Deloitte leader: Starting small, scaling up key to staying ahead in business

This comes as market activities compel banking and finance companies to align technological advancements in the industry with their respective business goals.

Ho Kok Yong is CFO Program Leader, Deloitte Southeast Asia, as well as Audit & Assurance Partner at Deloitte Singapore. He has over 30 years of experience in public accounting, specialising in audit and assurance for financial institutions, technical accounting, as well as advisory for fintech and digital bank-related advisory.

His expertise covers all aspects of audit for financial institutions such as loan reviews, compliance with regulatory reporting, financing of trade bills, payment systems, customer banking operations, treasury and securities brokerage activities, as well as financial derivatives.

Being well-versed in the International Financial Reporting Standards, he also conducts external seminars and internal training sessions on the implementation of these standards.

Kok Yong spearheads Deloitte’s CFO Program in Southeast Asia, which provides CFOs with information and insights to address issues confronting the finance function and the broader enterprise. Kok Yong also led Deloitte’s financial services industry in Southeast Asia from 2011 to 2021.

As one of the distinguished judges in the Asian Banking & Finance Awards, he has provided his insights on the rapidly evolving regulatory landscape, trends and opportunities in the financial industry, as well as how organisations can face challenges in the future and maintain their competitive edge.

What do you believe are the key challenges and opportunities for firms to ensure compliance whilst driving innovation in today's rapidly evolving regulatory landscape?

Navigating the current regulatory landscape presents a unique set of challenges and opportunities for financial services firms. On one hand, there is a remarkable push towards digital transformation across the sector. This drive for innovation, particularly with technologies like artificial intelligence (AI) and digital banking, offers tremendous opportunities to enhance efficiency, improve customer experiences, and promote financial inclusion.

However, the rapid pace of these technological advancements also introduces significant challenges. One of the primary hurdles is maintaining a balance between fostering innovation and ensuring financial stability. New digital entrants, such as digital-only banks, bring fresh opportunities but also come with inherent risks that regulators are particularly cautious about. Instances where digital banks have struggled or failed highlight the critical need for a robust, risk-based regulatory framework.

Regulators across the Asia Pacific region are increasingly focused on adapting their oversight to keep up with these emerging risks. This includes refining policies and enhancing supervisory capabilities. For firms, this requires continuous adaptation to evolving regulatory expectations, which can be demanding.

Another significant challenge is managing technology risks. As firms implement cutting-edge technologies, they must navigate issues like data privacy, algorithmic bias, and cybersecurity threats. The regulatory environment is starting to catch up with these developments, introducing new guidelines and legislative frameworks to manage these risks effectively. Staying ahead of these regulatory changes is essential for compliance.

On the flip side, there are substantial opportunities as well. Technology can be a powerful ally in meeting compliance requirements. For instance, leveraging data analytics and digital tools can streamline compliance processes, reduce regulatory burdens, and enhance overall efficiency. Engaging with regulators, participating in collaborative projects, and contributing to the development of new frameworks can provide firms with a strategic advantage.

Furthermore, robust risk management frameworks are crucial. Conducting thorough risk assessments and implementing effective controls not only ensure compliance but also support sustainable innovation. Effective data management is another key area. Accurate and comprehensive data allows firms to gain insights into operations, proactively manage risks, and respond to regulatory inquiries more effectively.

In essence, the key lies in striking a harmonious balance between compliance and innovation. Firms need to be agile and leverage technology to meet regulatory demands whilst pushing forward with innovative strategies. This balanced approach will be critical to navigating the evolving landscape successfully.

Could you share some insights into the current trends and emerging technologies that are reshaping the financial industry, and how organisations can adapt to stay ahead in this dynamic environment?

The financial industry is at a fascinating crossroad driven by the rapid adoption of technology. There are several key trends and technologies reshaping the landscape and actions organisations can take to navigate this evolution.

Firstly, automation and AI are pivotal. According to the Deloitte Southeast Asia CFO Agenda report, 74% of CFOs in the region are embracing automation, reflecting a broader trend across the Asia Pacific. Tools like robotic process automation and electronic invoicing are becoming standard, freeing up human capital for strategic initiatives.

AI plays a crucial role through the use of machine learning and predictive analytics to modernise risk management and automate trading processes. These technologies offer insights into market trends and customer needs, providing a competitive edge.

For organisations to stay ahead, starting small and scaling up is key. Begin with automating basic tasks and gradually integrate AI solutions aligned with business goals.

Generative AI is transforming operations by creating content, code, and marketing materials efficiently. Organisations should start with automation in areas like customer service and content generation before expanding its application strategically.

Real-time data insights are increasingly crucial. Customers demand up-to-the-minute information, driving open banking and personalised experiences. Financial institutions must invest in robust data infrastructure, integrating diverse sources for actionable insights.

Managing emerging risks, including cybersecurity and regulatory compliance, is vital. Robust risk management frameworks and staff training are essential to mitigate risks whilst enjoying the benefits of new technologies.

In summary, automation, AI, generative AI and data are reshaping finance. Organisations should adopt these technologies strategically, starting small and scaling up to stay competitive and meet customer expectations in today's dynamic environment.

What are some critical factors that potential investors should consider when evaluating investment opportunities in the financial sector, particularly in the context of market volatility and regulatory changes?

