In the wake of the global financial crisis, financial institutions are faced with stricter regulation, increasing complexity and interdependencies. Rapid technological changes are also having far-reaching consequences for the financial services sector and the players within it. Today's central banks find themselves in the midst of this fast-changing environment, with all the attendant consequences for their business. They are trying to be proactive and endeavoring to picture how the world might look tomorrow. Against the backdrop of rapidly changing demands, roles and governance, the qualities and skill sets they require have evolved, raising the question of what the key expectations on them are.
An exhaustive analysis by Roland Berger experts shows that there is no one-size-fits all solution on how to deal with rapid changes in the environment. They believe that there are several key elements crucial for success and that central banks must immediately start to create the conditions to manage the present while at the same time laying the foundations to own the future. As Adrian Weber, Senior Partner of Roland Berger in Zurich notes: “The environment today's financial market participants are operating in is experiencing rapid changes and also central banks are not immune to these disruptive forces. Expectations on central banks are high – from both the markets and the political world. To be able to cope with the unprecedented technological shifts and developments in their environment, central banks are heavily relying on a supportive organizational set-up and the capability of their employees to harness new technologies. HR, as the backbone of every organization, must act as a transformation partner and design the organization for adaptability."
As public institutions, central banks are required to allocate their resources in the most efficient and effective way, based on effective and sustainable HR operations. To deploy resources more efficiently and achieve better performance, central banks need to break down existing silos and foster a shift from a functional view to an end-to-end process perspective. Fostering an end-to-end process view and digitizing processes end-to-end will increase agility and allow central banks to adapt and transform themselves in response to changing market conditions.
The Roland Berger experts say that things will only get more uncertain as we go forward – so central banks need to figure out how to move towards long-term goals and how to be innovative. A few years back, who would have imagined that interest rates would be below zero in several economies? Innovation is not about reacting to a current crisis but rather about setting the sails for the future. Central banks therefore need to become more innovative and flexible; they need to infuse an entrepreneurial mindset into their traditional structures, one that constantly challenges the status quo.
“Change will only happen if supported and enabled by HR. They need to lay the foundations to drive change and foster innovation by revising the reward systems and personal development plans. Moreover, it is crucial that central banks understand that entrepreneurship is not a position reserved for the founder of a company but is, in fact, a state of mind. To thrive in today's and tomorrow's market environment, HR needs to create a culture for innovation by hiring the right people and cultivating the right leaders," adds Weber.
The modern central bank needs to move away from being a collection of "silos" towards becoming a truly agile and collaborative organization. The central bank of the future is not isolated but rather part of an open platform, bringing together the best in class around the topics of emerging technologies and other capabilities. Building up a network of experts enables central banks to stretch their own expertise and skills while getting on-demand access to external resources. They need to figure out for themselves which collaborative approaches they prefer and in how far they must adapt or upgrade their own skills and know-how to facilitate these new working methods.
"In a time, where specialized skills are scarce, it is important for central banks to not only consider building up know-how and skills internally but also think about leveraging external resources. By building up a network of experts, central banks can get access to specialized know-how and skills while also being able to better understand technologies from an early stage. Data scientists, digital communities, startups, Prototyping experts – the list of potential partnerships is long. What is needed is a strong ecosystem that allows the central bank of the future to be more flexible, efficient and innovative," sums up Weber.
The first dealt with the "The Organizational Challenge", exploring the difficulties central banks are facing in fostering cultural change within their organization. The second publication, "The Rise of Cryptocurrency", shed light on the impact of digital currencies and other emerging technologies on central banks. Our third study, "Central Banking IT of the Future", focused on how central banks can transform their IT departments into proactive business partners with a clear strategic mandat.
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HR has a key role to play in future-proofing central banks. Their success will be strongly determined by the skills of their employees and a supportive organizational set-up.
