Moving forward: Deloitte’s Financial Services Leader on strengthening the financial industry during and after the pandemic

To move forward, the financial services industry should aspire to a "higher bottom line", says Kok Yong.

Kok Yong is the Financial Services Industry Leader for Southeast Asia and is an Audit Partner with Deloitte Singapore. He has more than 20 years of public accounting experience involving the financial audit of multinationals and local companies. His audit clients span across a diversified range of industries. He is also responsible for leading teams in the provision of advisory services in Southeast Asia and Singapore. 

His experience runs in the financial audits and regulatory reviews of entities in the banking and capital markets as well as investment management sectors, due diligence reviews for acquisition of financial institutions, initial public offers, special investigation audits and system audits, information systems audits and consultancy work advising, assistance with the setting up of banking operations in Singapore, and FinTech/Digital related advisory projects including set up of digital banks and application of licenses.

As one of the judges at Asian Banking & Finance Awards 2021, this avid jogger is also a passionate watch collector, and enjoys learning more about the intricacies involved in their design, movement and construction. 

Kok Yong recently sat down with us to share some of his views about why digital transformation is not entirely just about technology; how financial industries can survive the pandemic; why strategy and preparation predicates effective management in the business and why over the next decade, regulation will continue to play a critical role in shaping the financial services industry. 

What do you think is your biggest contribution to your industry? Or what do you aspire to contribute to your industry?

At Deloitte, we take pride in fostering a diverse and inclusive workplace for our people to grow. We recognise each individual's unique personalities, harness diverse strengths, and celebrate the success of everyone as one. 

Having served as Southeast Asia Financial Services Leader for 10 years, I am an ardent supporter of diversity in the financial services industry. As a Diversity & Inclusion (D&I) advocate and a Board Member of Deloitte's Global Financial Services Industry D&I Council, I believe that D&I programs can improve results, provide different perspectives, and allow us to better connect with a more diverse customer base and workforce. Diversity can drive innovation and increase productivity companywide, and at the leadership level, it may also boost profitability. In my role, I work closely with our leaders to ensure that we recruit and develop more women for leadership roles within Deloitte.

Digital transformation has been getting the spotlight lately. Should all banks jump on this bandwagon? How can a bank know if it's well-equipped and ready to undergo digital transformation?

As its name suggests, digital transformation requires an enabling platform technology. More specifically, digital transformation relies on an open, modular infrastructure that will allow financial institutions to take advantage of developments in modern technology, and position them to create new products, new forms of customer engagement, and new ways of working with external partners. In the financial services industry, cloud computing is becoming an increasingly critical foundation for change, and many players are looking to replace their legacy IT systems with cloud platforms as part of their digital journeys.

But digital transformation is not entirely just about technology, and there are several prerequisites that financial institutions should fulfil to ensure a successful digital transformation process. Firstly, there must be commitment from all levels of the organisation, including the CEO and board. Without buy-in from the top, it can be challenging to secure the mandate, resources, and senior management attention that are required to deliver a successful digital transformation.

Secondly, there must be a well-articulated and well-communicated vision of the digital transformation objectives, in line with overall organisational goals. A visible, dedicated leader, especially at the early stages of transformation, can help to drive clear, engaging, and consistent messaging on the overall vision, strategic choices, and execution journey for the digital transformation.

Last but not least, financial institutions should also think about how they can leverage high-profile moments of success as catalysts for further transformation. Such moments, typically achieved through agile proof-of-concepts, can help to quickly prove the case for change, or simply show that digital transformation is achievable. Proof points like these can create a domino effect as business owners begin to take interest—and therefore help to generate the momentum for change within the organisation.

In your opinion, what are the most important traits that a financial service company should have to survive the pandemic's challenges? And which should they avoid?

It is no secret that effective management in the business world is predicated on strategy and preparation. For financial institutions, an essential starting point for developing a mindset and culture of preparedness is to create comprehensive crisis response scenarios and playbooks that map out potential risks, both internal and external.

