Sweeping changes to global capital markets and ‘staccato-like volatility’ over the next five years will force companies to respond to a wider base of stakeholders, strengthen corporate cultures and be more proactive regarding regulation and risk, according to a study by PwC.
The research, which includes a survey of 250 companies, investors and market participants such as broker-dealers as well as analysis from several PwC teams, concludes that companies will have to prove their social utility over the coming five years amid massive change spurred by resource shortages, advances in technology, changes in the labor force and increasing scrutiny by both authorities and the public.
‘Industry leaders must address continually changing market forces and prove they can operate within this new equilibrium, which includes justifying their social utility,’ says John Garvey, PwC global advisory financial services leader, in a press release. ‘To succeed in the world of 2020, participants and users of capital markets will need to choose what posture to adopt against this shifting landscape – whether to be a shaper of the future or a fast follower. Staying the same will not be an option.’
When asked to name the top three challenges facing capital markets and their participants over the next five years, 36 percent of the investors and market executives surveyed cite increasing profitability for clients while a third mention adapting to new technologies and another 33 percent cite keeping talented employees. More than half (56 percent) also say their top investment priority is expanding their offering to clients.
Slightly more than three quarters of those surveyed predict a financial center rivaling New York and London will emerge over the next five years while 70 percent expect shadow banking such as crowd-funding and peer-to-peer lending to pose a moderate to severe threat to traditional banking.
In its own analysis, however, PwC predicts that London and New York will remain dominant globally ‘as they provide a combination of stability, transparency and rule of law against a backdrop of global instability, state-directed capitalism and a war for resources.’
