The events of the last few years have demonstrated the unpredictable yet highly connected nature of our global economy as we are all now living through the material consequences of recent times. Starting into 2023, there is much uncertainty in the political, economic and social outlook.
And yet, although impacted by the energy and cost of living crises, the economic situation appears to be stabilising with sentiment shifting. The effect on the financial services industry has been tempered by rising interest rates and a relatively buoyant Irish economy in comparison to other EU counterparts.
But change is afoot. The disruptive forces shaping the evolving Irish financial services industry are well documented; power continues to shift to the consumer, firms are facing huge competitive upheaval, the boundaries of the traditional industry are blurring and technology is changing the game. What used to be reliable and predictable is far less so. Change is the one thing that is constant.

And yet I believe there are some patterns that will make themselves felt no matter what way the environment unfolds, presenting opportunity for those organisations that are prepared, focused and have the ability to act with conviction. I believe we will see these patterns clearly when we look back on the leaders emerging from 2023.

Environmental leaders will emerge
Globally, across all sectors, the focus on addressing societal and climate issues has now, thankfully, become the key driver of board and executive planning. As we move on from the pandemic, consumer behaviour and expectations in this regard have changed monumentally. The ESG agenda has rightly become one of the key driving forces of industry policy and strategy. It is no longer about what companies should do; it’s about what simply must be done. Consumers demand it, and regulators mandate it.

The year will see leading firms revisit their strategies with conviction, assessing and pivoting business models and priorities where needed, connecting with consumers at a purpose level and pulling away from the pack. The recent EY Sustainable Finance Index highlighted progress since 2019 across the FS sector but material challenges remain. The data shows that while social and governance dimensions have advanced clearly (with much more to do) there is a substantial difference between leaders and laggards in the environment dimension, as initial momentum stalled for many during the COVID-19 pandemic.

In 2023 leaders will emerge from their peer group with both conviction and momentum in their journey. It will be critical to address the data challenges, to strengthen the links between remuneration and ESG targets and to build confidence in the disclosures and reporting through validation.

Human-centric organisations will accelerate
2023 will be all about developing an adaptive organisation based on the strength of the workforce and experience of the individual. Finding and harnessing the right people and expertise is central to any firm looking to forge new paths to revenue and productivity while building more agility and responsiveness in the core business.

Whether it be about productivity or retention, leading firms are increasingly placing the employee at the centre of the business and implementing policies that take account of the changing nature of work. Successful firms will focus extensively on EX (Employee Experience) and ‘human centric’ culture. This means forging new ways of engagement and reshaping conventions on how organisational cultures evolve, and productivity can thrive, in the post pandemic work world.

New research conducted by EY in partnership with the University of Oxford indicates that giving focus to a series of specific human factors can increase the probability of transformation success to more than 70%.

Leading human centric organisations:
• Inspire teams by creating a purposeful vision
• Care by building a culture that embraces everyone’s opinion
• Build tech that drives visible action
• Empower people by setting clear responsibilities but also allowing creative freedom to innovate
• Lead the organisation with courage and accountability
• Collaborate by creating an environment that fosters connectivity, collaboration and creativity.

Leading firms will emerge from 2023 as ‘human centric’ businesses by reframing their thinking on the workforce and dramatically increasing their engagement retention and transformation capabilities.

Simple is beautiful
Complexity is evil. The words of a master lean practitioner will ring true over the course of 2023. Complexity in any business drives cost, impedes the pace of change and typically contributes to lower quality and increased points of failure.

The activities of the last few years have contributed to the already high level of complexity in most FS organisations. There has been much consolidation across the sector with limited time to drive out the planned efficiencies. The need to respond quickly to the COVID-19 pandemic saw in-flight investment plans disrupted and necessarily tactical interventions used to respond quickly to fast changing events. It will be important to tackle this complexity in 2023, putting actions in place to simplify organisations, remove costly and complex structures, break volume driven cost models and refocus.

Newly focussed and simplified organisations will emerge from 2023 with an increased ability to respond to market events quickly with more predictable operations and the foundations of more cost-effective operating models.

Trust and data - The Protected Organisation
There is much talk at this time of the year about the cost of regulation and the opportunity cost of meeting mandatory regulatory obligations as investment plans are committed and the shape of 2023’s change portfolios settle. Mitigating risk and managing the compliance agenda continues to be central to all activity across banking, insurance and wealth management with 34% of CROs citing that the implementation of regulatory risks/supervisory expectations as one of their top risk priorities for 2023 in our EY/IIF global risk management survey.

Leading organisations are making the connection between the ‘trust’ dimension of consumer sentiment and the ‘protection’ that emerges from operating with a lower risk profile and meeting compliance obligations in a consistent and effective manner. In 2023 leading organisations will assess their overall upstream regulatory roadmap, charting the requirements on a rolling periodic basis so that overlapping and correlated risks and regulations are worked on simultaneously. This will not only enable a lower cost of compliance but also create space for investing elsewhere.

Successful risk strategies will put more emphasis on the use of data and technology, dedicated regulatory change teams and an enhanced reporting function, essentially bridging the gaps between regulatory functions to create more holistic management. The pattern of the protected organisation will emerge, once that engenders more trust from both consumers and supervisors alike and consequently can redirect leadership focus to the next strategic horizon.

As organisations meet their regulatory obligations, there are opportunities in these programmes to realise transformation benefits for both the business and customer by leveraging data for more robust and faster decision making, enabling personalisation through better understanding of customer needs.

Right-sized and right-timed channels
2023 will see the right balance emerging in optimising channels to suit consumers versus optimising to suit their financial service provider. The continued build of digital servicing capabilities across mass financial service offerings means that customers can conduct most of their requirements ‘online’ or remotely with reduced need for human or physical interaction. And yet consumers are increasingly voicing their frustration that when it really matters the ability to interact more meaningfully with their provider has waned in recent years.

Leading financial services providers will re-assess entire channel strategy balancing their own business needs with those of the customer, digitising for convenience and cost reduction where feasible, but also investing in technology and servicing capabilities that enable meaningful human and personalised interactions when it matters.

The channel strategy chosen will also impact the employee experience brought about by new technologies, a drive to better understand customer needs and empowerment with data to inform better conversations and decisions.

2023 in summary
2023 will be a combination of settling into the new normal but clear leaders will emerge as those who can simplify their businesses, place people at the centre, embed ESG in their purpose and strategy while striking the right channel balance with consumers. The post pandemic focus on digital enablement will continue to enable new ways of serving customers but will bring with it an increasing need to improve customer financial literacy in an inclusive offering for all members of society.

The continued improvement in how organisations leverage data to better understand customers, build trust and make more robust business decisions will underpin successful strategies from ESG to proactive regulation to channels. One thing is very clear, 2023 will be the year of putting the human at the centre of the decision making in financial services, balancing the voices of customers, colleagues and communities.