Tom Holliday, Financial Services Consultant at KCOM
The financial services industry has found itself unprepared for the technology revolution that has seen a new breed of challengers emerge – from online-only banks to apps that enable users to trade stocks and shares on their mobile device. As they race to catch up, however, these traditional firms are finding that their progress is being prevented by their legacy technology infrastructure.
The sector’s slowness in adopting new technologies has seriously damaged financial firms’ ability to meet their customers’ needs, as a recent Forrester study shows.
Forrester found that 84% of UK financial service organisations are concerned about their ability to identify customers correctly, while a third believe they are ‘seriously lagging behind competitors’ when it comes to fraud checks. Meanwhile, the researchers found that UK firms have less interest in adopting new approaches to authenticate customer identity, lagging behind China, Singapore and the US.
It’s not all bad news, though. In autumn 2018 KCOM conducted in-depth research among senior decision makers at businesses in a number of sectors, including financial services, to gauge their progress towards cloud migration. We found that 80% of respondents from financial services businesses say they plan to invest in cloud migration in next 12 months to drive innovation – the highest of any sector studied.
The cloud is central to any significant business transformation project and enables financial services companies to throw off the shackles of legacy technology. But cloud migration is always a serious undertaking, and particularly so for financial services businesses.
A poorly-planned and executed cloud migration may simply achieve the continuation of a flawed system. This year we saw the huge risks of a failed migration, with a traditional bank suffering severe reputational damage. When a big technology project goes wrong in a large financial services business, it tends to make the front page. Just look at the reams of negative publicity that TSB garnered when the bank ran into problems updating its IT infrastructure. Do bank customers face a year of more of uncertainty and disruption, while challengers steam ahead with their superior tech agility and ability?
No industry takes its customers’ security more seriously than financial services, and our research suggests that respondents are fully aware of the potential risks of cloud migration. When choosing a technology partner, they were most likely to use selection criteria that are heavily weighted towards partners that they can trust, as measured through their delivery on previous projects.
Almost two in five respondents (38%) from financial services businesses use this criterion – more than those who choose a partner based on their ability to deliver against a defined technology road map (34%), and those that use agile methodologies, frameworks and contracts that enable the delivery team to work through the unknowns (28%).
This is understandable. Trust is especially vital in the financial services industry, as we’ve seen. Yet is such caution always the best way to develop systems and infrastructure that will support a financial services business’ success in the years to come? If financial services providers truly trust their technology partners, shouldn’t they be more open to accepting their advice on innovation and cloud migration projects, rather than expecting them merely to follow the strict instructions in the proposal?
Our research suggests that this remains a Rubicon that the financial sector is still unwilling to cross. We found that only 10% of respondents expect their partners to introduce ideas and help drive innovation, compared to 36% who identify the required technology first and then issue an RFP.
While financial services was a little ahead of other industries in being open to ideas from their technology partners, this 10% figure is hardly evidence of a “pioneer spirit”. Given the pressure from challenger banks, we would expect the industry to be more open to listening to technology experts.
We fully accept why financial services firms would approach digital transformation projects, including cloud migration, with caution – but can they afford to spurn the advice of their technology partners? For example, a trusted partner might advise that financial services businesses would do better to focus on cloud-native innovation and a more measured, gradual migration to cloud, rather than doing it in a “big bang”.
We don’t believe that the go-it-alone approach works for financial services businesses. Earlier this year, for example, we found that only 6 per cent of UK financial businesses know when all their infrastructure components will reach their end-of-life-date.
True partnership involves listening on both sides – it’s the best way of avoiding major misunderstandings, while also opening up the full gamut of possibilities that the cloud can provide. As the financial services industry looks forward to 2019 and beyond, we hope that it will be more open to collaborating with their technology partners, and taking advantage of their expertise – and so more effectively meet the challenge from their younger, more-agile rivals.
FIVE REASONS WHY YOUR BUSINESS’ PROCUREMENT TEAM SHOULD BE USING A CONTRACT MANAGEMENT SYSTEM
By Daniel Ball, business development director at Wax Digital
Even in today’s digital-first environment some businesses are still storing documents, such as contracts, in filing cabinets making it labour intensive to retrieve, manage and even identify important paperwork. In fact, it is calculated that poor contract management practices are costing companies an average of nine percent of their annual revenues.
