COVID-19: the impact on investor management in EMEA
Straight off the bat, Sankar Krishnan, EVP and Industry Head, Banking and Capital Markets at Capgemini states “that these are unprecedented times, with investor management front and center. In some ways it has taken a beating, but in some ways it’s trying to correct itself.” Over the last four months the entire investor management ecosystem has been significantly disrupted, creating new challenges for organisations and how they effectively maintain open communication with shareholders, provide guidance for the future and a deeper understanding of the industry.
Rapid investor management strategy transformation due to COVID-19
Prior to COVID-19 Krishnan believed that the best strategy for effective investor management was “transparency, followed by leaders providing a consistent strategy and measurement process that gives a true representation of how an organisation is doing compared to what was discussed in the previous shareholder meeting.” This approach allowed organisations to easily compare its performance based on previous history, bringing together the consumers, the asset management industry, the wealth management industry and the investment management industry. However, post-COVID-19, “due to nobody’s fault, there are a lot of unknowns,” comments Krishnan, who states that “since World War II, I would say we have never had a situation like this where it has been very difficult to predict outcomes in terms of where the world is going. We don’t know much about this virus relating to when it will disappear or when there will be a vaccine. As a result, from an investment management perspective, it is very difficult to predict business outcomes and the future of companies as well as the industry. Therefore, some have decided that to give this guidance after a time of total economic uncertainty would be wrong due to there being so many variables.”
Ultimately, Krishnan explains that the inputs in the investor management models provide outputs, which would be shared with the entire investment community, fostering good investor relations. However, “the models are not able to produce the outputs with a high degree of probability. So at best you can give a range or a best guesstimate, because investor management is facing global impact that crosses industries, companies, consumers and governments. While the virus may affect regions differently, there is no doubt that each country and industry will be impacted considerably. Unfortunately, a lot of the survivors will depend on having at least an 80 to 90% capacity utilisation. This creates problems for the investment management industry, because you are faced with the challenges of not being able to give guidance on any aspect of it, but life must go on. You have to make some assumptions and carry on, and I'm sure the public will understand if you've got some elements wrong. But I think right now we've got to deal with fighting the virus, I have no doubt that things will get better, however this is the current landscape for the investor management industry.”
The impact of COVID-19 in the EMEA region and the future of investor management in a post COVID-19 world
“First and foremost, uncertainty is driving investor management’s response to the pandemic in relation to giving guidance. In the UK we are seeing organisations struggling with trying to retain their staff while others have to make job cuts, and from an investor management perspective the question is: ‘how do you effectively communicate this and make the information available?’” says Krishnan, who explains that there are a number of components that are very important. “There is the business itself, in terms of what is going to happen to the business, what will be the financial result, how they will take care of people, the processes and technology needed to add business value and the need to appoint a crisis response team to tackle the communications. Once this is in place, from a guidance perspective, each of the companies and their investor management teams have to decide whether to continue with their current guidance. However you have to be careful in doing so because there could be a lot of legal issues associated.”
Krishnan continues to explain that “from an accounting perspective there are a lot of disclosures that have to be made. So, investor management teams have to work hand in hand with others to make sure they are doing the right thing. I think the governments of each country should come up with worst case scenarios. And similarly, I think it is good practice for each organisation to do the same in order to provide stakeholders with guidance on what the organisation will look like coming out of COVID-19. Finally, given that we are not going to meet too many people in the months to come, i think it will be interesting to see how communication technology like Zoom and Microsoft Teams will be used by organisations to replace traditional in person methods of communication and team management. It will certainly be interesting to see the reports that come out in the coming months. In Q1 many company reports only had March as a bad month. At the end of Q2 it will be interesting to see the reports with three bad months, and I believe what happens in July will pave the way for the rest of 2020, with a lot of it coming down to new financial models.”
When it comes to the future of the investor management sector in a post COVID-19 world, Krishnan contemplates “I wish I knew, but I have seen the following trends: starting with financial services, we are already seeing on average year-on-year 30% decline in footfall for branch traffic. With the impact of COVID-19, I see branches completely disappearing. During COVID-19 we have all become very digital, so I see app banking facing an all time high. Banks such as Revolut, Monzo and N26 are going to take off even more than they already have. I also believe that when it comes to technology and the financial services, companies are going to be collaborating like never before. From a cost management perspective I see that across industries, more companies will be moving to the cloud. I think some were holding back before, but I believe that we are going to see a lot of legacy transformation. I also see more remote practices being implemented with many companies accelerating their online presence and digital communication capabilities. I also believe that many contingency plans will certainly be reevaluated, with new industry models emerging as a result.”
