“The immediate priority for most organisations in the financial services sector, not only in South Africa, but globally, is adapting to the current economic instability,” says PwC Financial Services Leader for Southern Africa and Africa.
Professional Services Firm PwC has launched a new global initiative to identify emerging trends which will transform the financial services landscape over the medium to long term and to advise organisations of the steps they need to take now to ensure their business model remains relevant and competitive.
Tom Winterboer, PwC Financial Services Leader for Southern Africa and Africa, says: “The global financial crisis, subsequent developments in regulation, fiscal pressures, political and social unrest are all combining to create an unstable and uncertain business environment. The resultant instability makes the future of financial services, and in particular insurance, difficult to predict. This is forcing most industry executives to focus on short term optimisation, at the expense of longer-term strategy and execution.
“While insurers are grappling with the tough new business, investment and regulatory environment arising out of the instability, industry executives need to realise that they also face far broader challenges from other drivers of change. Demographic shifts, the rise in economic power of emerging markets and customer behavioural changes will all shape the insurance landscape in the longer term. Those insurers who can anticipate and plan for these broader challenges will shape their own future and create competitive advantage.”
The Project Blue framework considers major trends that are reshaping the global economy and transforming the behaviour of consumers, businesses and governments. The initiative has been developed through interaction with various financial services leaders around the world. It considers the extent to which these developments will disrupt existing business models. The initiative goes on to provide a framework to assist executives in the financial services sector, and insurance, to organise their business systems, and reconsider their strategies and business models.
Victor Muguto, Long-Term Insurance Leader at PwC Southern Africa, says: “The South African insurance industry should expect the increased focus from the regulators on solvency, governance and risk management to continue.
“However, beyond this turmoil, the market is changing rapidly. Survival and success will also depend on being able to deal with the longer term trends. The impact of new technologies, demographic shifts, social and political changes, changing customer behaviour and our own emerging South African specific issues are all combining to transform the insurance market”.
He says that leaders in financial services organisations should be asking themselves: ‘What exactly are my sources of value, who will be my most important customers and who will be my main competitors ten years from now?’
Muguto says that while South Africa’s insurance sector is dynamic and resilient, the behaviour of consumers, businesses and governments around the world will continue to change. To the extent that these developments disrupt existing business models, they will also create opportunities for more forward-thinking insurers.
Winterboer says: “Three years on from the onset of the financial crisis, financial services businesses are working around the clock to deal with an unprecedented wave of new regulation and economic instability but this complex and uncertain environment is leading to reactive short-term strategic responses within many organisations.
“There is little space left in the executive agenda to consider the long term future. Yet some forward-looking organisations are using the shake-up as an opportunity to redefine both their strategies and business models to take advantage of a once in a generation opportunity when the competitive structure of the financial services sector is relatively open to change.”
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