At a recent discussion group, hosted by Aequalis Consulting, CFOs from a number of international investment banks and domestic institutional banks provided insight on common themes facing their organisations. The firms attending represented a wide cross section of the Australian banking sector, from smaller overseas banks with local headcounts of less than 200, to two big domestic firms employing thousands of staff. But every institution - big, small, local and global - said they face the same challenges.
At a time when the screws are tightening again, pressure comes not only internally but increasingly from the continued regulatory and risk-management changes that are evolving rapidly and being reinterpreted along the way.
Costs are very much front of mind. Because margins have been squeezed, revenue lines are more uncertain than ever. Many of the organsiations have made significant investments that are still to make a contribution to the bottom line. Reduced deal flow has seen a declining revenue line, with (in some cases) costs still rising, or support functions remaining at the same size required when times were good.
Hubbing, outsourcing and offshoring
Every attendee has been managed to some degree on headcount and they have all experienced "rationalisation". There are a number of factors that facilitate reducing headcount in finance teams. Systems advances mean that processes have been automated and organisational changes have shifted responsibilities and created efficiencies.
Hubbing, outsourcing and offshoring are part and parcel of this. Only one of the organisations has neither a significant offshore function nor plans to proceed down that path. Conversely, one of the international banks has reduced its finance headcount from nearly 100 to less than 50, largely through offshoring roles.
However, in overall terms, layoffs have not been that large. Local offices of international IBs have participated in job cutting discussions with their head offices, but the effects on teams here have been comparatively minimal.
Although there were some remarks at the roundtable about pencils, newspapers and biscuits, cost cutting at one firm stretched to no longer paying for employees' professional memberships, which for an accounting team is not an insignificant saving.
Regulatory change was another common theme. With many of the "rules" now being applied globally, sweeping changes in capital adequacy, capital management, capital reporting are placing increased demands on all firms. Basle III developments and ever-moving APRA requirements are bringing an increase in the risk management duties of finance teams.
This time the hiring freezes are real
Candidate supply is less of an issue, given the drop in hiring activity, with attrition rates at one firm standing at less than 4 per cent. Although on the surface appears this an accomplishment, it is causing some challenges. For example, the role of finance as a launch pad into other areas of a bank has become limited, as have transfers to overseas operations.
Recruitment is far from discretionary and in many instances there is currently "no hiring". In my experience in the past, some headcount freezes haven't been worth the email they appeared on, but now they are not optional. Even replacement hires require significant business cases to support them. Temps and contractors are being finished up, and "make do" is the mantra.
Diversity is also on the agenda. Given that the nine organisations were all represented by male CFOs, it could be said there is an imbalance. The majority of their firms were actively managing diversity and have ambitions to appoint and hire more senior female staff. Interestingly, having gathered these roundtables together for a number of years, this was the first time that the attendees were all male.
More with less
In conclusion, the main challenge facing senior finance leaders in banks is the same: do more with less. There are indisputable increases in the responsibilities that CFOs have in the financial institutions. Risk, regulation, regionalisation, standards and policies, to name a few, are all being dealt with in an environment where costs are being heavily scrutinised.
Finance is a cost centre, and is sometimes seen as low-hanging fruit. Headcount is being restricted to meet the increased workload, which is unsustainable. How this is resolved will be interesting to see. It is true that there is more internal hiring, but the skills and experience required for these roles are increasingly specialised and the resources just won't be there internally. Hiring these vital skills when there is a headcount freeze will be the next challenge.
Simon Boulton, director, Aequalis Consulting