The rise and scams of cryptocurrencies have attracted much public, academic, and economic attention. While most cryptocurrencies have already failed, less attention has been given to the long-term regulation of those that might be successful, all of which purport to be 'eternal' stores of value or mediums of exchange. Now is a good time to review this experience and draw lessons for regulators, investors, and promoters interested in better management of risk around alternative currencies, and cryptocurrencies in particular. This paper concludes that conventional risk control concerns are relevant even when a technology is novel. The typical choice of blockchain technology with proof-of-work all but guarantees that efficiency concerns are material, and that the purely digital nature of cryptocurrencies offers opportunities for regulators to insist on comparison of outcomes with simulation modeling as one basis for regulatory control.
In this paper, we look at the emerging trend towards value stream led operating models for organizations. The benefits of value streams include a sharp focus on end-products and services that drive value for the organization, resulting in both monetary gains as well as improvements to the efficiency, morale, and status of the organization as a leading employer. We argue that if one looks beyond the hype, there are genuine benefits to focusing on a clear “path to value”. We explore the key challenges to implementation and offer the key measures needed to make the abstract concepts of value streams a pragmatic reality for financial services organizations.
Operational resilience has risen to the top of board and senior management agendas due to the ever-expanding threat of business disruptions. These disruptions can be caused by social unrest, cyber attacks, third party risk, climate change, pandemics, and geopolitical risk. In response to the recognized need for guidance, various regulatory authorities – such as those of the U.K., the U.S., and the Basel Committee – have issued their expectations for improving the resilience of financial services firms. They have stressed the need to limit the impact of disruptions to business functions and emplace the ability to quickly recover and restore business processes when incidents occur. At the same time, the ongoing digital transformation, with its triad of artificial intelligence (AI), machine learning, and robotic process automation (RPA), has attained the necessary maturity to begin to be implemented across the financial services industry. Specifically, RPA holds the promise of becoming an indispensable part of operational resilience, given its ability to create autonomous bots that can perform human operator tasks. This paper outlines the reasons for the adoption of RPA and why it is a necessary component of operational resilience, and explains the challenges inherent with its adoption as well outlining the benefits of adopting it within control-centric functions.
In this article, we compare the fundraising processes of initial public offerings (IPOs) and security token offerings (STOs) and explain how the STO process can be operationally more efficient and less costly using distributed ledger technology. We also highlight recent technological advancements surrounding STOs and the world of decentralized finance. We collate information about recent developments in regulation and digital exchanges to support the growth of STOs. We emphasize some important issues to tackle before STOs can be widely accepted as the new way of financing for companies. Finally, we argue that although STOs have the potential to revolutionize the security value chain, they do not have to replace IPOs completely, and the two channels can coexist to provide more opportunities for businesses.
Teams are the fundamental building blocks of modern organizations, but despite over 50 years of research and practice most organizations are still notoriously inconsistent in creating high performance teams. Traditional checklist approaches have not worked, because successful teams often display contrasting features in member composition, power structures, decision making processes, and resource levels. Teams with identical characteristics frequently deliver vastly different results. Based on recent empirical evidence from 25 leading organizations across seven countries, this paper advances the notion of “team to market” (T2M), an emerging approach that can significantly increase the chances of organizations creating “dream teams” through an outcome-driven culture, an experimental approach, and a greater level of diversity.
The digital transformation of organizations and society has created a set of novel challenges for leaders. To succeed in this new context, ‘digital leaders’ require new competencies: new technological competencies to lead in organizations where digital technology is inextricably embedded in everyday activity; new organizational competencies to build and lead teams that can utilize new technologies as well as inspire millennial workers who have grown up in a digitally transformed world; and, finally, new ethical competencies to navigate the ethical dilemmas created by the introduction of digital technologies in their organizations. Developing digital leaders is, therefore, a key part of the digital transformation of any firm and a failure to develop digital leadership at all levels will limit the impact of even the best-planned and executed efforts at digital transformation.
The risks associated with the use of artificial intelligence (AI) have captured the attention of research, regulation, and industry practitioners in recent years. Given that this is a vast topic in its own right, we are using the experiences of the financial services industry, in specific credit scoring, as a proxy for some of the salient features of AI from a sociotechnical perspective. Although it shares some of the operational risk challenges associated with other technologies, a model for decision making reveals how the interfaces with the social context create two new types of risk: naivete in the use of data for training AI as a statistical classifier and perceptions of the stakeholders regarding its societal implications. While the first can – and has – to be mitigated by increased literacy within an active internal risk management, the latter requires building trust.
