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Asset & Wealth Management and COVID-19: Emerging stronger from uncertain times
Overview
The COVID-19 pandemic is bringing the world into uncharted waters. What else can we expect? The more immediate question is how does the Asset & Wealth Management industry cope with this new COVID-19 world? What are the top priorities? This industry excels at problem solving and we are now facing one of the greatest challenges of our time in an increasingly globalised world that suddenly needs to raise borders and ask its citizens to batten down the hatches. Within the Asset & Wealth Management industry, it is no longer “business as usual”. Asset managers and third party service providers need to be prepared. While there are many challenges to be confronted, the bottom line is that the industry, its workforce and customers, the markets and economies will survive. In fact, the industry will learn from the experience and become stronger for it, even increasing its importance in the financial markets.
Our global crisis centre is currently working with a range of organisations across industries. Key concerns that are emerging for the Asset & Wealth Management industry include:
Crisis management and response
Businesses need to put their continuity plans in place. As a global pandemic might not have been part of a previous plan, these plans need to be continually assessed, revised and enhanced to consider new factors. There are seven key actions Asset & Wealth Management firms can take to help protect their workers and bottom lines, and strive to maintain business continuity.
Workforce
Businesses need to ensure that their employees have the necessary equipment, tools, working practices, access rights and technology so they can work flexibly offsite, especially with the need to minimise contact and business and community disruptions. Essential for continuity are engaged supervisors to keep approvals and processes moving as well as clear lines of communication and support. Stress levels may rise due to demanding clients, volatile markets and other challenges with remote working, without the supportive infrastructure and familiar working environment of the “office”.
With increased remote working comes greater risks of cyber security issues. Reinforcement and reminders of cyber security policies and threats such as phishing and data breaches will be key.
Operations and supply chain
Coupling the revenue challenges with the significant costs of business disruption will mean a very challenging economic situation for many businesses, even if some governments provide fiscal measures. Businesses that have embraced outsourcing might find benefit from a more flexible cost base. Keeping service providers informed and updated, as well as assessing the in-house functions for continuity of service will be essential. Operations may be challenged and/or stressed beyond what was ever previously envisaged, so constant assessment and monitoring will be essential. Some firms may start to consider mergers or deals as the environment becomes more challenging in the weeks ahead. In any case, firms will need to keep on top of changing regulations within the marketplace and the impact that this will have on business.
Finance and liquidity
Ongoing valuation challenges can also have an impact on liquidity, tax and investors. However auditing, accounting and reporting standards haven't changed and asset and wealth management firms still must adhere to their principles and interpret them in light of the current volatile markets. It will also be important for firms to scenario plan for the future to minimise the risk of liquidity issues.
Tax, trade and regulatory
While some regulators may be allowing for additional time for annual or interim reporting, others are requesting additional liquidity reporting on a more frequent basis. These significant changes, amendments and provisions are a moving target for the industry. It is therefore important for asset and wealth management firms to stay current on the requirements of the regulators, tax authorities and governments in the different jurisdictions where their business operates so they can be effectively monitored. They should also build any relief into current and future business plans and consider any caveats that will impact future business.
Strategy and Brand
Investors are naturally anxious in volatile markets and firms can strengthen their brands with a positive customer experience during periods of uncertainty. Technology will be key to enable the “human touch” in communications, when in person meetings aren’t advised. A robust communications plan is essential in case of increased redemption activity, consultations on liquidity, and views on the market prognosis to show clients their captain has a steady rudder in stormy seas. Whilst the near future may not be “business as usual”, many day to day operations will not change. Financial statements will still need to be prepared, valuations run, and regulatory reports filed, etc. Asset & Wealth Management firms that have robust business continuity and response plans in place and who also have clear and open communication channels with their workforce and their customers will be better positioned for when the environment stabilizes.
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