Who moved the goalposts? What CIOs in the financial services sector will face in 2015

Runner crossing finishing linePost by the EY Financial Services team: Dan Higgins, Craig Stanley, Gary Delooze and Nikhil Lele.

If you are not comfortable with complexity and minute-by-minute change, don’t aim to be a financial services chief information officer. The sector’s IT leaders — across banking, capital markets, and insurance — face an ever-expanding list of strategic priorities that could easily overwhelm the fainthearted.

The big four (no pun intended) are:

  • An ongoing cost squeeze
  • Increasing regulation
  • Accelerated digital and big data transformation
  • The need for future-proofed cybersecurity

Let’s look at some of the implications of these four priorities:

  1. An ongoing cost squeeze
    Financial services CIOs need to continue to optimize costs and instill rigorous cost management. Despite having spent a decade squeezing more out of IT cost bases, CIOs are still being asked to seek ongoing improvements.
  2. Increasing regulation
    CIOs must cope with ever-increasing regulation. This eats up significant resources. For example, in a Financial Times report, UK-headquartered bank Standard Chartered stated that regulatory costs were adding 1% to 2% to its spendings every year, and that its legal and compliance headcount had increased by 30% in the past year alone. (1)
  3. Accelerated digital and big data transformation
    Digital innovations continue to sweep through the industry. Today’s tech-savvy financial services customers want to interact via multiple platforms and devices. This means that organizations must build a coherent and integrated multichannel customer experience.  As multichannel activity has increased in financial services, big data has become “massive data.” These oceans of data could be used to transform the customer experience — by firstly building a deeper understanding of consumers, and then tailoring marketing and sales activity.
  4. The need for future-proofed cybersecurity
    Cybersecurity continues to ask tough questions of the industry. Though many organizations have done stellar work in managing security risks, the rules have changed once again.  Various important new technologies — such as cloud platforms and social media — were not engineered with sufficient security defenses to meet the high risk management standards of the financial services industry.

How to prioritize?
Together, these four add up to a rich menu of priorities for 2015. However, many CIOs only have a limited budget.

To help focus their investment and resources, CIOs can use a portfolio approach that blends both operational excellence and targeted growth initiatives.

A focus on big data and analytics, in particular, can help across the different priorities detailed here. For example:

  • CIOs can increasingly turn the analytics lens onto their own data in order to understand the IT function and its cost structure better. For example, one large global bank is using data on its IT function to understand what investments to prioritize, and to assess when to intervene in stalled or failing projects. The bank is also building predictive models that will allow it to allocate spend across projects.
  • With the right data analytics management systems in place, organizations can better manage regulatory and compliance risk.
  • The proliferation of digital channels has rapidly increased the amount of data available to firms. Properly managing and mining this data will generate deep insights, which can help financial services players to build customer loyalty and lifetime value.
  • Data analytics can be an important weapon in the cybersecurity armory. For example, it can increase visibility across complex networks of global platforms (see here for more).

Because IT systems themselves tend to be complex, most CIOs are comfortable with complexity. In a sense, it’s the nature of the game they are in.

As they weigh up their priorities in this complex game – where the goalposts are constantly moving – by harnessing the power of their own data CIOs in financial services could take a game-changing advantage.

(1) “Strategies shift as regulators renew scrutiny of bank compliance,” Financial Times website, ft.com, 21 August 2014 — subscription only.

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