In a recent newsletter, global business consulting and internal audit firm Protiviti points to five lessons learned from the economic crisis and 10 challenges financial services companies will face in 2010. With a few exceptions, they apply to companies outside the financial services arena as well, so I thought it'd share.
First, lessons learned:
- If it sounds too good to be true, it probably is. For an example, Protoviti points to claims that housing prices weren't going to drop eventually, but this is one adage that's usually true across the board. Always read the fine print. Somewhere there's a catch or a loophole.
- We live in a global economy. What happens here affects the rest of the world.
- Incentives influence behavior. Protiviti points to the "improperly designed" incentive packages that were awarded to those who manage financial services firms, notwithstanding the risk their behavior posed to the company. What works in financial services firms should work just about anywhere else: Tie the incentives to performance, and performance should improve.
- Lack of transparency can fuel a crisis. Again, Protiviti is pointing to the market here, but the same can be said for any organization. The less transparency, the easier it is to perpetrate fraud.
- Liquidity can be as important as solvency. If investors/customers lose confidence you, "the balance sheet may not matter."
The top 10 challenges of 2010 for financial services, which pretty much speak for themselves, are as follows:
- Managing regulatory changes.
- Dealing with more intrusive regulators.
- Addressing continuing credit problems.
- Managing and optimizing capital.
- Attracting and retaining talent.
- Restructuring business.
- Improving risk management.
- Upgrading technological infrastructure.
- Planning for the future.
- Maintaining a customer focus.