New forces and trends are reshaping law enforcement and public safety

Law enforcement is changing more rapidly than ever before. New forms of crime, advanced technologies, and evolving relationships with citizens and communities are challenging and shifting the very foundations and scope of law enforcement and public safety and how organizations and the officials perform their critical mission.

As a result, new processes, new tools and new strategies are urgently needed to equip law enforcement and public safety personnel with the resources and capabilities required to focus on core, value-added mission functions. Success will require deep understanding and adoption of new technologies, coupled with cultural and organizational changes. As emerging technologies drive new business and service models, governments must be prepared to rapidly create, modify, and enhance policy and regulatory frameworks to help ensure they&rsquo;re leveraged effectively and responsibly and maximize value to the communities they serve.

New technological developments are resulting in an explosion of data that is reshaping the law enforcement mission

There is an ongoing convergence of key digital technologies that have the potential to transform the way law enforcement officers work and perform their critical function of protecting and serving communities. Key disruptive technologies include 5G mobile communications, artificial intelligence (AI), data analytics, and the Internet of Things (IoT). Independently, each of these technologies have the potential for significant impact; however, the combination of these technologies is poised to create unprecedented opportunities to significantly augment the capabilities of law enforcement and public safety personnel and to significantly improve mission outcomes. The explosion of real time data available to organizations can accelerate the adoption of AI systems that will augment human capabilities. AI represents machine-based intelligence, typically manifested in &quot;cognitive&quot; functions that humans associate with other human minds.&nbsp;There are a range of different technologies involved in AI including machine learning, natural language processing, deep learning, and more. Cognitive computing involves self-learning systems that use data mining, pattern recognition, and natural language processing to mimic the way the human brain works.

AI has many potentially beneficial applications in law enforcement including (pre-) processing large amounts of data (e.g. from confiscated digital devices, police reports or digitized cold cases), finding case-relevant information to aid investigation and prosecution, providing easier to use services for civilians (e.g. with interactive forms or chatbots), and generally enhancing productivity and paperless end-to-end workflows. It can be used to promote human rights, dignity, freedom, equality, solidarity, democracy and rule of law. AI also helps socialize the tacit knowledge across the organization and improves collaboration beyond organizational boundaries.

The Challenges of AI, Human and Machine Interaction

The heart of new investigative analytics and similar tools is human-machine integration. The idea is not to have digital technology replace humans that perform critical law enforcement and public safety functions, but rather to have it augment their capabilities, allowing each to work to focus on and leverage their strengths. Digital technology can crunch massive volumes of data to pull out clues a human could never find, while the human can adapt it for context, understand circumstances, and interact with other humans.

While AI is indeed a very promising technology that could provide many benefits to law enforcement and public safety missions, it is important to be aware of its limitations as well as understanding and ensuring the ethical and responsible use of AI. This is imperative to begin to remedy common misconceptions people have about the use of this technology. Established and accepted guidelines and legal frameworks for the ethical use of AI (e.g., the <a href="https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/640163/EPRS_BRI(2019)640163_EN.pdf" target="_blank">EU Ethics Guidelines for Trustworthy AI</a>, <a href="https://www.consilium.europa.eu/en/press/press-releases/2022/12/06/artificial-intelligence-act-council-calls-for-promoting-safe-ai-that-respects-fundamental-rights/" target="_blank">EU Artificial Intelligence Act</a>, the <a href="https://oecd.ai/en/ai-principles">OECD AI Principles</a><a href="https://oecd.ai/en/ai-principles" target="_blank">, Australia&rsquo;s AI Ethics Principles</a>) continue to emerge and will constantly evolve. These frameworks will help set guidelines for the development and use of this technology and AI-enabled systems and capabilities will need to be adaptable to these new standards and regulations.

Building on Momentum to Strengthen Readiness

IBM and the <a href="https://www.mi-labs.de/#projects" target="_blank">Munich Innovation Labs</a> have been working on a series of innovations to leverage AI to help enhance the role of the law enforcement and public safety personnel while also ensuring its responsible use. These innovations include the following: 
&nbsp;

<ol>
	<li>Leveraging AI to detect hate speech: Create standards and harmonize practices to capture threat intelligence from internal and external data sources through an ecosystem of security tool integrations and open-source intelligence (OSINT) feeds to help public safety agencies detect and share threat data faster and prepare preventive actions against crime. 
	&nbsp;</li>
	<li>Gaining efficiency and automation in a very fragmented system: AI is a complex technology, but it is critical that AI is human-friendly, usable, fair, trustworthy, and explainable. There are a set of use cases that demonstrate how to design and build AI applications that are transparent and maintain human control of decision making throughout all processes.&nbsp; 
	&nbsp;</li>
	<li>Collaboration across national boundaries: Data Analytics and AI contribute to knowledge sharing across countries and help improve law enforcement. Lessons learned from different countries are being analyzed to accelerate the right adoption of technology and its adherence to the <a href="https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/640163/EPRS_BRI(2019)640163_EN.pdf" target="_blank">EU Ethics Guidelines for Trustworthy AI</a> and the <a href="https://www.consilium.europa.eu/en/press/press-releases/2022/12/06/artificial-intelligence-act-council-calls-for-promoting-safe-ai-that-respects-fundamental-rights/" target="_blank">EU Artificial Intelligence Act.</a> 
	&nbsp;</li>
</ol>

