For banks, one of the biggest lessons of the past year can be summed up in three words: Brace for impact.
Disruption is no longer a dark cloud on the horizon. Due to the COVID-19 pandemic, disruption is present and fully accounted for, and banks have had no choice but to respond accordingly. Like airplane pilots navigating a storm, banks are struggling mightily to see what’s ahead and to manage the softest landing possible.
Those that entered the current crisis with more agile planning processes in place were in for a much less bumpy ride. They were able to quickly run multiple what-if scenarios, reforecast budgets, and ensure their plans reflected the latest impacts across their business.
They’ve learned that agility is critical—and that modern planning helps achieve it.
Disruption Isn’t New, and It Isn’t Over
Banks have long dealt with disordering forces like regulatory changes, geopolitical tensions, and demographic shifts. Then came COVID-19—and with it new realities like an increase in remote working, soaring demand for digital banking services, and a flurry of cash preservation. Meanwhile, banks are playing a key role in the global economy’s recovery, from distributing stimulus funds to issuing loan deferrals, fee waivers, and more.
Even before the pandemic, Deloitte in its “2020 Banking and Capital Markets Outlook” predicted that “a new wave of disruption more forceful and more pervasive than what we have seen in recent years will likely unfold” in the 2020s. “While the roots of this disruption— technological, economic, geopolitical, demographic or environmental—may remain the same, the unique convergence of these factors should unleash unprecedented change in the broader society and economy, and, consequently, in the banking industry as well.”
Business Agility in the Age of Covid—and Beyond
For banks to thrive in this uncertain environment, they’ll need to reconcile how they can align planning technologies and processes with constantly shifting demands.
To their credit, banks have focused on technology, but adding new technology doesn’t necessarily solve technical debt, which is what happens when newer technologies are layered on top of aging infrastructure.
The consequences of technical debt are many. It greatly limits the capacity to be agile, preventing a bank from harnessing the power of data, for example, or leveraging machine learning for audits. Current conditions only amplify the need to rely on processes that can help you navigate uncertainty. In other words, legacy planning processes and technologies (such as spreadsheets or outdated, hard-to-use planning platforms) propagate siloed and static planning processes.
Technical debt has been a long-time issue in the banking industry, but the pandemic has sped up the day of reckoning.
“Those organizations that were more digital and had more of an agile core have done better” than others that aren’t in that position, said Ambrose Shannon, Accenture strategy & consulting, CFO & enterprise value lead, UKI, in a recent Workday webinar.
For banks, reliance on static planning can have lasting consequences. “The strategic planning and budgeting processes at many financial institutions have not kept up with the times, even as these processes have taken on increased importance given market headwinds and tighter regulatory requirements,” notes management consulting firm Oliver Wyman in its report, “It’s Time to Upgrade the Way Banks Plan.”
Fortunately, there’s a better way.
Navigating Disruption with Active Planning
According to the Oliver Wyman report, banking leaders are starting to recognize that their existing planning and budgeting environment isn’t able to deliver what they need for agile, strategic decision making. Banks want to:
- Continuously monitor results.
- Drill into non-finance business drivers.
- Conduct quick “what-if” analyses and the impact of potential decisions.
- Evaluate plan feasibility amidst financial resource and regulatory constraints.
What Oliver Wyman’s report describes is something called active planning.
Unlike traditional, static planning processes, which tend to be episodic, siloed, and confined within the finance function, active planning is continuous, comprehensive, and collaborative. Active planning tears down data and process silos to provide decision makers with a holistic view of the business. And it provides the flexibility to forecast continuously, model extensively, and even uncover problems or opportunities that might elude decision makers in a static planning environment.
A Way Forward Into the Next Normal
Until now, many banks have managed to scrape by with aging systems and processes. But the pandemic has been a wakeup call, and its message unmistakable: Legacy technology and processes are woefully ill-suited for a world where disruption occurs daily, even hourly.
The pandemic has changed the horizon to where forecasts must be continuous. Where tasks like data entry and consolidation must be automated. Where scenario models can’t be limited in scope or number. Where financial services enterprises must harness the scale, resilience, and security of modern cloud planning solutions or find themselves chasing their more fleet-footed competitors.
For banks to thrive in a landscape impacted by the pandemic, they’ll need to continuously navigate the aftermath of COVID-19 and beyond. And with CFOs across all industries wanting their financial planning and analysis (FP&A) teams to become more strategic partners to the business, the new chapter in the next normal in banking is to make driver-based planning, well, normal. Collaboration, too, is essential. For as much as continuous planning is a game-changer, the process will only work if the entire organization, from the leadership to the technology, is in on the game.
This is a time of unprecedented change, and the next normal, whatever form it takes, will be filled with more of it. For banks, the planning technology and processes that enable agility are already here. They must seize the opportunity to transform their planning operations with agile solutions so they can chart a course for growth no matter what weather lies ahead.