Financial Services Ireland

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How Ireland’s funds industry can navigate the pandemic and beyond

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EY’s Paul Traynor recently provided the below commentary for the Finance Dublin Yearbook (published August 2020).

Q: Ireland’s funds industry provides direct employment for over 16,000 people. Rapid technological change is taking place, affecting the work processes of many of the workforce in the industry. Covid-19, with its working from home and social distancing, will provide new organisational challenges for the funds industry, as it does for all FS businesses.

In what major ways can this major challenge be surmounted by the industry in 2020?

Covid-19 responses have illustrated the potential for scaled transformation at speed. New conceptions of resilience and agility, combined with the prevailing economic conditions, will influence the boldness of future decisions.

The initial focus of the funds industry was the safety and wellbeing of employees. While the rush to working from home was largely successful, there were bumps in the road:

  • Laptops and 4G dongles were in great demand, particularly in offshore centres, as disaster recovery second sites were rendered ineffective.
  • Risk management and liquidity frameworks were tested as fund management companies reacted to market volatility and were required to explore strategies such as gating funds.

The focus quickly shifted to putting in place processes and tools that would facilitate a prolonged period of working from home. Firms turned their attention to:

  • The heightened cyber threat of staff working over partially unsecured networks.
  • The roll-out of collaboration tools, e.g. video conferencing and screen sharing.
  • The physical needs of staff, be that second screens or ergonomic chairs.
  • Reminding staff of Market Abuse/Conduct rules particularly as it pertains to confidential information that might be accidently overheard across the shared workspace that was in effect the kitchen table.
  • Embracing microservices, e.g. using tools like Docusign to eliminate the need for wet signatures or replacing swivel chair interfaces with file transfer protocols.

More will need to be done to industrialise the work from home environment. No doubt the Central Bank will be evaluating how firms’ risk management and liquidity frameworks and governance more generally held up, perhaps tagged on to their upcoming organisational effectiveness thematic inspections.

Societal, customer and employee behaviours and expectations have shifted; for example:

  • New forms of hybrid work models will become the norm, the role of the office as a ‘place’ will be reconceptualised.
  • The digital transformation of the customer experience will be accelerated, artificial intelligence (AI) will be used to improve the experience and to better mine existing and new customers.
  • Cost pressures will see managers and servicers continue to embrace robotic process automation. AI will be deployed in the money management front office.
  • Customers will demand enhanced Environmental, Social, and Governance (ESG) products and processes and new asset classes uncorrelated to the public markets and real estate.

Ireland’s funds industry has an opportunity to play a significant role in the transformation of the investment management industry globally. Covid-19 has demonstrated that technology-enabled hybrid and distributed work models can be very effective. The industry in Ireland can help solve the challenges of cost-effective service delivery and the need for regulatory substance arising from Brexit by re-shoring to Ireland value-added activities from other financial centres.

Given the talent pool (including individuals currently employed in the tech sector) and our proximity to the EU, the UK and the US, the industry is well placed to play an extended role in areas such as:

  • Developing AI to deploy across the money management and asset gathering front offices.
  • Product development and distribution.
  • Fund and operational risk oversight.
  • Liquidity and treasury management.

By embracing this opportunity, we will grow employment, position Ireland at the centre of responsible investing and play a role in solving the global savings shortfall.

You can also review our latest insights and thinking to support you in leading through these volatile times; don’t hesitate to reach out if you have a question.

 

Paul Traynor

Partner and Consulting Lead, Wealth & Asset Management
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