Since mid-March, we’ve faced an expanding global pandemic, associated extreme economic volatility and mass protests over racial injustice. The convergence of these three crises over the past 100 days has many business leaders pondering the future and hopefully learning from unprecedented change in a highly concentrated time period.
In my last article, I noted that financial services executives keep asking, “What lessons are we learning?” As I reflect on all we’ve experienced over the past 100 days, ten takeaways come to mind.
1. Traditional scenario planning failed many of us.
Traditional scenario planning isn't much help these days because it generally focuses only on economic factors in a steady state and ignores complicated health factors such as the pandemic progression, timing of vaccine development and the like. As states start reopening for business and businesses start reopening workplaces, decisions get harder. If you operate in multiple locations, you face a patchwork of overlapping guidelines. With 59% of CFOs now concerned about a second wave of infections, you should plan for a number of scenarios and be ready to change course quickly.
2. Listen to your employee’s health and safety concerns.
Find out what your employees want to help them feel more confident in the workplace and respond accordingly. Our recent survey found only 47% of employees who were forced to stop working or work remotely say safety measures, such as wearing masks or reconfiguring layouts to promote physical distancing, will make them comfortable returning to the workplace. You’ll likely need to do more, and that might include measures such as contact tracing, boosting benefits and providing private transportation. Don’t forget, you’ll also need to balance safety with privacy concerns.
3. Give your workforce credit for adapting quickly.
Employees who can work remotely have adapted surprisingly well. We already have the technology and tools to make location less relevant for all kinds of work, and many CEOs have been surprised at how quickly it’s become mainstream. With today’s tools, even limited-partnership fundraising meetings, an IPO roadshow and critical finance functions such as closing the books can be done online.
4. Many technology investments made before the pandemic paid off.
Some firms had a running start with technology innovations they’d been planning for years. Suddenly, the working timeline was cut. Insurance carriers had to deploy remote operations in days while fielding calls and paying claims. Banks scaled their use of videoconferencing and other online collaboration tools to help serve customers when branches were shuttered. Those that were able to pivot quickly already had digital platforms and could simply migrate customers. In an environment where spending will be closely scrutinized, focus on tech changes that can deliver immediate results.
5. Transformation doesn’t have to take ten years.
Sometimes, you just need to start. This spring, some firms solved big problems in days because they had no choice. We saw mortgage lenders turn to automated valuation models (AVMs) instead of using full appraisals for refinances. One company adopted e-signatures in a few days after years of debating the change. Private equity (PE) firms put portfolio monitoring systems in place within days. Once changes like these are adopted, there’s little reason to return to the old way of doing things. You don’t need a holistic roadmap before you begin — but you do need vision and commitment.
6. It’s hard to adapt quickly if you don’t have the data you need.
In April, 55% of the small business owners we surveyed said they wanted banks to be more proactive in waiving basic fees such as overdraft charges. Unfortunately, some banks didn’t know which clients needed help. And data isn’t just about customers. Some firms struggled to know exactly where suppliers were located and whether vendors were vulnerable to COVID-19 lockdowns. Others could switch processes and vendors quickly to avoid service interruptions and frustrated customers. For PE firms, data has been invaluable to understanding how portfolio companies are performing in a no-revenue environment. Good decisions require good data, trusting the data and knowing how to get the data in a repeatable manner.
7. Spend only where it counts.
Pet projects will likely not get funded in the current environment. Keep that in mind as you decide which expenses are strategic and essential. Use zero-based budgeting to reassess your costs. You may need to make room in shrinking budgets for new investments that can help you drive top-line growth or support other core goals. To do that, you’ll need to make tough decisions, but you may never see a better time to make them permanent.
8. Your culture rose to the occasion. Keep it going.
Many financial services CFOs say they’ve seen some outcomes from their pandemic response that may make them stronger in the long run, including work flexibility (72%) and resilience (67%). Industry leaders are being thoughtful about which changes to keep. As tough as the crisis has been, employees have risen to the occasion at many firms, demonstrating the behaviors CEOs and CHROs hope for but don’t always see. Give your employees the tools they need to collaborate and get work done effectively so these behaviors stick.
9. We need to have honest conversations about racial injustice.
The pandemic and the resulting recession hit minorities particularly hard, but the widespread global protests have much deeper roots. Recent tragic events have put a spotlight on systemic racism in the US against the Black community. Here in the US, we seem to be more willing now to engage in real conversations about racial injustice. We need to maintain the momentum to help drive real change. At PwC, we’re increasing our commitment to support our Black colleagues, to improve diversity and inclusion efforts within our firm, and to contribute to the efforts of those who are fighting for racial justice and equality.
10. Leaders rise to the top in times of crisis.
Leaders don’t need to know everything. No one does, and there is no playbook. Instead, they can inspire trust through actions that focus on employee well-being and by working in the trenches with them. Acknowledge that you don’t have all the answers, be open and transparent and let employees know you have their backs. Ask employees what they need; don’t assume you know. And give them a platform for reflecting and contributing, for problem solving, for communicating their needs and for processing their stress.
No one has written the playbook for the past 100 days and thus no one has all the answers. We all face a pandemic, a recession and systemic racial injustice. We’ll need to hold on to these lessons we’ve learned as we prepare for the changes ahead. The financial industry can come back bigger and bolder.