Covid19 - Opportunity on its way for BFSI!

The Situation

We all are aware of the havoc that is wrecked by the Pandemic and the damage is not done yet. We do not have a solution in front of us, other than containment. Most countries are in a lock-down or a near lock-down. All economists have predicted that economies across the world are going to be seriously affected. The growth projections are revised downward. No sign of industrial or economic activity picking up soon. The only industry expected to do well now, is the healthcare industry.

The BFSI (Banking and Financial Services) industry outlook is also very similar. A good portion of the industry has given up on any growth prospects for this FY. Survival seems to be the mantra for the year fort the time being.

Is the situation that gloomy? Is it time yet to give up on hopes for this FY? My humble view is that, it is not.

What lies ahead

The Lock-down that most of us are in, is not going to be permanent, nor is it going to eradicate the virus. It is a PAUSE. It is a method to buy time to get prepared to go back to normal life. Our respective governments are using this time to procure enough ammunition; in this case PPEs, Ventilators, setting up ICUs etc. Once that is done, we have to come out of our homes. A prolonged lock-down can have a very serious impact on the economy, it must be ended before the damage becomes irrecoverable or irreversible. So, it is evident that the lock-down will end, at least partially, very soon. We will get back to life as usual, for sure with proper controls around hygiene, physical distancing and the like.

What does this mean to BFSI

The lifeline of Indian Economy is the Micro and Small-scale companies (for many other countries as well). They would need to re-start their operations. The common man who, by this time would have gone through a lot of financial stress, may also need financial help. Where will all of them go? They would definitely need to approach retail lenders such as Banks, NBFCs, HFCs etc. The same holds good for the target segment of Microfinance companies as well. As some Industry Leaders like Ravi Subramanian have already shared, there would be a high demand for credit from all these sections. It is very important for the lenders to gear up and plan for this demand surge.

How to prepare

While there is a definite opportunity, this needs to be approached well. The available time needs to be spent in analysing this demand and to see if that needs any changes in policies and processes. SPEED at which an organisation can meet the need of the customer would be the key. It has always been so but will be more important at this time. Risk assessment may need to be re-looked. New controls may need to be introduced. Due diligence has to be at its best.

The Risk

As always, risk is more when the volumes are on the high. Internal and external frauds could be on the rise, if the vigil is not at its best. Fraud control/Risk control units have more to do, so is the case of Internal Audits. The samples checked by FCU/RCU or audited by IA may need to increase, the frequency of Audits may also need to increase. Existing approved plans for Audit may not be adequate as the times have changed before we could blink our eye.

Technology

No need to mention that nimble technology would play the role of a catalyst. Those who have nimble technology supporting different functions are indeed better placed. Whether it is Core- Banking, Sales, Collections, Risk Management or Audit Management, these are times when good technology solutions prove to be a true base for any business function.

To conclude

These are times when the flexibility of any business unit is put to test. Those who are nimble, and dynamic and can create a strategy to deal with this, at the speed that it demands, are placed better and would make the best of the postlock-down situation.

We could not plan for the disaster that Covid19 is, but we sure, can plan for what follows.