Staying dry during the recessionary storm of 2023

As we enter 2023, many business leaders may be experiencing feelings of uncertainty and apprehension. Heading into a recession and with costs continuing to rise at unprecedented rates, the next 12 months will undoubtedly be tough. But all is not lost. Finance Derivative spoke to five industry experts to determine what we can expect from 2023 and how to weather the storm ahead.

Doing more with less

We have already seen the initial impacts of the looming recession in 2022, as food, fuel and energy costs began to soar. Hugh Scantlebury, CEO and Founder of Aqilla, recognises that this is likely to continue into 2023: “The serious problem for next year comes from inflationary pressures, causing rises in food, fuel, energy, and resources. For businesses and individuals, the cost of living and operating will go up. Although salaries will rise accordingly, all those things must be accounted for, so we will need to keep a much closer eye on what’s coming in, and what’s going out.”

“As the recession takes hold, I wouldn’t be surprised to see the Government viewing fines for data misuse as a way to raise additional cash,” adds Michael Queenan, CEO and Co-Founder of Nephos Technologies. “Not only could this fill a significant fiscal shortfall without hitting voters, it could also strengthen Government support as it presents itself as being serious about data protection. It’s a win-win for the Government so I think it is inevitable that the ICO will be hot on the tails of companies that fall foul of permitted data use.”

“2023 is going to be all about doing more with much less,” notes Bruce Martin, CEO of Tax Systems. “Not only will all businesses be tightening their belts due to rising costs, but particularly in the tax industry, there is a severe shortage of skilled professionals. The main problem is that everyone is embracing technology and, therefore, requires staff with the knowledge to utilise the implemented tech. With this huge increase in demand, the supply of quality developers is being stripped. Simultaneously, we’re not seeing the huge influx of new tax talent needed to meet such demand. This forms the basis of the ongoing ‘war for talent’.”

Automate the future

A key method that will prove crucial in doing more with less will be automation. Scantlebury from Aqilla explains that “automation, artificial intelligence, and machine learning within finance functions can help accounting teams considerably. They can do the heavy lifting, the time-consuming data entry tasks and the repetitive work that can fill up so much of the working day. They also remove much of the grind and monotony — freeing up the time of skilled professionals to add value to the business. Although the finance sector is currently behind the curve in adopting these technologies, hopefully, 2023 will be the year that businesses push and transform the industry once and for all.”

“The manual, monotonous tasks should be automated to free up time for training and development that will accelerate the value being added to the business,” agrees Tax Systems’ Martin. “People don’t want to spend 8 hours a day inputting data into a spreadsheet and they shouldn’t have to when technology can automate such tasks.

“Tax has been lagging behind in the digital revolution that many other industries have experienced in recent years. We have seen the beginnings of this in 2022 but I hope that 2023 will be the year it truly takes off.”

Starting 2023 as we mean to go on

2022 has been a transformative year for the finance industry, as many organisations found new ways to embrace technology. Financial institutions will continue following this trend in 2023 whilst ironing out the creases and righting the wrongs of their journeys so far.

Andrew Doukanaris, Business Director Fintech Europe at Intellias, acknowledges that the success of Buy-Now-Pay-Later (BNPL) payment options will continue over the next 12 months and beyond: “BNPL schemes have become a practically overnight sensation. And in 2023, they are set to continue their ascent. One recent study, conducted in 2021, found the market is set to reach a value of $3.98 trillion by 2030. That’s a huge increase from only $90.69 billion in 2020. And Gen Z’s use of such services grew six-fold in 2021 so it is likely that it will inform consumer behaviour far into the future.”

Similarly, Eyal Sivan, Head of Open Banking at Axway, recognises that open banking hasn’t been as successful as previously predicted: “Although Europe pioneered open banking with their PSD2 regulations, their efforts have been considered by many to be lacklustre at best and an outright failure at worst. Balkanization of standards, inconsistent implementations, and tepid enthusiasm on the part of incumbent banks have led them into Gartner’s Trough of Disillusionment.” But 2023 could be the year that Europe catches up and reaps the technology’s benefits. “However, as the Europeans observed the successes of those that followed, notably in Brazil and the Middle East, they started to revisit their approaches. While PSD2 was centred around payments with data sharing added afterward, the impending updates to legislation (by the name PSD3 or otherwise) will more than likely have a broader focus on generalised data sharing, open finance, and even open data, as Europe catches up to its peers.”

Equally, “Operational Resilience regulation is the dominant theme on the regulatory agenda”, notes Gary Lynam, Director of ERM Advisory at Protecht. “Resilience is shifting the organisational mindset and very much seen as a catalyst for change. What is needed is a structured approach to building operational resilience maturity over time. There is no room for cutting corners. We are likely to see high-profile cases of hefty fines for those financial institutions that fail to successfully demonstrate their ability to recover from stressed events. It is well advised to get ahead of the game in building accountability and tolerance against potential operational disruption, not only to meet incoming new legislation but to be ready for potential disruptive events that could be on the horizon.”

Yet, it is impossible to truly predict what the next year has in store for us – the last couple of years have certainly been unpredictable! As Aqilla’s Scantlebury concludes, “Ultimately, who knows what will happen next year?! We didn’t know there was going to be a war in Ukraine and we didn’t see the energy crisis coming. So, there are a lot of unknowns as we head into 2023…” All we can do is keep our fingers crossed that they are positive surprises!

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