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The Emerging Threat of Supply Chain Risk in Financial Services

 
The_Emerging_Threat_of_Supply_Chain_Risk_in_Financial_Services


Historically, large financial services companies have led the market in adopting supplier administration programs as a means to controlling costs and to streamline the effort of engaging multiple vendors.

Oddly enough, this leadership still has not translated into much of a talent supply chain strategy. Culturally, a vast majority of these firms prefer the proprietary control of human capital engagements, thus have cast a broader supply chain management strategy aside.

Moreover, this fact is even more profoundly true for the institutional end of the financial services business spectrum, otherwise known as capital markets. In the pre-global financial crisis (GFC) era, brokerage firms, dealers, and investment houses built cultures intent on keeping their operations entirely proprietary; a clear bias for build vs. buy. Of course, they could afford to behave this way. New trading and hedging product innovations were fat with market-making, commission and distribution profits during the early decades of the modern capital markets era.

However, the post-GFC era has changed all that. An array of new regulatory mandates and guidelines has washed over the global financial services ecosystem since 2008-2009. As the industry’s most pervasive and impactful mega-driver of the past five to six years, this regulatory juggernaut has caused unprecedented and long term transformation of financial services operating models. Within this, is a trend towards increased use of contingent workers, managed services and other flexible engagements that lead to both right-sized costs and “operational agility”. However, because of the increased movement of critical capabilities to outsourced engagements, regulators have also become more focused on developing guidelines for financial firms to manage the emerging threat of supply chain risks.

Within the growing spectrum of new rules and mandates however, there remains relatively low awareness of guidelines that can dramatically improve financial firms’ ability to manage the complexities related to “know your vendor” (KYV) and talent supply chain management (TSCM). This paper provides some insight on this topic and details new guidelines designed to manage the growing risks of third party engagements, where most firms’ capabilities are today relative to these guidelines, and finally, the solution profiles that are currently available to manage the growth of supply chain risks.


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