In the frame

Lisa McClure, director, PwC, explains why building links to the SAAAME regions is the key for the future of Jersey's offshore finance industry

Four years on from the 2008 financial crisis, we seem to have settled into a mode of medium term strategic planning, which revolves around dealing with never-ending waves of regulation that challenge us to prepare now for impacts as they come into force.

PwC is supporting clients as they adapt to doing business in the new regulatory landscape but we have also been looking further into the future;

We are sharing with our clients around the world, our thinking on even more significant changes to the global economy happening now, that may leave our finance industry at best caught on the back foot and at worst out of business within a decade unless we start to plan now.

We see this as one of the key implications coming out of 'Project Blue: Capitalising on the rise and interconnectivity of the emerging markets' the published findings of our research project on global mega-trends and the future of financial services, known as Project Blue.

Rapidly accelerating growth and increased intra-trading across South America, Africa, Asia and the Middle East (SAAAME) is leading to a radical shake-up in the competitive environment for financial services businesses, both within the SAAAME region and beyond, according to  our research SAAAME regions are emerging as an increasingly interconnected trading zone, which effectively, in physical terms at least, bypasses the West.

Nigel Vooght, partner and global leader of financial services at PwC commented during his recent visit to the islands: “The real story is not so much the speed of growth within SAAAME, but how interconnected the trade flows between these markets have become.  As intra-SAAAME trade proliferates, an even greater proportion of global commerce is set to bypass the West altogether, leaving Western financial institutions at risk of being cut out of the loop.  Financial institutions need to find ways to tap into this emerging-to-emerging market commerce if they are to sustain competitive relevance.”

The development of financial infrastructure across the region, alongside increasing access to long-term funding and the ability to tap into fast growing sources of liquidity and investment, will play a key role in sustaining this expansion in trade and provide opportunity for financial services firms internationally.

As SAAAME markets continue to develop and grow, so too will the need for new infrastructure and the associated finance.  This will create significant opportunities for financial institutions which both fully understand the risks involved and develop service offerings which are both tailored and relevant to the local market.

The SAAAME regions report explores just one of a number of themes identified during our research. Project Blue provides a framework to help industry executives organise their assessment of a world in flux, debate the implications for their business, rethink their strategies and, if necessary, reinvent their organisations.

As hard as it is for many organisations to look above the dark clouds of regulatory reform they are battling to do business under right now, seeing the future clearly, being the first to adapt strategies and business models, and breeding a culture that shapes, rather than reacts to the changing business environment will be the building blocks of sustainable competitive advantage in the future.

We highlight the SAMAME region report, as it has obvious particular relevance for our finance industry but Project Blue also explores other mega-trends including demographic, social and behavioural change, the war for natural resources and technological change.

The Project Blue Framework is flexible enough to be applicable to all industries within our Islands.  It recognises that whether the drivers of change are threats or opportunities depends on the nature of your business.  Investing time to reflect on these themes and what they mean for your business will help you target investment, identify talent requirements and develop the necessary operational capabilities needed to make the most of your competitive potential.

Looking more widely some of these trends already resonate for us as island communities, and it is imperative we as businesses and as jurisdictions, invest in understanding the implications for our future economy, and in formulating what could be our most radical and innovative reinvention of the islands offering yet.

The pressing priorities also include the need to engage in what is termed as ‘the war for talent’.  This is a key factor for both individual organisations and the Islands.   We must continue to develop skills that will enable us to meet future challenges and seize emerging opportunities in the global markets.... so for example, if Gigabit Island is to succeed as a strategy / our ICT strategy is to succeed as a strategy, we need to support it with serious investment in growing a top quality skills base in the island.

Nigel Vooght observes: 'In an increasingly globalised financial services sector, the impact of the rise and interconnectivity of the emerging markets will be felt in the West as much as SAAAME itself.  Western business cannot simply assume they will be able to transfer investment and growth into new markets.  They are going to face growing competition from SAAAME-based international groups and could become targets for acquisition themselves. 

“Success is likely to depend on being able to anticipate and respond quickly to changes in customer expectations, behaviour and use of technology that are shaping SAAAME and wider global markets.”

For the greatest chance of success the Channel Islands as industries need to respond and quite possibly need to do so together. How we plan and invest now, will determine our future chances of success. Historically we have been able to adapt and plan to deliver innovative products. 

We will need to harness this skill and challenge ourselves to deliver products and capabilities that domestic players in the SAAAME regions cannot do, and be sensitive to the realities of doing business in these countries.