Ernst & Young: Technology key to cost reduction in financial services
07/07/2009
According to a recent poll commissioned by Ernst and Young, a majority of global financial service companies expect no return to growth until 2010, or even later. The IT department is likely to see the greatest changes over this period: according to the survey 16% see information technology as leading the way to cost reduction; a larger percentage than any other field.

Fuente: http://www.bankingtech.com  Fecha: 7.07.2009

With 34% still not confident of growth during 2010, the timeframe is uncertain. Nearly two thirds of the industry has stated that more money and time will be spent to secure a strong financial future for their companies. Technology departments will see a marked change; in the current economic climate, 20% percent of companies will be cutting investment in information technology. On the other hand, another 20% of those polled said there would be an increase in technology investment.

Tom McGrath, managing partner of Ernst & Young's EMEIA financial services business, comments: "The end of the recession and a return to profitability is a tough one for any industry to call. But financial services are naturally more cautious - and possibly more realistic - about when the return to profitability might happen." This is an interesting sentiment considering many financial services were heavily affected by the recession due to lack of caution, unnecessary systemic and business risk as well as forecasting faults.

Many see this recession and virtual collapse as a great opportunity for change and improvement. If companies within the sector can focus upon reorganizing at a fundamental level than a crisis of this scale may well be avoided in the future. In order for this to be successful technology and its implementation will help companies to contract costs and waste making them more efficient - at the same time casualties will appear and the fittest will survive.

A majority 70% of institutions have changed risk management strategy as a result of the crisis: 68% had implemented permanent differences to their regulatory framework and over half (54%) have changed their operating model. Before the crisis made itself completely clear, banks had been taking on too much risk leading to 80% of institutions increasing investment in risk management. They need to view and evaluate their risk profiles more often and through a wider window.

One positive is that 61% of respondents have had the opportunity to improve cost cutting in the last six months. Four in ten also plan to hive off their non-core or non-performing business, compared to five in ten in a similar survey earlier in the year.

Carmine DiSibio, managing partner for Ernst & Young's Americas Financial Services Office, comments: "The financial services industry has been battered, but will certainly emerge from this recession stronger and healthier, with more focus on risk management. As the industry recovers, we are likely to see changes in operating models and regulatory frameworks. It's likely to be a new world, and financial services firms will find their way together."