Geopolitical factors have always affected financial institutions due to their influence on regulations, but recent months and years have had an unprecedented impact on the industry.
Technology executives in financial services institutions must stay on top of current and future events to ensure their digital initiatives will be able to weather new developments in the talent market and regulatory space.
Geopolitical Developments Create an IT Talent Challenge
The COVID-19 pandemic has caused significant challenges both for financial institutions and the technology providers that serve them. On the heels of changes in the domestic IT talent market and the need for companies to adapt to the remote/hybrid workplace, disruption to daily life in India caused a shortage of outsourced technology talent.
Geopolitical tensions in Ukraine and Russia have only increased the unpredictability of the IT talent pool. Technology providers have faced significant disruption since February due to the large numbers of engineers and software developers based in Ukraine. For example, 20% of Fortune 500 companies used Ukrainian IT services before the Russian invasion in February. Prominent fintech providers such as retail banking app Revolut and payment platform kevin. have operations in Ukraine and nearby Lithuania, which, in recent years, has also become a fintech hub.
Financial institutions have had to approach hiring creatively during this period, introducing new types of benefits and career development opportunities to stay competitive and retain domestic talent. As for outsourcing, the cost of technology talent in regions outside of Russia and Ukraine is expected to rise due to decreased supply. Organizations are faced with the prospect of increasing expense and uncertainty associated with both domestic and international talent.
Mitigating Adverse Impacts on Innovation in Financial Services
Uncertainty in the global talent market can impact technology organizations even in ways that are not directly related to personnel. Studies show that talent turnover adversely affects innovation for up to five years after the event. That said, executive leadership making strategic choices and taking initiative can mitigate these impacts. Financial services executives, particularly CIOs, need to consider how they can continue to foster a culture of innovation in an increasingly competitive talent marketplace.
Though many aspects and challenges of financial services technology are unique to their sector, North American financial institutions do not exist in a vacuum. Upcoming national regulations and directives will affect financial institutions of all sizes. The key concern for executives is how to make their digital strategy robust and flexible.
The best response technology executives can give to geopolitical uncertainties will involve the creation of a digital governance council to ensure regular oversight and current state assessments. A structured system of review, such as a digital governance council, ensures that digital initiatives can be altered early on if they are impacted by geopolitical developments or associated regulations. Procedures should be tailored to the organization as factors such as size and the specific nature of a financial institution’s business will affect it individually.
For advice on tailoring your IT response to any of the geopolitical factors affecting the financial services industry, contact me at [email protected] to learn more about Aite-Novarica Group’s Financial Services CIO/CTO Advisory practice.
