Financial services: Key lessons for 2022

2021 launched sustainability to the top of the agenda. For financial services firms, risks and opportunities in ESG and climate are around every corner, but many firms are still unsure of what it means for them. Firms must consider key points when building ESG frameworks. 

COP26 highlighted the focus on sustainability. Now, regulators are turning that attention into draft proposals and plans to capture firm’s ESG profile – notably around disclosures. Firms must allocate sufficient expertise and resources to keeping up with regulatory changes. 

To manage sustainability changes, opportunities and risks look at our financial services ESG hub. 

As we move past the emergency phase of coronavirus, regulators are shifting towards new requirements and tightening existing rules. Firms are struggling to keep up with the stream of resources – reports, discussion papers, draft proposals – that are being published. Keep up to date with regulatory changes through our weekly financial services regulatory blog. 

Regulators have issued subtle warnings as reminders for financial services firms that they must maintain the integrity of their regulatory returns. This includes looking at remediation plans, self-assessments, operating models, control environments, and independent assurance. 

We have recently published our regulatory handbook, which looks at the regulatory landscape for financial services. Download your copy of the UK regulatory handbook 2022.

To manage all these ongoing changes, firms must have the right quantity and quality of skilled labour. Firms have already cited workforce shortages as a major obstacle to growth – an issue that has broader implications in the sector. Attracting and retaining the right talent is a top priority. 

Regulators are also eyeing this area, pushing firms to focus more on leadership support and development, as well as broadening mindset and capabilities. While firms are broadly compliant with new rules, there is still more to be done on embedding personal accountability into an organisation.

Find out how to address the deepening skills gap in the UK mid-market.

Operational resilience has come under increasing regulatory scrutiny. However, more clarity is needed to allow firms to accurately identify what an important business service is. New regulation comes into effect in spring 2022 and some firms have not started the necessary work. 

Firms are also underappreciating the amount of work needed to upgrading business continuity and operational resilience frameworks, including how this interacts with legal – particularly on exit strategies. 

On transformation, companies are now carrying out strategic reviews and asking how they can deliver at pace - raising several challenges. Firms should be asking questions around agility, and the ownership and empowerment of teams to drive their own workload when aligned to commercial priorities.  

Change that has been put on the backburner is now high-priority and firms are finding that they're struggling to identify the key drivers going forward. Firms must embed operational resilience in change management. 

A robust data strategy is vital for growth. Firms can leverage data to reduce risk, streamline operations, and generate value. Building the appropriate structures and developing capabilities will continue to add value to the wider business. Regulatory focus on transparency will only keep pushing the demand for data. 

Coronavirus also accelerated the appetite for digitisation. Firms can use lessons from these overnight shifts to review and improve their existing structures. Difficulties remain in identifying and implementing robust governance structures to guide this growth.