These playbooks should analyse the financial institutions biggest risks, and provide standard operating procedures to follow if a crisis occurs. While playbooks may not be able to anticipate every possible scenario, a comprehensive, regularly updated analysis should provide enough of a starting point to put CXOs on better footing should the unexpected occur, especially given today's volatile global environment.

In addition, financial institutions should strengthen their resilience to risk events through actions that, while not geared toward preparing for any specific crisis, can broaden their overall range of available options and hedge their bets in case of disruption. Examples of such actions include diversifying revenue streams, investing in talent reskilling, and increasing the use of technology to enable new business models.

What's the current status of banks in response to keeping economies afloat during this crisis? Have there been any changes compared to the height of the COVID-19 pandemic? Or things are still the same? 

Historically, banks have played fundamental roles in enabling value exchange, offering mechanisms for risk management, and facilitating investments across multiple parties. During the COVID-19 pandemic, we have witnessed that despite some hiccups, most banking operations have continued smoothly: customers were served, employees were productive, and regulators were reassured. Across many jurisdictions, banks also played a crucial part in stabilising the economy, and transmitting government stimulus and relief programs.

So, the COVID-19 pandemic has not altered these traditional roles of banks. What has changed, however, is the growing public consciousness and expectation for banks to perform these fundamental roles in more socially responsible ways. Through the multitude of roles that they play—as financial market intermediaries, asset owners, investors, and employers—banks need to be at the forefront of leading social change and mitigating climate risk by reallocating capital, enhancing risk frameworks, providing greater transparency, and improving data and reporting standards.

What do you think are the new opportunities for financial services during and after COVID-19? How can a financial institution achieve a high level of sustainable growth even during the crisis?

Increasingly, financial institutions will be called upon to rebuild public trust, contribute to a more just and sustainable world, and build a more equitable financial services industry where profit and societal impact coexist amicably. 

From financing green enterprises, products, and initiatives to offering sustainable investment options and using technologies that serve stakeholders across the socioeconomic spectrum, financial institutions are particularly well-suited to help the world address issues like climate change, financial inclusion, and education for underserved markets.

To move forward, the financial services industry can—and should—aspire to what we call a "higher bottom line". Broadly, this will entail doing three key things differently and better. Firstly, financial institutions will need to put the customer at the centre of everything that they do, and embrace new platforms and business models that will help them create differentiated customer experiences and new approaches to revenue generation. 

Secondly, they will need to examine how they can use technology and data to their fullest potential, while sharing it in innovative and responsible ways to engage the customer and create new sources of value. Finally, they should consider forming alliances and multi-dimensional ecosystems with a variety of different stakeholders across industries to extend the scope and value of their offerings, and innovate for the next generation of consumers.

What cutting-edge regulations should finance leaders in banking keep track of and how does that impact their road to digitisation? 

Over the next decade, regulation will continue to play a critical role in shaping the financial services industry and its ability to respond to new technology. It will also enable new business models by supporting financial services experimentation and allowing for the adoption of foreign regulatory innovations, such as open banking. 

While regulation is sometimes perceived to lag innovation and society's expectations, authorities all over the world are increasingly receptive to advancements that spur competition, enable broader access to financial services, and prioritise data privacy and security. With increased digitisation, cyber security and financial crime will also emerge as long-term priorities for regulators, who are likely to consider these more intently from the perspective of operational resilience. As firms make revisions to their operating models, any lasting changes made to processes and technologies must be shown to have beneficial or neutral impact on the risk levels for cyber security and financial crime. 

With the growing groundswell of support to tackle climate change, we have also observed policymakers emphasising green recoveries from COVID-19. This is particularly the case for our region, given the multitude of carbon net-zero emission commitments, ESG disclosure, and climate risk management requirements announced by Asia Pacific jurisdictions in 2020. 

Financial institutions should therefore look to leverage their influence as key players in the market, such as their relationships with clients and investors, to encourage other players to move towards collective action for the provision of important social goods. Firms can also play a more direct role in mitigating climate change, for example, by prioritising the financing infrastructure that supports more sustainable economic development such as renewable energy, recycling plants, and energy efficient buildings.