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Oct 16, 2014

Financial industry looking to operational leaders to drive business change

With greater visibility into regulatory and market structures, chief operating officers are getting involved in business strategy earlier, says Economist Intelligence Unit/Broadridge survey

The majority of business leaders in the financial services industry are now eager for their chief operating officers to play a leading role in driving changes in their companies’ business models, according to a recent survey conducted by the Economist Intelligence Unit and sponsored by Broadridge Financial Services. That’s largely because in the current globally connected business context, COOs have more visibility on regulations, evolving market structures and the changing needs of clients.
In a report on the survey results, titled Operations power performance: managing risk and delivering value, Broadridge said its clients -- banks, broker dealers and other institutions across the buy- and sell-side -- are encouraging their COOs to get involved earlier in the process of formulating business strategies. The respondents consisted of 414 financial executives across North America, Europe and the Asia-Pacific region and included leaders in investment management, institutional capital markets and retail markets.

Although the findings don’t directly concern corporate secretaries or other governance professionals (except those working in the financial services industry, who now should make sure they establish or strengthen working relationships with COOs and other key payers in that department), they attest to the more careful attention that institutional investors and other key proxy voters are paying to integrated risk management processes and related governance issues within their own firms. That may indicate how much more scrutiny they are willing to pay to these same processes and policies in the companies in which they invest.     
The survey shows that 77 percent of global financial institutions are altering business models due to changes in regulation and market structure and that more than two thirds of respondents see new regulation and governance requirements (35 percent) or changes in market and industry structure (32 percent) as the primary forces driving business transformation, ahead of globalization (17 percent) and technological advances (13 percent).

The survey also finds that 43 percent of financial services executives believe that building processes that integrate risk management, audit trails and compliance processes is the most effective strategy for adapting to stricter regulatory and governance requirements. Another finding is that senior executives now expect operations leaders to initiate proposals to move the company’s broad strategic goals forward. Roughly 84 percent of C-suite level respondents at high-performing companies say this is already happening, versus 69 percent of respondents at less adaptable firms.

Managing risk was deemed the most critical way to respond to global challenges by 39 percent of respondents, followed by investment in product differentiation and innovation and meeting increasing customer demands, both named by 34 percent of respondents.  Twenty-six-percent of those polled see establishing operational standards and controls as a priority.

Financial institutions ‘want to make sure they have control over process. They want much more standardization and [are asking] How do I have best practices and Who can help me adhere to bests practices?’ says Tim McConnell, managing director at Broadridge.

‘We’re seeing our client constituents have a more collaborative, much more informed approach as all stakeholders come together,’ he says. ‘These changes are not just incremental. With so much happening so fast, [leaders are saying] Let’s look at the whole business transformation [and ask] are we in the right markets, are we trading the right asset classes?’ The chief operating officer is being used more to execute changes, with leaders pushing for a greater investment in technology today in the hopes of transforming their businesses for longer term growth, he adds.

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary