If one word defines the last decade, it is disruptive; but if the events of 2020 so far are any indication, we “ain’t seen nothing yet”. No sector is more likely to be disrupted by the pandemic than banking; however, those that see opportunity in crisis can outmatch this major threat to their bottom lines. Resilience, adaptability and vision are must-haves for banks that choose to lead out of turmoil.
The pre-pandemic world had its share of risks, but they were predictable, and risk managers knew how to use data to measure and manage them. Mid-way through 2020, the finance sector finds itself thrown into a grave new world marked by great uncertainty, a reality for which it was not well prepared. Being ready for the unknowns is now a must for survival, but how can banks accomplish that feat?
A sale isn’t a sale until the money actually changes hands, whether the payment occurs in a retail store or online. As consumers increasingly turn to cyber-space, it behooves CFOs to seal any cracks in their digital-payments systems. Central areas to consider include competitive advantage and business model innovation; optimization and streamlining costs; localization return on investment and new market growth strategies; and connected finance, cash flow and treasury management.
Crisis forces change, and often positive, enduring change. Witness banking’s recent response to the COVID-19 crisis. The luxury of slowly unrolling digital transformation was abruptly replaced by the urgent need to provide the bulk of bank services via online or mobile channels. The future for banks lies in maximizing their omnichannel capacity, even after the crisis subsides. They need to reimagine themselves to provide the best service imaginable to customers.
The pandemic has left its mark on all sectors of every economy, including real estate. Prime London property hasn’t been spared, although the reality of buyers’ hoped-for price drops may not be as dramatic as sales data indicates, with shortages of some sought-after residential properties shoring up values. Camilla Dell of the buying agency Black Brick shares her experiences from representing buyers of London properties in the midst of COVID-19.
The emergency-loan lifeboats thrown out to small businesses to help them stay afloat during the immediate COVID-19 fallout will need to be repaid, mainly to banks. With many businesses still struggling, defaults are guaranteed. In the UK, progress is being made on developing a debt-collection code of conduct to guide banks seeking repayments of government-guaranteed coronavirus loans. Providing already-burdened SMEs with more equity, not debt, may be the best solution.
Although history doesn’t precisely repeat itself, we can learn much from the past, and this is especially true for banks during a crisis. The COVID-19 pandemic has inflicted widespread health and financial harm. Banks need accurate data to predict how deeply they will suffer from credit risks, and informed analyses of historical data such as loss given default levels are crucial in providing this to them.
COVID-19 Response in MENA: The challenges and opportunities for the banking sector and financial inclusion
No part of the world has been spared the COVID-19 economic saber, but the MENA region is suffering from a double-edged sword: the pandemic and persistently low hydrocarbon prices. Despite the recession specter, many banks, both central and private, are doing what they can to minimize the damage for citizens and businesses. Confronting the challenges, they are finding new opportunities, primarily through digital means, to improve their operations and reach.
Instead of prodding countries together to fight a common enemy, the pandemic has in many cases driven nations apart, leading them to insulate themselves from others, thereby threatening years of progress in forging trade partnerships. COVID-19 has exposed many of the inherent weaknesses in the current trade system but also made a strong case for strengthening global connectivity through advances such as digitalization so that all countries can prosper side-by-side.
The special administrative region of Hong Kong has long been a magnet for foreign direct investment. Recently, the cracks in its special “one country, two systems” relationship with China have widened. The grievances of pro-democracy Hong Kong residents have erupted into massive protests—threatening Hong Kong’s appeal to international investors. If not Hong Kong, where else can investors direct their wealth? Or should they wait the Hong Kong situation out?