Combining Resilience and Agility to thrive in challenging times

Over the last few years, financial services regulators have made it clear that Operational Resilience is as important as financial resilience. The new policy ‘Building Operational Resilience’ released on 29 March 2021 is the latest in what is an increasingly global focus on resilience by regulators.

In uncertain times, with an extraordinary, and ever increasing, pace of change, the real question is not simply how resilient are financial services - but how able are they adapt to customer and market needs whilst maintaining resilient operations?

Adapt to thrive

Financial services are at a tipping point. With the arrival of the digital age, rates of change have accelerated and the way in which competitive advantage is created has been turned upside down. However, most organisations are still organised in the same way they were decades ago. In our research of over 500 CXOs, a huge 66% of financial services firms reported that they expect some prominent organisations to fail because they are unable to keep up. And in a recent poll with UK Finance members over 90% of respondents told us that they were struggling to keep pace with change.

As firms are accepting that they either adapt or fail (75% of financial services firms agreed with our hypothesis that the ability to respond rapidly will make the difference between firms surviving or becoming obsolete) – they were hit with the hardest test of resilience for centuries.

COVID-19 forced firms to change overnight so that employees could continue to be effective, and they could find new ways of engaging customers and offering services to markets. The FCA policy states that “Firms that had mapped their important business services ahead of the pandemic found themselves in a much stronger position”. The pace of change, COVID-19 and the focus on operational resilience has created a unique set of challenges for the industry and left some firms thriving, while others fight to survive.

At PA, we believe that being resilient is not at odds with speed and agility – but rather that the two share a set of complementary characteristics and outcomes. In our experience, organisations that embrace five key agility principles are able to change at pace, whilst increasing the resilience of the services offered to customers and markets.

1. Customer-centricity

True customer-centricity is about understanding your customers and market so that you can anticipate what they need and design to their requirements. From an agility perspective, this means inviting customers to play an active role though co-creation, listening to their feedback and prioritising accordingly.

This principle has strong resilience implications as it encourages firms to understand, protect and improve the most Important Business Services (IBSs) they offer to customers and markets – a key requirement of the new policy. This is especially true of vulnerable customers who may have specific needs. The policy states, “Firms should consider these groups when considering how much disruption could be tolerated. Firms should also construct communications and alternative mechanisms to minimise harms arising for vulnerable consumers in the event of disrupt”.

We recently worked with a UK bank to get fast feedback from their customers on whether they would be willing to return to branches. To do this, they identified five families to understand how their habits are changing during COVID-19, how they feel about their bank and how their appetite for services is shifting. This feedback helped them improve both customer experience and the resilience of services offered and will help them thrive.

2. Speed up time to value

Keeping up with the increasing pace of change, should not be at the expense of resilience. The change governance needed to make improvements to products and services can be agreed with both speed and resilience in mind. Strong resilience leaders will be those who are incentivised by protecting existing services, but also by the time it takes to deliver value to customers through changing and launching new services.

Integrating controls into change backlogs ensures that operational resilience principles are being delivered iteratively rather than being treated as an after-thought via change impact assessments and checklists. Resilience and change teams should work closely together to focus on both innovation and protection of services.

3. Design for simplicity

Simplicity facilitates faster decision-making. Organisational complexity can lead to a lack of transparency in processes and roles, which can hinder the stability and resilience of an organisation.

From a resilience perspective, clarity of roles, such as IBS leads, is key. These resilience leads should work closely with product owners to ensure that decisions about technology changes and new features are taken with resilience in mind. When embracing the simplicity principle, firms must also think about how they present data from the board level down, to show how they are meeting regulatory requirements. Simple dashboards including how third parties support the resilience of each service should be created and should be easy to navigate and understand.

4. Build to evolve

The ability to continually evolve is a new executive priority. It’s not just about having the right systems, processes, and people in place now – it is about planning and anticipating for what you will need in twelve to eighteen months’ time.

Organisational systems and processes must be able to flex easily in response to changing requirements (e.g. building technology systems in decoupled modules or designing business processes that enable simple launch). There must also be a culture of, and ability to, accept changes at any point in the development lifecycle. This includes the courage to start new things and stop those in progress if they are not adding value.

For resilience, this means agreeing governance models which are not only fit for the new operational resilience policy, but also for similarly new regulations that contain resilience principles. They should take into account other regulatory priorities such as the EBA guidelines on outsourcing, and exploit the common requirements for governance to design a model that’s fit for the future.

5. Liberate your people

Agile organisations believe that people are intrinsically motivated – and they will flourish given autonomy, mastery and purpose, enabled through servant leadership. This often requires a fundamental rethink of your people policies and practices.

Financial services organisations should create a culture of empowerment which is fun, dynamic, and motivating. An environment where people collaborate should be encouraged to spark creativity, ingenuity, and learning. And those shared learning points can be crucial for organisations in their ambitions to become not just agile, but resilient.

What we have learned from COVID-19, is that you can empower crisis leaders to delegate and place trust their teams to make decisions faster than with a senior governance processes in place – providing the data and analysis is available to do so at the time of decision making.

We believe that to change at pace and without disruption, firms must apply a ‘resilience lens’ to change. Our five dimensions of agility can help firms to adapt to the new normal and comply with the new policy, increasing the resilience of the services offered to customers and markets.