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As 2020 ends, we're looking forward to 2021, and the enduring effects of COVID-19 on financial services businesses. In our last edition of the CEO C19 Response Briefing we're sharing how CEOs and their teams will re-think reputation governance, and stakeholder relationships, particularly with activist investors (think AMP's #metoo moment), government and media.

1. Market feedback

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

A. Regaining momentum and planning for 2021

Funds management CEOs are reporting a late surge of activity in Australia, particularly with institutional clients.

Some institutional clients – the super funds - are still grappling with the early release regulation, although this may be running off at the end of this year (i.e. last submission for 2020-21 will be made on 31 December, after, which, the program will stop).

The fund managers report that these clients are now managing allocations that were planned to have been made earlier in the year. Commitments also scheduled for earlier this year are now being scheduled for Q1 2020. People are tying up loose ends and looking to next year, hence the flurry of activity.

B. Continuing ‘super wars’ and is the property lobby fighting a losing battle?

Institutional investors and their fund managers are now feeling the flow on effects from the continuing ‘super wars’. Fees (management fees) will be more of a focus than ever for most funds as a result of performance and fee benchmarking.

Across the super industry there’s a sense of still shock reported at the strength of political winds turning against the for-purpose fund sector as it is today. There was a sense, before this year, that the system, if not SGC, was a protected species. Now that’s replaced by a sense that it's open season - there’s no winning in Canberra regardless of the merits of the argument.

Talk among finance sector executives and business owners outside commercial property is that the CBD property lobby may be fighting a losing battle. Anecdotally we’re hearing big financial brands giving up as much as 70% of their tenancy footprint in marquee buildings in favour of sub-leases, smaller premises or a significant forward commitment to WFH.

Smaller businesses and local offshoots of global players report the same – you want less space for your people in CBD locations.

While there’s clear upside for collaboration, onboarding and communication, and despite the property lobby’s exhortation to move your staff back into the office, most of you don’t see this as a good next, temporary or permanent, step.

2. Management responses

This section outlines how CEOs and their leadership teams are responding

A. Lifting the WFH public health order

From 14 December, the public health order by the NSW state government requiring employers to allow employees to work from home will be repealed, with the government encouraging staggered start and finishing times to reduce impact on public transport.

This move back to the office may be more difficult for large global corporations given they are likely following global protocols (e.g. some offices here may be following US/EU protocols where some countries are still under lockdown). It is harder for these employers to facilitate a transition back to the office than for smaller firms.

Some firms are considering a hybrid workplace given the success of WFH and employee needs. However, some firms (fund managers) are still reporting struggles with WFH, for example, the hindrance of WFH on completing onsite due diligence.

Fund managers have also noted that there is increasing interest in F2F meetings, although, other firms are still under ‘virtual meeting only’ mandates.

3. CEO Guidance

This section provides our guidance on management and communication responses

1. Adopt a reputation governance mindset, and build it into the strategy cycle

Whether you treat reputation as a separate risk category in risk management and governance, or not, consider the current commercial environment, and reassess the risks to enterprise sustainability and reputation in the next strategy cycle.

  • Top-down reputation governance includes redefining who your business’ critical stakeholders are, now, not as they were in early 2020
     
    • This year, for many businesses, the “showstopper” stakeholders changed from the usual suspects (for example from activists to elected politicians in Canberra, or from disgruntled former employees to CBD workers to parents with young children) as COVID unfolded
    • Strategy success, and some businesses’ sustainability, now rely on monitoring, understanding and engaging a different group of stakeholders, or doing so differently in 2021 to, say, 2019
    • Monitor those stakeholders’ views, and take even ‘weak’ signals of change seriously. Here's why...

      • Many in superannuation were caught by surprise this year at the change of sentiment around the industry in government. This was despite warning signs growing for years, and becoming far more more pronounced in the months prior to Government announcements
      • Now, many in commercial property currently maintain that all workers - or most - must come back to the CBD in order to make their employers function properly as businesses
      • Both might be examples of an industry - or many in an industry - being blinkered to stakeholders’ views, despite those views being easily observable
    • By contrast, ‘stakeholder signals’, when incorporated in planning and communication, can be used to help preserve both social licence and commercial viability of individual businesses and their wider industry
    • Actively monitor, and perhaps manage, even stakeholders you don’t see as directly involved with, or crucial to the success of, your business
    • It’s too late, when crisis looms, to build a relationship of trust with a key stakeholder like an elected politician, media commentator, union representative, or unhappy institutional shareholder
    • These predictably important groups and individuals, while busy, are remarkably open to respectful listening, constructive dialogue and “common ground” exercises, or even just a simple ongoing exchange of views
    • Thinking longer term, and more broadly about who might control your individual or brand reputation, long before you need an audience or a favour, can be wise risk management and reputation governance.
2. Adopt at least one “bottom up” reputation governance practice such as issues tracking
  • Many financial services organisations of scale still don't have basic issues tracking in place
  • Issues tracking identifies near-term reputation risks, helps prioritise and manage them, and gives you some control over the outcomes
  • If you don't measure and track it, you will not manage it.
  • And you may end up in some of the unpleasant situations you've watched others endure - take those hammered in the Royal Commission into Banking in 2018, or more recent Standing Committee on Economics public processes calling on superannuation sector players such as IFM Investors, AIST, AustralianSuper, Mercer, BT Super, and previously insurers including QBE (Vivek Bhatia), Suncorp (Gary Dransfield), IAG (Peter Harmer, since replaced by Nick Hawkins), Youi (Bert Bakker and Jason Storey) and many others are who were, this year, called to Canberra for a public grilling.
3. Change your definition of, and relationship with, media
  • It’s a dangerous heuristic to believe that if you don’t engage with journalists and commentators you’re somehow safe from public scrutiny. Asking if media matters for your business or your leadership is a high quality question right now, more than ever. 
  • A more mature approach is to re-examine what “media” is, where your own business model is heading (more digital, most likely), and to reassess the role of news outlets and journalists in your own strategy and narrative.
    Here’s why: 

    • With audience attention increasingly fragmented ‘earned’ (news) media remains a significant channel to quickly and effectively reach an audience, including your own clients, and to find prospects and influence thinking
    • Media business models are changing rapidly, and their means of engaging audiences are also
    • This means that there are effective, overlapping and rapidly evolving media channels and platforms that, combined with other forms of communication, can help you change how critical audiences think, feel and behaviour towards your organisation.
  • Play a bigger game: specifically look at how you might “level up” relationships with media organisations: 
     
    • Examine the potential for earned media coverage, along with paid (above-the-line) channels to help scale your lead generation / customer to member acquisition and growth marketing
    • Assess or get advice on media relationships (not media relations), as a source of competitive intelligence and a way to influence commentary or the direction of public debate and policy decisions
    • Ask how you can best add value to pressured journalists working under immense time constraints to report on complex topics
    • Earn relationship credits now, for when you might need them in the future. 

4. 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 took the view in March 2020, based on client feedback, that the collective benefit to you all took precedence over normal competitive pressures this year. So we threw the commercial rule book out, and simply 'gave with both hands' - to clients, to potential clients, to colleagues, and to our competitors.

This briefing was started to help CEOs as they responded to the daily challenges of COVID19 this year.

That moment has passed. We’re reconsidering what this might next year and whether we take forward your collective intelligence to benefit a wider financial services leadership community in 2020.

Thank you for being part of our journey in 2020. I wish you a very peaceful and relaxing holiday season.

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, pleasecall us or fill out our contact form here.

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