How European trading firms can emerge stronger from the COVID-19 crisis

‘Never let a good crisis go to waste’. This phrase has gained a lot of traction and received a lot of usage in recent weeks. It has been used by a wide variety of organisations, from management consultancies to industry associations, as it provides a way of detailing how the Coronavirus pandemic crisis has presented an opportunity for necessary and worthwhile change.

The saying has been frequently used to show that the damage that caused by the current crisis provides organisations with an opportunity to rebuild, and to do things differently – things that previously may have not been considered possible.

For example, financial trading firms could be looking at partaking in projects that previously would have made little sense but now appear to be obvious. As such, those in the finance industry are starting to discuss what their working life will look like in a post-pandemic world.  

Navigating the three stages 

When it comes to a crisis, there are three different stages. These are the emergency phase, the transition period, and the post-crisis period.

The first part, known as the emergency phase, refers to when organisations are desperately trying to manage the crisis. In the finance industry, banks and brokers especially need to ensure that critical tasks can still be fulfilled, enabling them to continue servicing clients. In order for this to be achieved, plans need to be activated to ensure business continuity.

Looking at the current crisis, European banks and brokers, both large and small, were relatively successful in their handling of this phase. This can largely be attributed to the presence of communications technology, which has reached a point whereby companies are able to adopt and implement effective work from home strategies.

We are currently in the second stage of the current crisis, caused by the coronavirus pandemic – the transition period. This is a critical period, with financial companies working out how best to manage the worst effects of the ongoing crisis, whilst also planning long-term changes that will be implemented in a post-crisis world.

Nevertheless, there is still a lot that we do not know about COVID-19, thus making it very difficult to know how long this phase will last, and when it will end. Therefore, this will impact when it will be safe for businesses to operate in a similar way to how they were run in a pre-pandemic world.

COVID-19 cases have recently been rising in countries throughout the continent, causing fears of a second wave, and so we have seen restrictions and lockdowns returning to certain regions. As such, businesses that were slowly working their way towards a greater amount of on-site trading need to be alert and remain flexible to any changes in guidelines.

An example of financial firms being flexible includes banks that are looking at deploying hybrid operations, such as a “Team A/Team B” model. This means that some traders can come into the office a couple of days a week, and then work from home for the rest of the week while their colleagues are on-site. This of course leads to fewer people being in the office building, thus complying with social distancing rules and helping to limit the spread of coronavirus.

Once the transition period comes to an end, businesses will enter the post-crisis period. In relation to the current coronavirus crisis, it is highly unlikely that this stage will occur until a vaccine has been found and developed, and subsequently widely distributed to the population.

Whilst it cannot be denied that COVID-19 has caused widespread economic problems, many economists are of the opinion that the economy will rebound post-pandemic. It may not be entirely smooth sailing, but the fact that financial markets have shown resilience so far is a positive sign that the recovery will be healthy.

Emerging post a position of strength

It is important for European trading firms to use the current crisis to their advantage to improve their chances of making a healthy recovery, and to emerge from the crisis in a position of strength. 

The use of a successful community networks offers participants access to a ready-made, diverse and global financial ecosystem – one that includes a wide variety of counterparties for price discovery, liquidity and execution, trade lifecycle services and market data providers.

Additionally, to support this new reality, technology infrastructure may have to adapt further. For example, we might see a rise in investments for high-speed fibre connectivity in traders’ homes, as well as greater use of soft turrets and cloud-delivered solutions.

We anticipate that many companies will reprioritise their IT budgets, having seen the damage and extreme circumstances that are possible, as they will need to brace themselves for any possible eventuality. This refocus on spend will manifest itself in the form of greater investment in cloud migrations, and in ensuring that legacy trading infrastructure is able to look after the headroom necessary to cope with possible surges in volatility and volumes under exceptional market conditions.

With greater emphasis being placed on voice trading, firms will also want to invest in the infrastructure to support a more seamless client and sales experience across Chat and Voice channels. However, given the cost constraints that many IT departments face, some projects and types of spending will need to be prioritised over others to support this initiative.

While a return to normality may be desired by many, the reality is that it will likely not be possible for some time and that our concept of ‘normal’ could be entirely redefined.

By taking advantage of the current crisis, and investing in technology that has proven to be robust and flexible enough during this challenging time, European trading firms can make sure that they maintain their resilience and do not let a good crisis go to waste.

Terry Ewin is Vice President, EMEA, at IPC.

The views and opinions expressed in this Viewpoint article are solely those of the author(s) and do not reflect the views and opinions of Fintech Bulletin.