Evaluating investment opportunities in today's financial landscape requires awareness of macroeconomic indicators and sector dynamics. There are several critical factors for investors to consider in 2024, shaped by economic trends and regulatory developments.

Firstly, with potential rate cuts by the Federal Reserve, interest rate-sensitive investments like mortgages and bonds face profitability and risk changes.

The M&A landscape in banking and fintech is evolving, driven by corporate buyers and alternative financing. Assessing deal structures and financing terms under varying cost scenarios is crucial.

Understanding regulatory shifts, such as Basel III Endgame, is vital for capital adequacy and operational resilience.

Investors should prioritise firms with robust frameworks in data, technology, and enterprise functions, enhancing operational efficiency and readiness for M&A.

Strategic areas like embedded finance and Insurtech offer opportunities for growth amidst market volatility, appealing to wealth managers scaling through larger deals and multi-alternative platforms.

Agility in reacting to market shifts is essential. Proactive measures in value propositions and customer alignment mitigate risks and capitalise on trends.

Evaluating financial investments demands integrating economic foresight, regulatory acumen, and operational readiness. Navigating these factors positions investors to capitalise on market dynamics whilst managing risks effectively.

You have assisted in the setup of banking operations in Singapore. What are some strategic considerations that organisations should keep in mind when expanding their operations into new markets?

Expanding banking operations into new markets requires a strategic and nuanced approach. Some of the strategic considerations include:

Regulatory compliance: Understanding and complying with local banking regulations and licensing requirements is essential. This includes regulatory frameworks set by regulators such as the Monetary Authority of Singapore, which are crucial for operating legally and effectively. Given how quickly financial regulations can change, staying informed about both current and emerging rules is also key.

Market analysis: Conduct a thorough market analysis to understand the competitive landscape, consumer behaviour, and demand for banking services in the market. For example, every market is unique, so organisations should strive to understand local preferences and spot gaps that they can fill.

Technology infrastructure: When it comes to technology, Singapore is well-known as a tech-savvy hub. As every market is different, organisations should assess their technological infrastructure and ensure that their banking systems and digital platforms meet local standards for security, reliability, and ease of use. Tapping into the local fintech scene can provide companies with innovative tools and services that can enhance their operations and customer engagement.

Risk management: Every market has its own set of risks, be it financial, operational, or compliance-related. Developing robust risk management strategies that are tailored to the market will help ensure stability and resilience in the face of local economic fluctuations or regulatory changes.

Talent acquisition and localisation: Having the right team on the ground is invaluable. Investing in recruiting local talent who understand the market dynamics and regulatory environment will help banks build trust and credibility with both customers and regulators.

Scalability and flexibility: Finally, organisations should plan for scalability and flexibility in operations to accommodate future growth and be ready to adapt to evolving market conditions in the local market. This means having agile business processes and scalable technology infrastructure. That way, they can quickly respond to new opportunities or shifts in the market without missing a beat.

Looking ahead, what do you foresee as the biggest disruptors in the financial services sector, and how can organisations proactively prepare for and respond to these disruptions to maintain their competitive edge?

Several disruptive forces are reshaping the financial services industry in 2024, particularly in the banking & capital markets sector. Key amongst these are intensified competition, regulatory shifts, technological advancements, and changing customer expectations. To maintain a competitive edge amidst these challenges, organisations must adopt proactive strategies that embrace innovation, regulatory compliance, and enhanced customer engagement.

Competitive dynamics are undergoing a paradigm shift as traditional banks face formidable competition from digital banks offering higher deposit yields and fintechs providing innovative payment solutions like digital wallets and buy now, pay later options. It is therefore necessary for traditional banks to innovate swiftly in digital offerings whilst preserving personalised customer service—a delicate balance crucial for retaining customer loyalty.

Regulatory pressures are mounting globally, influencing everything from data privacy to capital requirements. Organisations must navigate diverse regulatory landscapes, such as the European Union's stringent AI Act and evolving open banking rules, which demand robust compliance frameworks. Proactively engaging with regulators and investing in compliance technologies will be critical to mitigating regulatory risks and maintaining operational resilience.

Technological advancements, particularly in AI and automation, are revolutionising banking operations. Machine learning and natural language processing are automating tasks from risk management to customer service, enabling banks to streamline operations and enhance productivity. Embracing these technologies whilst fortifying cybersecurity measures against emerging threats like deepfakes is essential for safeguarding customer trust and organisational integrity.

Moreover, customer expectations are evolving rapidly, driven by digital empowerment and personalised service demands. Banks must deliver seamless omnichannel experiences and personalised financial solutions to meet the preferences of tech-savvy millennials and discerning institutional clients alike. This entails leveraging data analytics to derive actionable insights and forge strategic partnerships that enhance service offerings.

In response to these disruptors, forward-thinking organisations are embracing agility as a core strategy. Agility enables banks to pivot swiftly in response to market shifts, innovate iteratively, and capitalise on emerging opportunities. This includes fostering a culture of innovation, upskilling talent in digital competencies, and cultivating partnerships that broaden service capabilities.

Ultimately, maintaining a competitive edge in the banking & capital markets sector requires a multifaceted approach—embracing technology, navigating regulatory complexities, and prioritising customer-centricity. By proactively adapting to these disruptive forces, organisations can not only survive but thrive in an increasingly dynamic marketplace.