COVID-19 has created an unprecedented disruption in organizations worldwide. Financial uncertainty, unpredictable working conditions, and health concerns are building stress within the workforce, and impacting organizations’ futures. The impact of the pandemic is driving the need for change in organizations across the globe. One of the vital ways to help ensure the success of organizational transformations is to include key stakeholders, such as employees, in the change. This article explores the importance of engaging employees with organizational transformations, whenever feasible to do so. It considers the antecedents of engagement with organizational change and recommends some practical implications for managers and leaders.
The need for change within organizations is not uncommon in a world full of technological, political, and cultural transformations. But how can organizations effectively transform themselves in a global world and what can leaders and professionals do to effect meaningful change successfully? This article outlines a model that shows strategic and cultural transformation as an ongoing process. There is no single best way of changing organizations. Consequently, reasons for change are related to suitable change strategies and supportive actions for guiding the change process. Special attention is given to critical capabilities that change masters need to succeed in change as an ongoing play between actors engaged in deep change.
The complexities of interconnected global risk and the growing uncertainties associated with emerging threats, such as the cascading effects of COVID-19, have challenged the existing approaches to business continuity management. Organizations are now implementing and maintaining “operational resilience”. However, operational resilience is distinguished by a lack of clarity as to how this concept can be translated into validated practices and the essential elements of such practices are sometimes obscured rather than clarified by its aggressive marketing to the practitioners. This paper develops a short perspective on what the strength and weaknesses of the current approaches to operational resilience are. We believe that while operational resilience as a concept is suitable for both professionals and scholars, it should be used with caution. We further suggest that its optimal application could be in combination with stress testing scenarios, which could be applied for defining common points of failures between distinct threats, to increase the flexibility of adaptation to complex crises. We propose five practical steps for bridging theories on cascading effects and systemic risk into mature practices for “thinking the unthinkable”.
The purpose of this paper is to explore the interconnectivity between defense, security, and business, particularly when viewed through the prism of operational resilience. The standard stereotype depicts the military acting as a harbinger of destruction while business represents the motive force of wealth generation. This is too simplistic, however. Militaries fight wars, but they also make an important contribution to addressing the expanding array of non-traditional threats that form part of national security, including wildfires, floods, earthquakes and, of of course, pandemics, such as COVID-19. The military's physical resources, attitudinal robustness, and rigorous planning regimes represent three of the more important dimensions of military operational resilience. Mutual commercial-military benefits can be gained via a two-way street in the adoption of best-practice resilience solutions. There is a recognition that just as military resource managers can learn from business, so equally can business learn from the military. The U.K. case is offered to illustrate the principles, policies and practices of military operational resilience.
In a series of conversations with financial executives across Canada, we discussed the current state of operational resilience planning and their organizations’ plans for the future. The primary challenges mentioned were a high dependency on third (and fourth) party providers, increased organizational complexity, getting appropriate buy-in and focus across the organization, and regional variations in regulatory requirements. To address these challenges, and heighten their resilience, organizations are finding and pursuing several opportunities, which include mechanisms for identifying and prioritizing their critical services, as well as leveraging a global workforce to provide distributed capabilities. Organizations also discussed approaches for dealing with differing regulations globally. In terms of resilience structure, organizations have looked at their governance frameworks and ensuring they are fit for purpose, as well as utilizing stress and scenario testing to assess their capabilities. An effective training program underpins a solid resilience plan, and organizations discussed their approaches here as well. In a mid- to post-pandemic world, an effective resilience strategy has been, and will continue to be, integral to the success of financial institutions. The current environment provides a compelling reason for firms to bolster their capabilities.
In this paper, we bring attention to the rapid shift taking place in the marketplace, with consumers, employees, and technology impacting the way nancial institutions need to organize themselves and deliver their services and features by adopting modern delivery approach. We discuss the key drivers behind this shift, the core pillars of modern delivery approach, and the challenges in adopting them, and offer proven steps to successfully adopt modern delivery.
By 2020, five major long-term trends had been impacting international business. This article examines how the pandemic and related economic crises seriously disrupt these trends and will produce emergent, complex patterns. It then seeks ways forward. Establishing the point of departure, we look at public health and economic policy interventions and future scenarios. We assess the more likely global developments that businesses will need to prepare for. We suggest that the business challenge is to take into account six discernable emerging trends, and plan for and ride these as opportunities, rather than be overwhelmed by them.
