Globalization continues to shape the financial services industry, requiring firms to internationalize their operations and expand their footprints across the world.
In the post-Global Financial Crisis era, most financial services companies took a hard look at their corporate structures and global footprint. More recently, Brexit, and a looming trade war, have financial services firms considering non-traditional site selection locations that could shake up an industry built on the power and prestige of long-standing traditions. Venerated financial hubs such as London, New York City, and Tokyo have storied reputations and street credibility, but they are also incredibly expensive and congested in a world that is becoming increasingly cost-conscious, nimble and decentralized.
Another important element that has accelerated this trend is the development of the fintech industry, which promises to disrupt traditional business models and ways these companies have interacted with their customers thus far. FinTech is poised to revolutionize mainstream banking and consumer engagement through advanced platforms and apps that will streamline mobile payments, peer-to-peer loan transactions, and modernize how people invest in stocks, cryptocurrencies, and conduct other Internet-based financial transactions through their smartphones. This decentralization of the industry presents unprecedented opportunities especially for growth or emerging economies. Determining exactly where, and how, to establish a new presence in different states, countries, or cultures requires a complicated mix of critical factors that could—without notice—devastate not only the expansion venture, but the entire brand and enterprise.
The key to understanding any complex situation is to break it down into its core elements and examine it, from every angle, how those elements are connected and create either success or failure. For financial services firms, effective site selection requires a cohesive team that offers a diverse array of expertise and competencies in everything from real estate and international tax laws to environmental engineering and supply chain logistics. Navigating this level of sophistication requires extraordinary diligence. Below is a list of seven site selection challenges financial services firms must resolve to avoid costly expenses, if not permanent damage to their brands.
1. Cultural Differences: Cross-cultural communications pose a variety of unseen and unexpected challenges as different people can experience the same interaction and yet walk away with entirely different impressions and conclusions. Site selections require in-depth discussions about elaborate topics such as local licensing rules and regulations, construction and utility issues, and other culturally sensitive matters regarding labor laws, political matters, and financial protocols. Every site selection team must have members who are fluent in the language and cultures of the selected geographies.
2. Poorly Defined Requirements: Every site selection is unique and presents its own particular sets of challenges and obstacles. Too often financial services firms overlook important details in their fervor to expand their footprints and impress stakeholders. Smart site selection teams rely on built-in checks and balances to ensure requirements are clearly defined and prioritized throughout the process, from discovery to final negotiations. Simultaneously considering multiple sites helps teams abide by a definitive scope of requirements that must be confirmed with each site assessment. If the initial requirements are not clearly defined and delineated, the entire project is put in jeopardy.
3. Lack of Transparency: Site selections involve a dizzying number of people, opinions, and professional insights that do not always align or connect in productive ways. Communication breakdowns can impact every level of the process, and result in costly mistakes that may require unbudgeted time and money to correct. Site selection teams must ensure that protocols are in place to guarantee all criteria are measured through objective facts and data. All human beings are fallible, so site selection teams must follow strict guidelines that protect the integrity and transparency of data sources, research procedures, and the dissemination and analysis of information.
4. Incomplete Research: Site selections impact an extensive spectrum of stakeholders, and each of them must be carefully consulted. Most instances of incomplete research are the result of failing to solicit the full involvement of all of the stakeholders—and not just the readily obvious ones. In addition to the decision-makers and inhabitants of host nations and municipalities and their respective regulatory bodies, site selection teams must consider neighboring municipalities, labor and economic development organizations, and other relevant community, political, or industry groups. Addressing the priorities of these stakeholders early on is key to a successful site selection.
5. Underestimating Full Operational Impact: Site selection is a resource-intensive endeavor, and it is easy for companies to underestimate the full impact the process can have on existing priorities and operations. Even the smallest reallocation of human capital, technology, or other assets can reverberate throughout a company and its external partners in ways that disrupt important routines and relationships. Before initiating the site selection process, companies should perform a stress test that identifies the people and processes most likely to be impacted by site selection procedures.
6. Inadequate Oversight: Effective leadership is key to running a successful site selection project. The numerous groups and individuals that contribute to site selection decisions make the operation highly susceptible to workflow silos, data fragmentation, and neglected performance benchmarks. Site selection teams must have an entity responsible for accountability on every level—from defining requirements and evaluating communities to tax/real estate analysis and the final site acquisition. Oversight mechanisms must be implemented from the very beginning to prevent corrupted data or processes from contaminating ensuing discussions and decisions.
7. Brand Integrity: Expanding operations to increase a financial services firm’s global footprint is a very public, costly, and high-profile pursuit. News of a site selection failure quickly spreads throughout the industry, and across the world. Financial services firms that “get it wrong” suffer catastrophic damage to their brand identity, and become associated with perceptions of incompetence, poor management, and bad decision making. Site selection teams should work with media companies to lead the narrative regarding the efficacy and benefits of the site selection. Firms that “get it right” elevate their brand above the competition and can build future business and profits based on a well-orchestrated site selection operation.
In conclusion, financial services firms must remember that each site selection project is a singular endeavor that will require flexibility, foresight, and a willingness to learn. Using the same strategies and asking the same general questions is a recipe for failure. However, implementing an unbiased, dynamic, and comprehensive strategy will identify challenges early on, enable realistic solutions, and optimize the entire process. Situational awareness must be observed at all times, from every member of the team. After all, successful site selections are the ones where people take precedence over the place.