By Terry Ewin, Vice President EMEA, IPC
‘Never let a good crisis go to waste’ is a phrase that has been widely peddled this year by many industry associations, management consultancies, and organisations on how the global pandemic has presented several opportunities for new and meaningful change.
Although the impact of COVID-19 has caused extreme market volatility and led to many companies quickly uphauling their operations and enacting their business continuity plans, the crisis does also offer organisations the time and opportunity to rebuild. This has the potential to influence financial trading firms greatly, as until 2020, it was unheard of for traders to leave highly regulated trading floors and work from home instead. Yet, when faced with no other option in the face of national lockdowns around the world, financial firms had to pivot and interestingly, remote working was a huge success and vital operations were able to continue.
In recent weeks, a light at the end of the tunnel was revealed to the world when news circulated that an effective COVID vaccine is within reach. Although it may take months, perhaps even another year, before any vaccine can be widely administered to the population, banks and brokers alike need to consider what life will look like post-pandemic and how their technology strategies may need to adapt.
The three stages of a crisis
There are three distinct phases when it comes to a crisis – the emergency phase, the transition period, and the post-crisis period.
In the emergency phase, firms were in critical crisis management mode and plans were activated to ensure business continuity. Banks and brokers perform a critical function to society, and they had to ensure operations could still resume and continue to service their clients. Overall, both large and small European banks and brokers were able to handle this phase relatively well, which is largely because communications technology has now reached the point where productive work from home strategies are in place. Cloud-connectivity, in addition to the use of soft turrets for trading, has enabled traders around the world to keep working throughout the lockdown restrictions. At IPC, we know that clients were able to make a relatively smooth transition to remote working operations owing to cloud adoption and through utilising technology solutions.
The transition period is where we all are with the current coronavirus pandemic. This stage is where financial companies can start to work out how best to manage the worst effects of the ongoing crisis, whilst also considering longer-term changes once the crisis comes to an end. Even with a coronavirus vaccine seemingly on the horizon, no one can say how long it will be until we enter the post-crisis period. With European governments advising their countries to prepare for “a hard winter”, there is still a lot of uncertainty as to when businesses can return to pre-pandemic operations.
Even with restrictions across Europe being eased, companies will not necessarily be rushing back towards more on-site trading. For example, many banks are starting to look at hybrid operations where traders come in for one or two days a week and work from home for the rest of the week. This will mean fewer people in offices so social distancing practices can be followed. Along with this, there will of course be a continued reliance on remote working technology solutions.
Finally, there is the post-crisis period. Until a vaccine has been distributed among the masses, this stage is very unlikely to occur in the near future. However, many analysts predict that there will be a strong rebound in the economy once the vaccine does arrive and while it may not exactly be V-shaped, the resiliency that has been displayed by the financial markets this year indicates it will be healthy.
The silver lining of this crisis
No one will deny that the coronavirus pandemic has not been catastrophic in many areas, but nonetheless, European trading firms should be seeking to take advantage and emerge from this crisis in a position of strength, which will be the silver lining. In order for this to be achieved, there needs to be increased participation in large, diverse communities that give companies the opportunity to showcase real differentiation from their competitors.
By utilising successful community networks, financial market participants gain access to an established, diverse and global financial ecosystem. This ecosystem includes an array of counterparties for price discovery, liquidity and execution – such as broker/dealers, inter-dealer brokers, exchanges, dark pools, hedge funds, asset managers, institutional investors, trade lifecycle services and market data providers. Essentially, the information that financial firms require to find liquidity, as well as the ability to access it.
To further take advantage of the situation and support a new reality of flexible working, technology infrastructure may need to adapt and advance. An example of this is that we may see a rise in investments for high-speed fibre connectivity in traders’ homes and greater utilisation of soft turrets and cloud delivered solutions.
At IPC, we anticipate that many firms will be looking to reprioritise their IT and business continuity budgets having now witnessed the damage and extreme circumstances that are possible without sufficient planning. It is of course crucial that financial firms are prepared for any crisis, so this refocus on spend may well manifest itself in the form of further investment in cloud migrations, as well as ensuring that legacy trading infrastructure is adequate to handle possible surges in volatility and volumes under exceptional market conditions.
There is a great emphasis being placed on voice trading, and financial firms may consider investing in infrastructure that supports more seamless client and sales experience Chat and Voice channels by leveraging AI/ML-drive technologies. However, considering the cost restraints that many IT departments may be facing at this time, financial firms will need to prioritise certain projects and spending over others to strengthen the business.
Despite the positive news of there being a near-effective coronavirus vaccine, many banks are still predicting and expecting there to be a permanent change to their offices, business operations and infrastructure. Our understanding of ‘normal’ could be completely redefined, so by investing in a long-term remote working strategy and leveraging robust and flexible technology, European trading firms can crucially ensure they maintain their resilience while at the same time taking advantage of the crisis by transforming their operations to be equipped for a post-pandemic world.
