Aligning Your Target Operating Model and Technology Strategy – The Key to Global Markets Success?
Introduction
Following the recent instability and turmoil in the banking sector, the industry can expect no let-up in regulatory scrutiny and legislative focus.
Meanwhile technological advancements and disruptive players entering the global markets space continue at pace, and established participants will need to adapt quickly to remain competitive.
If banks are to continue to deliver against heightened client and investor expectations, they will need to manage the ongoing regulatory demands in parallel to adopting transformative technological change.
Trends in Global Markets Business
The future of the global markets business will likely be shaped by a number of factors, including technological advancements, shifts in economic conditions, and changes in government policies. Some of the trends that are likely to be key factors include:
1. Digitalization: The increasing digitalization of global markets is likely to continue, which will create new opportunities for businesses to reach clients and improve efficiency.
2. Cybersecurity: Cybersecurity is likely to become even more important in the future as the digitalization of global markets continues. Cybersecurity measures are required to protect bank’s operations and reputation.
3. Regulatory oversight: Following the enforced UBS-Credit Suisse merger and general instability in the US regional banking sector, the industry should expect a further heightening of regulatory scrutiny.
4. Artificial Intelligence and Machine Learning: The integration of AI and ML in the global markets business is likely to grow as businesses leverage these technologies to automate operations, reduce risk and gain a competitive edge.
5. Environmental, Social and Governance investing: The growth of ESG investing is expected to continue as businesses take more steps to reduce their environmental impact and improve their social and governance practices.
6. Volatility: Global markets will likely remain volatile, and businesses will need to be able to adapt quickly to changing market conditions and opportunities.
7. Increased competition: Competition in global markets will likely increase as more businesses enter the market and existing businesses expand their operations.
Each of these topics, from what is a non-exhaustive list, is worthy of a separate deep dive article. When considered in their totality, the challenges facing the industry are clear. Furthermore the speed of recent market events in the banking sector reinforces the real consequences of failing to adapt fast enough, and underscores the need for a well-defined technology strategy in order to support production stability, risk mitigation, future growth and agility.
Defining the Right Technology Strategy for Global Markets
Defining the right technology strategy for a global markets business depends on the specific needs and Target Operating Model (TOM) of the bank. No one size fits all. Neither can a strategy ignore the reality of constrained budget cycles.
Ideally, the TOM and technology strategy should be developed in parallel to ensure alignment and coherence between the operating model and the technology capabilities required to support it. The TOM provides insights into the organizational requirements, which can inform the technology strategy in terms of the systems, tools, and infrastructure needed. Simultaneously, the technology strategy influences the TOM by enabling new ways of working, automation, and digital transformation.
By developing the TOM and technology strategy together, organizations can ensure that their operational and technology components are mutually reinforcing. This approach helps avoid potential misalignments, ensures that technology investments are aligned with the desired operating model, and enables a seamless transition to the future state of the organization.
However defining the best technology strategy has the dual challenges of keeping pace with emerging technologies, and adapting quickly as business needs change. There are however several strategies you can employ when defining your technology strategy to help effectively navigate this situation:
1. Stay agile, adaptable, and continuously monitor trends: Embrace an agile mindset and cultivate adaptability within your organization. Regularly monitor market trends, emerging tech, and client expectations. Stay informed about industry developments to identify new opportunities and potential disruptions.
2. Engage stakeholders for insights and alignment: Involve key stakeholders, including business leaders, department heads, clients and employees in the technology decision-making process. Seek their input and insights to understand their evolving needs, pain points, and aspirations. This collaborative approach ensures that technology solutions align closely with changing business requirements.
3. Prioritize scalable and flexible technologies: Look for technology solutions that offer scalability and flexibility. Scalability allows your systems to accommodate growth and increased demands, while flexibility enables you to adapt and customize the technology to meet evolving needs. Consider cloud-based services, modular architectures, and open APIs, as they provide scalability and flexibility.
4. Foster innovation, experimentation, and partnerships: Create a culture of innovation within your organization. Encourage experimentation and exploration of new technologies. Consider implementing innovation labs or pilot projects to test and validate new solutions before full-scale implementation. Collaborate with technology partners, consultants, and industry experts to gain insights and access specialized knowledge and resources.
5. Invest in continuous learning and skill development: Prioritize ongoing learning and skill development for your employees. Provide access to training programs, workshops, and resources to keep them updated on the latest technology trends and developments.
6. Regularly review and update your technology strategy: Dedicate time to evaluate the effectiveness of existing technology solutions and identify areas where enhancements or changes are required. Stay proactive in reviewing and updating your technology strategy to ensure alignment with evolving business needs.
The key is to foster a mindset of agility, adaptability, and continuous improvement. By staying attuned to changing business needs and leveraging the right technologies, you can effectively navigate the evolving landscape and form a technology strategy that can help drive sustainable growth.
Conclusion
In the ever-evolving global markets business, banks and financial institutions must navigate the challenges of regulatory demands and technological advancements to meet client expectations and remain competitive.
The trends shaping the industry, such as digitalization, cybersecurity, AI/ML integration and increased competition, require a well-defined technology strategy aligned with the organization’s TOM. Developing the TOM and technology strategy in parallel ensures alignment and coherence between the operating model and the technology capabilities needed to support it.
Failing to implement the right technology strategy can lead to inefficiency, financial losses, suboptimal risk management, regulatory risks, cybersecurity threats, and missed opportunities. To effectively define the best technology strategy in the face of rapidly evolving business needs, organizations should embrace agility, continuously monitor trends, and engage stakeholders for insights and alignment. Prioritizing scalable and flexible technologies, fostering innovation and partnerships, investing in continuous learning, and regularly reviewing and updating technology strategies are crucial steps in navigating the changing landscape.
By adopting these strategies and fostering a mindset of adaptability and continuous improvement, organizations can overcome challenges, leverage emerging technologies effectively, and drive sustainable growth in the dynamic global markets business. Staying attuned to evolving business needs and aligning technology strategies accordingly will position banks for success in a rapidly changing environment.
How Bailrigg Can Help
Bailrigg have deep expertise in advising on the global markets business and technology strategies.
Our talented team have decades of experience defining Target Operating Models, delivering regulatory commitments, and executing roadmaps of transformative change that leverage best in class technologies.
We have industry experts, as well as strong Project Managers and Business Analysts who have experience across banking functions and technology. We have hands-on experience of executing complex change programs, detailed business and product knowledge, and a deep understanding of the technology available to support these changes.
If you would like any further information, please do not hesitate to drop us a line at info@bailrigg.co.uk.
Author: Joe Coquelin – Markets Strategy and Technology
May 2023