Moving to a contract management system online can speed up the retrieval process and help decrease the amount of time and resources required to manage contracts. Using a CMS companies can create an online database to centralise information and store documents. Not only does this help ensure contracts are well managed and kept up-to-date, but it can also help businesses save up to 20 percent of overall costs per year.
From legal departments overseeing regulation compliance to finance teams ensuring payment deadlines are met, contract management technology benefits many areas of an organisation. So, how can a good CMS help your procurement team?
How will a good CMS help your procurement team?
The number of suppliers your procurement team must oversee varies depending on the size of your business. It’s not uncommon for large enterprises to be working with thousands of suppliers at one time. A CMS will use automation to record, manage and streamline data, providing procurement teams with important contract details including time and location information, as well as real time alerts such as contract breaches.
Here are five reasons why your business should be using an online contract management platform:
- Increased spend visibility
Using a CMS can give procurement professionals full visibility of suppliers, including the company name and location of where a product is coming from and in what quantity. This transparency will also help contribute to the risk management strategy of your business as it enables you to spot vendors who may be prone to environmental, economic and political uncertainty. In the current environment, for example, suppliers’ may have decreased or ceased production due to COVID-19 or could have been heavily impacted by the negative price of oil, making visibility increasingly important for businesses.
- Eliminates maverick spend
Centralising and streamlining contract documents will ensure that buyers can instantly access up-to-date information to see if a contract already exists. This helps buyers avoid simple and common mistakes that often occur when using manual filing systems, such as onboarding new vendors when existing agreements are in place with another supplier.
- Keeps track of contract renewals
It’s easy to forget about contract renewals or sign up for another term without ending an existing agreement, especially when using a traditional filing system. Businesses using an online CMS can set up renewal alerts in advance, allowing buyers sufficient time to source new vendors or negotiate better prices.
- Improves spend management
A centralised database means that all negotiated prices, contract conditions and other important transactions can be accessed in one place, making it easier to analyse spend. A CMS can help identify discrepancies, find where contract violations have occurred and deal with any associated problems.
- Adhering to regulatory and legislative compliance
It’s important to ensure that all suppliers are meeting the terms of their contracts. A CMS will automatically audit supplier information, meaning that any failures are immediately raised to procurement teams. The platform will also provide notifications if any new data is required or updates need to be made, avoiding potential legal issues.
It’s clear that using an online CMS will benefit your business and procurement teams by increasing spend visibility, enabling access to up to date information, ensuring contracts are closely monitored while contributing to the reduction of unnecessary spend. So, now’s the time to stop relying on those dusty old filing cabinets and start using a CMS.
PROTECTING YOURSELF AGAINST A RECESSION
James Turner, Director at Turner Little
The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the steepest economic downturn since the Great Depression.
So, what does that mean for you? James Turner, Director at company formation specialists, Turner Little, suggests “While there’s no fool proof way to ‘recession-proof’ your finances, establishing a solid base now will put you in a better position to weather the storm.”
“Whilst the future of the global economic landscape is simply too complex to predict, it’s not hard to spot imbalances that have built up, as central banks and governments around the world talk about introducing further fiscal stimulus and monetary expansion, the consequences could be significant,” adds James.
A good wealth management agent will recommend starting by saving a substantial cash emergency fund in a high-yield savings account, understanding your spending habits and where you could cut back if you needed to, and establishing your long-term investing strategy now, so you can stick to it.
If you were to solely invest based on the inevitability of a recession, you are likely to miss returns that are immediately available. If you truly want to recession-proof your assets, the best thing to do is develop a long-term strategy and invest wisely.
Diversification still matters
It’s dangerous to pile all your investments into a single sector, including consumer staples. Diversification is especially important during a recession when particular companies and industries can get hammered. Creating a diversified portfolio of assets blended across asset classes—such as fixed income and commodities, in addition to equities, sectors, geographies and strategies—can also act as a check on portfolio losses.
Build a reserve
To keep your money protected before, during and after a recession, it’s recommended to have an income generation conversation with a financial advisor. This will cover a lot of different topics, but one of the most important is the emergency fund. You’ve likely heard many times that it’s good to have between three and six months’ worth of living expenses set aside in the event of a job loss, health crisis, or other unforeseen circumstance.
Protect your assets
If you’re interested in talking about protecting your assets and your investment portfolio, do get in touch. We specialise in creating bespoke solutions for individuals and businesses of all sizes. The knowledge and expertise of our specialists will be able to assist with any enquires, no matter how complex.
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