Here’s the reality: If you don’t start with your firm’s mission as the guiding principle, even the most sophisticated cost-cutting plan will likely fail. How should you decide where to make strategic cuts versus where to invest? And what should drive your planning in a world that might require you to completely change your strategy in a few years.
Growing pains. The conversation around shutting down entire lines of business will likely continue. It’s a hard decision and not one that should be made lightly, but many firms have few options. Having already trimmed and outsourced to reduce spending, now they’ll ask if there are some parts of the business that no longer belong.
A different kind of bet. We now live in a world where the pace of change makes predictions far more unreliable than ever before. We expect leaders to try a different approach, doubling down on foundational assets. Targeted cost-cutting can help them support strategic investments in information assets, customer experience improvements, and administrative platforms.
Expanded use of digital tools. Leading firms will continue to deploy digital tools such as artificial intelligence (AI), advanced analytics, machine learning, and RPA to reduce costs and improve decision making. We already see companies using these tools to improve efficiency in front-, middle-, and back-office functions. As use of these tools continues to expand, leaders will be thinking about broader issues around governance, controls, and standards.
Don’t plan for one future. Business planners know how to pick a fixed target, assess what it will take to get there, and make a plan to close the gap. Unfortunately, that approach won’t work so well going forward. In our fast moving world, you can no longer rely on a static vision of where you need to go. You’ll want to embed versatility and flexibility into your planning because the future state will need to be updated—and more quickly than you expect. Think about how you execute and who you partner with along the way, and be prepared to pivot quickly.
The cult of cost cutting. “Cut 10%. Make it so.” Sorry, but this kind of directive doesn’t have the power it once had. Culture has to be part of the equation, and changes should be made at every level of the organization. You’ll need to deal with managers who have conflicting objectives, not to mention employees who may be so upset with the changes that they look for workarounds, defeating the whole purpose. It’s hard to change behavior, but it’s necessary if you want to be successful.
“The current conversation is much less about ‘how do I get on a diet’ and more of ‘how do I get the spend in the right place to get the most bang for the buck.”
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Managing Director, Insurance Strategy, PwC US
Global Growth Strategy, US Financial Services Practice, PwC US
Leader, Financial Services Institute, PwC US