Change-related incidents are one of the top causes of failure and operational disruption in financial services. Recently published analysis by UK regulator the Financial Conduct Authority (FCA) shows that, of the nearly 1,000 incidents reported in 2019, 17% were caused by change activity. Effectively managing the risk associated with change is therefore crucial.
Financial institutions will continue to face unprecedented levels of change and increasing complexity across day-to-day operations. The global pandemic revealed serious gaps in some areas of operational resilience and digital service provision, both of which have become compelling drivers for change. In 2021, the FCA highlighted that significant IT failures in the previous 10 years have led to greater scrutiny of the effectiveness of technology change management in financial services and this regulatory scrutiny is set to continue.
A host of other developments are keeping financial firms’ change agendas full, evolving and in need of strategic prioritisation. These include remote working strategies; employee welfare; increase in cybercrime; and regulatory changes, from LIBOR phase-out to the EU’s Sustainable Finance Disclosure Regulations (SFDR).
‘The evolution of business models, economic and regulatory change and the increasing pace of technological advancements have emphasised the need for firms to change with confidence,’ says the FCA.
Making change more agile
Change is continuous, and the traditional ‘end state’ of change projects is fading. Rather than focus on end state success, many firms are focusing more on implementing a dynamic, agile change capability that is scalable, and both proactive and reactive.
A 2020 McKinsey report highlighted that the market will always change constantly. Firms need to make a constant effort to adapt, and change programmes that adjust as needed are 4.6 times more likely to succeed, it said.
Firms moving towards a more dynamic and agile approach should start by reviewing their current approach to change management. Do you manage change at a project, programme, portfolio, or enterprise level? Do you have an internal change management function? Or do you use external consultants or a hybrid model? Is your strategy fit for purpose given the increasing complexity and frequency of change in your organisation?
There is no one-size-fits-all solution. For example, the existence and maturity of an organisation’s enterprise change function will influence which model is optimal. Regardless of the model you adopt, the factors that drive optimisation and scaling of change remain broadly consistent. Delta Capita’s change management model follows five core elements that help drive this consistency:
- Identification and awareness
- Evaluation and desire
- Management and knowledge
- Planning and ability
- Implementation and reinforcement.
The importance of governance and collaboration
To succeed with this change model, it is critical to connect each of these five core elements through the change governance lifecycle – from initiation to closure. It is crucial to embrace and enact change, even when the required change itself is initially unclear.
Inaction can often seriously undermine the change initiative, even though waiting for complete clarity may appear to be the most prudent, risk-based approach. To help manage the risks associated with this uncertainty, firms need a robust governance model. This provides the rigour and discipline you need to apply auditable and consistent standards across the change initiative, and throughout the change lifecycle.
So even when the specifics of the required change are not entirely clear, the governance process and structure applied to the proposals will help classify and assess the validity of the change, significantly increasing the chances of success and reducing risk.
Engagement from all stakeholders in assessing change drives collaboration. An agreed approval process, with the right stakeholder buy-in, paves the way for successful implementation.
McKinsey’s research found change programmes with governance structures that identify roles and responsibilities clearly are 6.4 times more likely to succeed. A typical change governance structure would comprise an executive steering committee; a change management office; change executive sponsors; initiative owners; and their teams. Nearly all successful programmes include these four elements.
How Delta Capita can help
Investing the time and resources to implement the right change management approach and governance model is crucial.
Delta Capita are well-positioned to help you manage the uncertainty of change. We can support you in assessing your current and targeted change capabilities. We help determine which solution is right for your organisation; how to optimise what you have today; and which model is optimal for the future.
We can also help you implement longer-term strategic change by using our extensive practitioner-led change capability and frameworks.
For more information, please contact: Martin Hillier, Director, Head of Project and Programme Delivery, firstname.lastname@example.org or Michael Robertson, Managing Director, Head of UK Consulting, email@example.com.