more immune in the future; and Developing an operating model, fully costed, that enables the company to run a reset transformation in case one of the worst scenarios materialises.
“As the crisis from Covid-19 evolves further, scenario planning should be continuously updated to account for changes in business or other macroeconomic factors.”
Internationally, Kearney’s advice is to act immediately but have possible future events as the guideline.
“Further actions involve biweekly reviews of scenario parameters. Essential are frequent stress tests, regular revision of performance ratios and early warning signals criteria. Plus a regular review of the strategic project portfolio set against the new priorities, and the integration and refinement of mitigation actions respective to the relevant scenario that is playing itself out.”
Giving back control to clients and stabilising operations are essential