Prepare for the Unknown: In an Era of External Shocks, FIs Need to Inject Flexibility, Scalability, and Agility into Their Operations
This IDC Financial Insights Perspective responds to the new reality in the European banking ecosystem brought about by low-probability, momentous events. To help banks prepare for such events and to respond more quickly in future, IDC has consolidated a number of action items. The Brexit referendum in the U.K. is a prime example of such an event. Despite the possibility that the "leave" vote could win, it still caught the financial services industry completely off guard. It was this shock effect that sent markets tumbling downward while speculation, fearmongering, and panic spread. Brexit may have been an unprecedented event, but IDC believes banks should see it as a case study of a low-probability, momentous scenario that they would do well to be better prepared for in future. To some degree we have now entered the age of uncertainty, and while the coming together of similar unknown events in 2016 may be coincidental, banks should prepare better for the unknown. The future is unwritten and instead of trying to predict the long-term implications, they should focus on short-term tactical considerations to help deal with the shock of momentous events. Agility, flexibility, and scalability — upward and downward — therefore will put an institution at a clear advantage in turbulent times, where outcomes may not be predicted accurately and realities can change with the blink of an eye.