How Pandemic Threats Can Impact Financial Institutions
Not that long ago, the world was forced to shut down.
According to the World Bank’s financial blog, 120 countries worldwide have been affected by the COVID-19 pandemic, being forced to go on a full or partial lockdown. That translates to everyday operations and businesses halting in their work.
Last year, the IFC issued the results of a survey on the impact of the health crisis on the financial sector. According to the findings, although the economy flopped significantly, liquidity persisted as such.
Thankfully, the financial sector didn’t suffer a major blow and emerged victorious. Keep reading to see how pandemic threats can influence the financial world and all players in it.
Operations Were Halted, But Liquidity Is Up And Running
Half a year after the pandemic peaked, financial institutions reported their operational levels were still below those before the crisis.
And yet, even though the high volatility rates and the unavoidable uncertainty of doing business persisted, most financial institutions could maintain liquidity.
Due to the impact of deposits, the adequately calculated provisions, and the unimpaired access to emergency liquidity from central banks and investors, the financial sector managed to dust off and keep going anew.
According to the World Bank, the IFC, or International Financial Corporation, contributed to the mending of the world economy with $4 billion in trade and working capital.
Digitization Takes Over
Searching online and shifting towards digitalization for individuals is easy. For example, you can find a variety of financial information on Fastbull and stay in the know of everything finance. But the problem occurs when a whole company needs to make the change.
Due to the world shifting to a different way of interacting, businesses were forced to offer their clients and customers apt ways of communicating and operating. Most companies needed to adapt to the new reality and become digitally present.
Businesses that already practiced remote work (although not many) were not that much in shock by the new way of doing business. The issue arose with those that weren’t.
As a matter of fact, the digitization of businesses brought upon the world by the pandemic was somewhat of a blessing in disguise. Going digital, companies could cut the middlemen out of the picture and communicate directly with the consumers, which translates to cutting costs.
Moreover, customers became so used to digital transactions and online business that they preferred it over the traditional face-to-face MO.
Redefining Customer Relations And Commercial Models
Even though the pandemic took the world by surprise and messed with everyone’s modus operandi, the good thing is that the company-client relationships elevated to a higher level.
Namely, the banking sector experienced a revival of client-bank relations – going all-digital and offering more benefits to its clients. Banks were able to make the shift from employing bank tellers to engaging in digital platforms that offered more client perks.
Plus, the opportunity to partner with fintech companies makes the banking sector a catalyst between clients and banking opportunities in terms of faster loan admissions and processing, credit transactions, and so on.
Increasing Economic Resiliency
Thanks to the aftermath of the pandemic, the world has become accustomed to web-based shopping and performing digital transactions. That particular occurrence helped cushion the blow on the world economy, triggering economic resilience.
Moreover, other than boosting online sales tremendously, the pandemic also inflicted a need for more goods to be traded online, like investment consulting services, loan opportunities, stock market options, and so on.
Increasing Cyber Security
If financial institutions were known to employ top-notch security systems to ensure their assets stay threat-free, the pandemic further heightened the need to do so.
Cyber attacks were common during any world crisis, and Covid-19 wasn’t an exception.
Financial institutions were the target of cyber criminals looking for illegal profits. Banks, loan companies, insurance providers, and stock markets saw the importance of cyber security, pushing them a step closer to collaborating with fintech firms.
Remodeling The Financial Infrastructure
To be able to deliver financial services, the success of financial institutions depends on the infrastructure of the market.
Financial infrastructure providers (FIPs), like depositaries, exchange offices, and clearers, play a major role in the shape of the financial infrastructure. Payment providers and payment systems are also an inevitable part of the big picture.
Until now, this particular sector of financial institutions has proven to successfully fend off the adversities brought by the pandemic.
Conclusion: Can Pandemics Impact Financial Institutions?
In short – yes, and in more than one way.
From ceasing operations to outdating businesses, pandemic outbreaks can be a danger to the success of any type of company. However, as we have seen so far, the financial sector can overcome pandemic threats in many ways.
Employing up-to-date customer relations, increasing cyber security levels, and utilizing the perks of digitization are just a few ways to stay afloat after a pandemic storm.
