The turbulence in the global economy is due to a multitude of factors. The last few months have been witness to the Greek crisis, the mayhem on the Chinese stock market and falling crude oil prices. A new study by global consultancy Accenture—Unlocking the Potential of Global Structural Reform—claims the impact of global structural reforms (GSR) is rewriting the financial services landscape. Investments have started flowing but there is still no clear strategy. The report explains how seven pillars of structural reforms will alter the financial services landscape in future. These are scrutiny from domestic regulations, governance of legal entities, stricter stress testing, capital and liquidity adequacy, recovery and resolution planning, separation or cessation of activities and geography focused finance.

Over 56% of large financial services institutions surveyed, including banks, insurers and capital markets firms, expect to invest at least US$200 million on projects to overhaul how they do business to address GSR regulations this year, with nearly one third expecting to spend at least US$500 million. Piyush Singh, managing director (financial services), Accenture spoke to Financial Express’s Anup Jayaram on this and more.

Excerpts:

Your report has identified seven pillars of structural reform. Which of these seven pillars according to you are more critical than others and why?

A: The biggest focus all around is that the investments made ensure greater degree of transparency and proactively forecast issues. Those are the two areas where most of the investments would be focused on. We have identified seven pillars – but they are not quite hierarchical. They are not task oriented pillars. You will have to focus on all the seven pillars simultaneously. Depending on the organisation and its current state, you will channel more investment into one or the other. I dont think that it is the heirarchy of addressing the seven issues across all organisations, it is to making sure in order to address the seven pillars how do you prioritize investments. It is based on individual organisation and their current state. That would help decide where they would need to focus on investing in one pillar or the other.

The organisation’s current state would determine on what order they would invest in order to focus on the seven pillars and thus address all not only one. The prioritisation would depend on the individual company and each of the historical investments. We cannot determine a generic hierarchy that can be suggested to address all organisations.

How quickly do you see the impact of GSR on the financial services industry globally?

There are two sides of the impact. Firstly, if you are sitting on the part of the business that is dependent on discretionary  investments, then it is squeezing that part of the business because it is sucking up a large part of the discretionary investments that the financial services industry can afford to make in those areas. On one hand, the discretionary investments is getting diverted into fixing some of the structural issues therefore there are parts of changed businesses – if you look at customer or technology changes they are getting impacted considering they are losing out on the part they would have received otherwise.

The second part is concentrated efforts from the financial services industry to make sure that they are seeming to be proactively investing to be compliant. Therefore, there is an impact on the compliance and their relationship with the regulator. Equally and more importantly, it is about rebuilding the trust in the brand. Some of the compliance issues that had emerged has hurt the brand especially the big brands that got involved in it. The way it is impacting, it is going back to the back value proposition of the financial services of the industry, and make sure that it is seen as going out of the way and investing across in the people, process, the technology to demonstrate with stakeholders that they are keen to be proactive, to be transparent so that they remain the trusted brand. The financial services industry is one where people leave their money, hence it is essential them to be trustworthy.

What changes can one foresee in the future once GSR happens? Would that prevent the world from a 2007-‘08 like crisis in the future?

I can’t predict that the crisis would not happen again. However I would like to focus on the question: Have organisations invested correctly? The organisations that according to me have invested correctly are ones who are looking at all the pillars that we have identified. Within that they are ones who are looking at changing the process, governance structures and technology. According to the survey, a large number of people have invested and a number of them have invested correctly – then I see them being better prepared for the crisis, being able to avoid mishaps in the near future and better returns from shareholders. Specifically, when I look at India, we have to look at going through a better investment cycle in this area. The changes that are happening in this area will also force them to look at it differently.

By when do you see GSR being rolled out in India?

It is going to happen, but at a much slower phase. From a macro perspective we are currently looking at a forecast of the continuous increase in the investment cycle in India. If the investments will continue to be continuous, I see the rollout in the next 3-5 year period. But in case the investments don’t happen as planned,  then the quantum of the economic investment and maturity will still be behind thus the rollout could be pushed behind.