The clocks have stopped. Lock-downs around the world have put businesses and the markets on ice. We’re living through “Day 0” as our lives go on hold. Now, the question we’re all asking is: What does Day 1 look like?
It won’t be a pretty “Post-COVID” world
Unfortunately, this pandemic isn’t going anywhere. There will be further waves to this virus over the coming months as it ricochets through the interconnected world we’ve built. As it stands, I don’t see this being the last time we’re in lock-down this year.
Even once the current outbreak is under control, we will be facing the medium-term risk of the virus mutating as it spreads, undoing months of vaccine research.
Over the long term, we’re looking at a multi-year recession. This won’t be the sharp “V-shaped” recovery we were hoping for. We also have to accept that free movement of people, goods and money has effectively created one interconnected world, which has also given the pandemic a fertile breeding ground.
We won’t be going back to the way things were. But those frozen clocks will start ticking again. We now have to plan for Day 1.
If COVID-19 is here to stay, what’s next for capital markets?
But when I look back over the last few years, there have been periods of market flux that acted like change agents and drove the biggest transformations in the sector. As Warren Buffett once quipped; “It’s only when the tide goes out that you learn who has been swimming naked”.
The last time our world stood still was in 2008, as the financial system was struck by a liquidity crisis and collapse in confidence in the banking system. Regulators stepped in and wealth managers have spent the last decade settling into a new rhythm of cost-cutting and regulatory compliance.
With the tide now on its way out again, we’re learning what the industry’s next generation of risks are. We no longer have a capital problem like we saw in ’08. In 2020, the issues are stemming from creaking infrastructure and a reliance on manually intensive processes to keep operations running smoothly.
How many people do you need to maintain your non-core operations?
COVID-19 has cut through wealth managers’ BAU processes like a hot knife through butter. The shift to working from home has been the easy part. Many COOs have now seen how painfully reliant their non-core operations are on individual people sitting at their desks and the risks it entails, as they barely manage their BAU in these volatile and turbulent capital markets. Now, they’re questioning how many people they should have in that position.
There’s only one right answer to this question: ZERO. As a result, every function: core and non-core, is going under the microscope. For non-core functions like securities lending, there shouldn’t be any humans involved. The current agency lending model is predicated on people, but that has to change. Outsourcing and automating these functions will be the singular focus for wealth managers from Day 1.
For now, we’re still sitting at one minute past midnight. But the next crisis will come, and it might be sooner than we think. Now’s the time to think about how we get ready for it. The clock is ticking.
Boaz Yaari is the Founder and CEO of Sharegain.