Impact of COVID-19 on the investment management sector
Global economic activity is at a standstill as the world takes an aggressive stance to slow the spread of COVID-19 and that is having broad implications for the investment management industry. Aggressive fiscal and monetary policy responses combined with critical containment actions around the world have made a major economic impact,yet liquidity remains remains scarce and the outlook for earnings is soft.
Market volatility has redirected the attention of most sellers and buyers as it relates to M&A activity. Buyers may emerge in a stronger position to neogtiate transactions while sellers will have to perfect their competitive advantages.
Challenging times can be acatalyst for future innovation and growth. Organizational resiliency plans and overall operating models will be re-examined to advance digital transformation and agility. Work, workforce and workplace experiences will be forever changed, supported by an ecosystem of virtual resources, rechnology and behavioral norms that define work as a thing we do, not a place we go.
Investor confidence and trust will slowly be restored. The active versus passive debate will rage on as active managers look to advance their brand of investing. The pandemic will icnrease investor and board of director attention to environmental, social, and governance (ESG) considerations.
June 24, 2020
Impact of COVID-19 on the banking & capital markets
The uncertainty from COVID-19 will remain for the foreseeable future. Banks and capital markets institutions have no choice but to remain hyper vigilant and rewrite their business continuity playbooks as circumstances change. While it is reassuring to see some aggressive fiscal and monetary policy responses around the world already, clarity on how these actions will stabilize markets and accelerate the path to normalcy is slowly emerging, and in some cases yet to emerge. However, banks and their customers can take some comfort that capital ratios were the strongest going into the crises than at any time in the last decade.
Banks need to actively consider the immediate needs of their people and simultaneously the multiple near-, short-, and medium-term operational, financial, risk, and regulatory compliance implications. They have an opportunity to support market and economic activity and to facilitate a quick return to stability. If banks and capital market firms respond well to these unprecendented challenges, they will not only help society, but also increase trust and the reputation of the banking industry in the long run.
Potential long-term impact on banks and capital markets:
Revisions to the operating model, given the impact and lessons learned from this crisis, e.g. acceleration of digital transformation, organizational agility, future of work, and instead focus on cyber security.
Changes to the sector including restructurings, M&A, and wind-downs of fintech and smaller banking institutions given limited capital and revenue/profitability reduction; also opportunities for the banks to support restructuring of a wide range of industries.
Impact of continued reduction of interest rates, reduced business activity, and large scale non-performing loans if this becomes a prolonged recession.
Implicaitons of possible regulatory changes and enhanced and new requirements