This paper reflects on operational resilience in the 21st Century world of transboundary crises. Transboundary crises cross borders, including geographic and organisational boundaries and beyond. In so doing, transboundary crises can have surprising, even unique, consequences. Atypical in both their nature and severity. In the case of COVID-19 the crisis spread rapidly from the biological world into politics, markets and operations/supply chains, almost stopping the beating heart of our global economy. The paper proposes a capability-based framework for thinking about operational resilience in the face of transboundary crises. This framework incorporates formal and informal elements, along with a combination of pre-crisis planning and in-crisis adaption. The idea is to maintain flexibility, while avoiding unstructured chaos. The case of Texan supermarket chain H-E-B is used to illustrate the framework. Though not from the financial services sector, there is much that financial organisations can learn from its example.
Organizations are taking advantage of new technology to change the way they work in response to the increasing complexity and unpredictability of the business environment. Simply adopting new technology is not, however, enough to ensure the success of a digital workplace design. The technology itself is just one of four key elements that are vital to designing “smart” digital workplaces. The others are the workforce, new ways of working (NWW), and leadership. All four must be considered in terms of the overarching goal the organization is aiming to achieve with its digital workplace transformation. It is crucial to identify the current situation pertaining to each element and any changes required to bring about the desired transformation. Moreover, the four elements are not independent, but interact in various and sometimes unexpected ways; hence, successful digital workplace design must take into account the complementarities between the different elements and adapt accordingly.
The 2008 global financial crisis served to illustrate the interconnectedness and the global nature of the world’s increasingly complicated financial services sector. While the concept of financial resilience has been front of mind for regulators for decades, the broader concept of operational resilience has gathered momentum and increasing focus over the past 10 years. The financial system has shown itself to be robust in the face of the COVID-19 pandemic to date, however, the pandemic has also served to further illustrate the broad nature of disruption that can quickly spread across the world. Regulators, boards, and senior executives have shifted their view from resilience being about responsiveness to specific events, such as a cybersecurity incident, to the wider multi-faceted question of operational resilience and preparedness for severe disruption – regardless of cause. Regulators across the globe are converging on a common definition and it is broader than ever before, with expectations around preparing for, responding and adapting to, and recovering and learning from severe disruption. There is recognition that vulnerability at a single firm, financial utility, or third party provider can result in substantial negative consequences across the financial system. Boundaries are greyer and wider than ever – and previously considered individual risks are converging faster. Regulators are focused on ensuring operational resilience is paramount in protecting financial stability as an essential service. While firms need to be prepared, they should also see operational resilience as an opportunity to positively differentiate themselves in the eyes of their clients and other key stakeholders.
Organizations introduce collaboration tools, such as Microsoft Teams and Facebook Workplace, to stimulate communication and collaboration across hierarchies and silos. However, many firms struggle to successfully get their workers to adopt these new technologies. The result is that both management and employees are frustrated, and neither of them become more collaborative. What are the reasons these collaboration initiatives do not always live up to their expectations and how can this be overcome? In this article we discuss four major dilemmas that firms need to address in order to increase the chances of their initiatives becoming a success. First, the scope: is the goal of the project a repository of best practices, or a collaborative space for (work-related) exchange of ideas? Second, design of the tool: should it match the expectation of what management envisions, or should it match (and thereby amplify) current work practices? Third, the implementation strategy: should you go for a top-down implementation with champions and KPIs, or does it make sense to “just let go” and let users play around? And fourth, project governance: should you focus on the quantitative data, or on qualitative evaluations of end-users? Addressing these dilemmas will enhance focus, and ultimately help address the question of how to manage the implementation and use of collaboration tools in relation to broader organizational change: do you want to “disrupt” or “augment” existing ways of working?
Artificial intelligence (AI) and machine learning (ML) are gaining more and more traction in finance and asset management. But AI/ML is a complex tool that requires specific skills to be created, trained, and interpreted well for a given task. In this paper, we discuss some of the context parameters to be considered in order to apply AI beneficially in financial settings. We explore a matrix of use-cases, following the lifecycle of asset management and structured by the type of underlying AI technology. As AI requires human setup and interpretation, we briefly review the role of us “humans-in-the-loop” of AI implementations. Finally, the emerging field of asset tokenization promises to disrupt the conventional markets and market practices, opening up for a new field of AI applications to tackle the new way of trading and servicing securities. The AI game is on in asset management. Not to play is not an option.
The asset management industry has grown signifi cantly in recent years – in Europe alone assets under management have more than doubled in the last decade – and, as a result, is attracting heightened attention for its systemic implications. Alternative investments, including hedge funds and private equity, form a signifi cant part of that industry. In the E.U., the Alternative Investment Fund Manager Directive (AIFMD) provides a dedicated regulatory framework for these alternative investment funds. This article presents a comprehensive mapping of the €6 trillion E.U. AIF market, and an overview of the indicators ESMA applies to assess industry-level risks.
