What are the short-term and longer-term risks of COVID-19? Patrick Heisen, PwC Asset & Wealth management Netherlands, discussed the impact of the corona virus outbreak on the business model of asset managers. "Having reliable information and a plan to manage the risks following the COVID-19 pandemic and fall-out are crucial."
"In our experience, gaining control over an emerging crisis is a matter of weeks, not months. Having a plan is an opportunity to take control and see through a period of uncertainty. An integrated impact-analysis identifies challenges and opportunities, and provides guidance on where to focus your efforts." It helps to use scenarios to adopt to the "new normal" and emerge stronger from the crisis.
In the current situation, risk analyses help create relevant scenarios. Events with a high impact determine the choice of scenarios, e.g. scenarios to address impact on people, economy, supply chain; economic scenarios to address financial impact; and scenarios to address investors' behaviour post-crisis.
Integrated view is crucial
Forecasting in the face of uncertainty requires an integrated view on strategy, finance, and risk. "When you have this integrated view, you must make a distinction between short-term and medium-terms actions." Asset managers are currently under unprecedented pressure to urgently answer complex questions and will need to determine the differentiating capabilities they'll need to thrive. "Especially in a crisis, we need to emphasize on those things that make your organization unique."
Use what-if scenarios
Patrick's advice: use what-if scenarios for your own business model to help stay in control. Apply different scenarios, including very broad ones with a lock-down situation to scenarios stating the way in which investors are dealing with the current crisis and their risk appetite. "This will create insights and give a view on what measures should be taken. Finally, look at the strategy you have in place to consider aspects such as finance, your own risk appetite and capital requirements."
This article is part of the
report of the webinar on Potential business impacts of the COVID-19 outbreak on asset & wealth managers - and how to tackle these.
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