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Navigating Regulatory Waters: Friend or Food? How To Stay Ahead in Financial Services

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Legal firms may still be enjoying strong revenue, but their technology sometimes has struggled. Other major corporations have had similar problems.

1. Market Feedback

Intelligence about the impact of COVID-19 on specific financial services sectors, not published by media. 

A. Offshoring

Companies with outsourced back offices and call centres in the Philippines and India have had to rapidly make alternate arrangements, as many workers in those locales do not have the equipment needed to adequately work from home (WFH). One client with operations in Manila now successfully has those people working from home.

We hear some with India-based staff are rapidly trying to hire onshore (Australian staff) to keep up with demand or even just business as usual (BAU). Some think such onshoring may become permanent across industries once the dust settles.

B. Fund managers

There are signs of stabilisation in the actual COVID-19 outbreak. Confinement measures will last longer, however, and no one knows for how long. That is still having a negative effect on equity markets, because it’s difficult to assess total damage on growth and earnings.

Our clients’ commentary suggests that a recovery, when it comes, will only be gradual (not vertical). We’re being told to expect high volatility and downside risk for some time. This includes (in retail shareholder language) bear traps (where short selling investors are caught by unexpected rallies) or dead cat bounces (temporary rallies).

Portfolio managers say the longer the economic standstill lasts, the bigger the damage and higher risk of negative consequences.

European economists are watching credit and funding markets to see if central bank measures will help ease recent stress. Belief now is that central banks will succeed in keeping systemic risks low to prevent a credit crisis.

C. Essential services

Despite what you might be seeing in-store, intel from the finance team at a major grocery chain suggests sales are returning to normal ie people are no longer stockpiling. 

D. Legal - major law firms

Earnings are ‘surprisingly good for March’, reflecting our earlier intel of a huge amount of inbound inquiries for legal queries. Hence many staff are still going into city to work. Government clients are paying uncharacteristically early, for unknown reasons. Law firms, barristers face difficulties around shifting work online, particularly for folk like those working on subpoenas meaning staff still have to go into office.


A-REITs (Australian based real estate investment trusts) have fallen 34.3 per cent for Q1 values and the sector as a whole is trading at 40 per cent discount to book value.

The Australian REITS index is heavily weighted to retail, hence A-REITS hit harder. Some pure retail names are trading at 60 per cent discounts to book value. Before the COVID-19 hit, they were already at 15-20 per cent discount, but nobody expected it to go to an unprecedented 60 per cent.

Social restrictions have directly affected real estate as a place of congregation, though higher quality REITS with stronger assets & tenant base are likely to perform better

We understand office buildings may be heavily affected. Offshore buyers will be restricted by current international travel restrictions, meaning economic impact will be far worse than the GFC.

With evictions due to financial distress banned, this is far from BAU.

2. Management responses

This section outlines how CEOs and their leadership teams are responding.

A. Digital & IT infrastructure

Zoom and Microsoft Teams are the go-to video conference software now for enterprise – they’re reporting that they’re more stable and have capacity to hold more users. Skype is reportedly okay for smaller numbers.

The NBN maybe getting “smashed" now with everyone WFH, but so far, it’s coping well. Anecdotally, those on NBN are faring better than those who are not.

At major banks, systems are available online, however, some claim there is only capacity for 10,000 – the 10,001st person gets kicked off. There is a fallback (browser based, however, it's not as capable.

B. Facilities

Major bank staff have to go into the office to change passwords every month and must carry ID and letters to prove that’s essential.

There are outages at least once a week and banks have been slower to get work online so it can be done from home (mainly a security issue), so some have to physically go into office.

C. People

We understand there's still some "presenteeism". At one major bank (the same with capacity issues and outages), team are still supposed to be week on / week off in the office. Management don't see this is a problem so staff are expected to come in despite their concerns.

D. Facilities

For essential employees at major banks, staff are being temperature checked upon entrance. Each desk has hand sanitisers and there are hand sanitiser stations scattered across floors. There's no more hot desking.

E. Legal industry

Law firms are working on rapid response communication to stakeholders given that engagement levels in some B2B and B2C categories are at all-time highs.

They are also considering ‘beyond lockdown’ permanent opportunities or changes, such as shift modes of delivery and services, and reconsidering office tenancies.

3. CEO guidance regarding Coronavirus responses 

A. Focus on inner ring stakeholders, but now plan more carefully
  • Earlier we urged erring on the side of over communication. Now it’s time to design and deploy a more durable comms plan for stakeholders (employees, clients, LPs (limited partners), investors, etc)
  • Prioritise at different levels, so attention can be allocated e.g. you might decide all significant LPs must receive personal contact, and offer a phone call at least once a fortnight
  • Don’t assume it’s ‘one and done’ because they didn’t respond or (in your mind) nothing has changed
  • Consider the best frequency, channels and content, based on evidence
  • Ask for feedback and collect it systematically. “What do you want to hear from us? How are we doing with communication and our response? What can we do better? What should we stop, start or continue?”
B. Turn communication challenges into long term opportunity
  • View the need for increased communications with internal stakeholders as an opportunity to get more feedback, get closer to key clients, increase engagement with resources, transfer email/mail engagement into engagement with online tools etc.
  • Set a goal with a KPI to focus efforts.
C. Formally review your strategy for the weeks and months ahead

A number of boards and CEOs are starting to look beyond the current COVID-19 environment to pivot, adjust or take advantage of emerging opportunities. Now that there’s a longer planning time frame, this makes sense.

4. COVID-19 resources 

5. Appendix: How to help us help you

This briefing is collective intelligence gathered, anonymised and shared with you by my firm for the greater good. We’ve taken the view, based on client feedback, that the collective benefit to you all takes precedence over normal competitive pressures at a time like this.

This is an excerpt from one of our client COVID-19 CEO response briefings. For more COVID-19 response resources and guidance, visit our COVID-19 Response page. 

If you’d like to discuss adjusting your communication strategy for the current times, please call us or fill out our contact form here.

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