From the desk of John Arnesen,
Consulting Lead, Pierpoint Financial
Following my last blog, I conclude this week with my thoughts on two of the remaining panels only at the risk of making this too long a read. Further, given the risk of misquoting, I will not name individuals.
Women in Securities Finance
The final panel on day one, moderated by Women in Securities Finance, invited representatives from Oliver Wyman to discuss the findings of a paper they published late last year. It is worth a read, and you can find it here. It is impressively comprehensive, having included feedback from 468 companies in 37 countries or jurisdictions. Central to the panel’s discussion was that despite progress in the representation of women on executive committees (exco) and boards, progress has been slower than the ambitions of financial institutions. In 2003, the percentage of women sitting on excos and boards was 11% in each case, and that had risen to 20% and 23% respectively by 2019.
The chart below shows exco membership by women, by country. In providing possible reasons for this low representation, it was noted that women are more likely to work in HR, marketing, legal and compliance and that the path to board membership or CEO roles come more frequently from leadership in other areas of business. The task is to ensure that women are appointed to the roles that feed into the most senior of roles. Another factor, one I find really important in need of change, is that women tend to leave jobs in financial services between 20% and 30% more frequently than women in other industries. When debating why this is the case, it was cited that women tend to vote with their feet when they feel that they are not included or considered for promotion. Institutions which, while making every effort to develop diversity and inclusion initiatives, do not live up to them in practice instil a cultural problem. Changing culture is the hardest thing to do and the consensus, that women should make up 30% of excos and boards, is taking longer to achieve.
Unfortunately, the pandemic seems to be challenging women more than men in balancing work and life, with a high 25% considering checking out entirely on their careers. Such a situation needs to be addressed, and it strikes me that cultural change cannot be a top-down process but must be a bottom-up one. Individuals need to check themselves for conscious bias and behaviours.
The report identified four key areas where firms fall short:
Empathy
A lack of diversity ideas
Marginalising women
Defaulting to men’s preference
This reads as if there is plenty still to be done by all financial institutions.
Day Two
On day two, the Global Industry Leaders Panel started with reflecting on the pandemic and how the industry has faired. Other virtual webinar panels have addressed the same issue recently, and I heard nothing remarkably different: all have come through it unscathed, and one panellist said that assets have grown during the lockdown and that they have pitched and won new business. This is encouraging; it is becoming clear that a full-time return to the office environment is some way off, if at all, and that the shift to the new way of working if here to stay for the foreseeable future. Parallels to the global credit crisis were drawn, and it was felt that this time, it is very different. The liquidity which central banks injected happened with speed and commitment. In fact, it was debated whether the Fed and other central banks could be the liquidity providers in perpetuity. Given where we are at present, this doesn’t sound so far-fetched. One issue I noted, which hadn’t occurred to me, was how emergency or furloughed payments were made. In Europe, governments used the distribution network of banks, whereas, in the US, payments came directly from the government each approach with its own challenges.
The debate turned to the role of technology, and I was surprised to hear that there are in the region of 70 unique platforms available to the securities finance industry. That is a mind-boggling amount, but it does suggest that enough tech types are available to look at ways to embrace the newest technology. The panel noted that the use of electronic communications has improved in the past few years and has helped to automate the low-yielding activities such general collateral trading while the use of machine learning has aided the developments in collateral management although where this is most needed is in post-trade services. This view reflects the debate in Europe where the industry has sharpened its focus on this area, mostly driven by the necessity to deliver SFTR compliance. The panel agreed that all had applied greater automation and machine learning processes internally either to improve a process or to make it faster, but that there are non-competitive processes in post-trade life-cycle events on which the industry could collaborate to automate completely or apply newer technology to free up resources to concentrate on revenue generation. It was suggested that the industry reviewed the 70 available platforms, pick a couple and choose one as a collective solution. While this would be ideal, the chances of this happening are wrought with challenges. The recognition of standardisation as a prerequisite to any future application of digitisation or token-based model appears to be equally high on both sides of the Atlantic. Both the RMA and ISLA have working groups looking into this, but to achieve agreement across the board on a single solution from an existing vendor I think is unlikely. It is more likely a disruptor from outside the industry emerges, depending on the issue that is attempted to be solved. A great point was made that it is all well and good for securities finance to be making headway on the digitisation front, but it would only make sense if done in parallel with securities processing in general. It strikes me that as a single asset class with settlement highly automated via the DTCC, US equities settlement is ripe for a digital solution.
Conclusion
The panel concluded with where it started to some extent in a discussion about operating remotely and the future viability of this. The jury appears to be out as to whether there will be a split between remote and office working. Interns and associates have definitely missed out this year on the training that they would typically receive. One panellist described that his workday has flipped from business to people management in a 90/10% reversal as the current situation is not without anxiety, some find it hard to work from home and yet it may not yet be safe to return to the office. All employers seem to have embraced a high level of employee care which is encouraging. Equally encouraging was to hear that client relationships and communication had improved despite a lack of personal interaction, partly due to the need to be clear and precise when operating virtually and partly as a result of empathy in that we are all in this together facing similar challenges.
This made me think of the event as a whole. To some extent, it is harder to remain focused entirely on a virtually held event. To its credit, the RMA has made all the sessions available online to watch at one’s convenience – and when you add the travel, expense, wear and tear of endless food and a couple of cocktails at physical events, is this future of conferences? I have my opinions on this, and if you are interested, I’ll tell you at the next conference.