Many industry professionals have a growing need to leverage new technologies like automation, AI and analytics. Not only do these systems improve cost savings, but they also enhance product development and transform the client experience. Studies suggest that technology, data and digital capabilities will be critical in the next few years.
As capital markets companies continue their digitisation journey toward the cloud to meet their technology and data needs, they unintentionally expose themselves to several operational risks. Two technology and operational patterns that have emerged over the last few years have been capital markets firms’ gradual shift towards digitalising their technology and increasingly adopting new cloud-based services. While both contain significant potential, there is a challenge with digital and adopting new technologies – an increase in operational vulnerability and possible cyber threats.
Even before the pandemic struck and new restrictions came into play, the fragmented workforce spread across multiple industries and regions, replicating the decentralised structure of many capital market companies. The rise of a distributed workforce placed more emphasis on technology as a critical enabler of communication and collaboration. While many companies have returned working practices to a similar condition as before the pandemic, most capital markets organisations still have high numbers of employees working remotely, which makes cyber resilience a significant consideration.
Providing that flexible working practices and remote access to data are likely to be a part of business operating models, it becomes essential for companies to implement technologies to support remote processes while safeguarding the integrity and operational resilience of the company. The main challenge is developing these processes and embedding a resilient structure in a cost-efficient manner while sustaining speed to market.
From extreme weather conditions to pandemics, the last few years solidified the necessity of creating a solid resilience strategy. One of the main imperatives impacting any asset-focused business is how to implement resilience across the entire company. A flexible organisation can manage disruption, but flexibility requires the ability to predict and prepare for times of uncertainty.
Resilience should represent the primary focus of a business strategy. This approach requires corporate and financial resilience, creating stability by minimising operational and commercial disruption. Protection of the conditions of assets for the long term is becoming increasingly important, but the challenge is meeting this against constrained budgets. Technology is critical to managing this, but the people are equally important in delivering a positive culture that recognises the value of technology in improving resilience and productivity in their roles and the overall business.
Investment plans must focus on data that explores asset health and predictive data that determines the potential disruption and allows stakeholders to make informed, strategic decisions. The choices that steer a business must be evidence-based. This process requires technology that delivers reliable insights that show stakeholders the intended measures. Digitalisation has become a rapidly growing trend, but ultimately technology plays a critical part in corporate resilience.
Businesses today need to recognise the potential threats to their business and create a range of responses and solutions, which is a challenge for most but one where digitalisation can help. When many companies are doing more with less, utilising technology to drive both resilience and efficiency is how businesses can discover a competitive advantage.
Delivering a climate resilience investment plan
Managing the potential impact of climate risk has rapidly become a key investor priority. There is mounting evidence to show that climate disasters impact portfolios and their associated assets. In response to the increased risk, the IIGCC intends to focus on developing a climate resilience investment framework (CRIF). Following the established net-zero investment framework, plans recognise the investor’s top responsibility, financial duty and the mission of contributing to a net zero and resilient future as highlighted in the Paris Agreement.
Recently, responsible investment plans have focused on climate change measures, net-zero goals and financed emissions reduction targets to 2030 and beyond. Mitigation represents one part of the investor response to climate change. Determining and responding to physical climate risk and directing capital to the opportunities made by adapting to it are equally important. Resilience focuses on supporting operations and supply chains during a climate crisis, but adaptation is the response to specific events.
While some regions face more severe climate challenges than others, no one is immune to physical climate risks, so investors must integrate this into their risk management plans. By doing so, investors can support the climate resilience of individual assets and their portfolios.
It seems clear that investors will need to recognise climate resilience and understand adaptive capacity at both the asset and market levels. Collaboration between multiple stakeholders is required to deliver a framework that supports assets and capital markets in managing climate risk.