New and emerging technologies have the ability to help law enforcement and public safety organizations keep pace with advances in criminal capabilities and evolving mission requirements. &nbsp;Organizations like the <a href="https://www.mi-labs.de/" target="_blank">Munich Innovation Labs</a> and other major nonprofit organizations, are envisioning the ways these new technologies can enhance the missions of these organizations and developing recommendations based on real-world use cases to help organizations around the world better prepare for the future.

Over the coming months, we plan to convene a series of discussions with global experts and share lessons learned through a series of blogs outlining strategies and solutions for governments to address the challenges that lie ahead. We encourage you to contact us (<a href="https://www.linkedin.com/in/cristina-caballe-77516938/" target="_blank">Cristina Caballe</a>, and <a href="https://www.linkedin.com/in/markus-straub-16978320/" target="_blank">Markus Straub</a>) directly to learn more. Stay tuned for the next blog on &ldquo;Leveraging AI to detect hate speech.&rdquo;

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How emerging technologies can transform law enforcement and public safety

The COVID-19 pandemic exposed governments to a host of mostly unexpected challenges. And while leaders have captured many lessons, it is questionable if they have fully embraced them.&nbsp;

Over the past two years,&nbsp;governments around the world have navigated&nbsp;and responded to the impacts of&nbsp;the pandemic.&nbsp;Throughout this journey,&nbsp;governments have captured valuable lessons and gained an understanding of critical areas of focus. But government leaders are now telling us they fear what were previously viewed as rare Black Swan events are now becoming more frequent&mdash;and more destabilizing.

One event follows closely on the heels of another, or even multiple events are occurring at the same time. For example, the COVID-19 pandemic was still ongoing when the unthinkable happened&mdash;the Russian invasion of Ukraine leading to deteriorating international relations. Various climatic/environmental challenges are occurring around the world, such as <a href="https://news.sky.com/story/southern-france-lashed-by-heavy-rain-thunder-and-flooding-12407846" target="_blank">severe flooding in France</a>, both <a href="https://www.theguardian.com/australia-news/2022/mar/10/parts-of-australia-suffer-drought-and-low-rainfall-as-la-nina-and-climate-change-create-weather-extremes" target="_blank">drought</a> and <a href="https://en.wikipedia.org/wiki/2019%E2%80%9320_Australian_bushfire_season#cite_note-:2-2" target="_blank">bushfires in Australia</a>, and <a href="https://www.cnn.com/2022/05/04/us/california-drought-water-restrictions-climate/index.html" target="_blank">water shortages in California</a>. And we are experiencing the economic fallout from the pandemic and the war, which has even the <a href="https://www.worldbank.org/en/news/press-release/2022/06/07/stagflation-risk-rises-amid-sharp-slowdown-in-growth-energy-markets" target="_blank">World Bank concerned about a period of stagflation</a>. Governments must develop the agility and resiliency to protect against and respond to this plethora of challenges.

Recognizing recent successes

While many stories detail the troubles the world has faced, it is important to remember where governments have successfully delivered extremely valuable solutions and services for their constituents (albeit after some delay) over the past few years.&nbsp; IBM has partnered with government agencies to navigate the pandemic; for example:

<ul>
	<li>The Italian Ministry of Health and the Red Cross built a <a href="https://www.ibm.com/blogs/client-voices/machine-learning-keeps-ambulance-transport-on-schedule/" target="_blank">predictive platform for ambulance transport times</a>, fully integrated with the national healthcare system allowing for multiple layers of analytics. As a result, data collection, driver shift management, invoicing of completed trips, and much more were greatly improved.</li>
	<li>In the United States, New York State launched the <a href="https://newsroom.ibm.com/Digital-Solutions-Help-Support-New-York-State-with-Reopening-Plans" target="_blank">nation&rsquo;s first state-run vaccine passport</a>, allowing easier verification of vaccine status and test results.</li>
	<li>In Rhode Island, the state built a <a href="https://www.ibm.com/case-studies/state-of-rhode-island-ibm-consulting/" target="_blank">cloud-based data lake and automated processes</a> to enable faster, more sophisticated, and more reliable analysis. Within three weeks, the data team was disseminating deeper COVID-19 insights needed to guide policy and operational decisions and keep the public informed.</li>
	<li>The US Department of Defense (DoD) ordered the creation of the <a href="https://www.ibm.com/downloads/cas/YODO9EVN" target="_blank">Joint Artificial Intelligence Center (JAIC)</a> with the goal of enabling teams across DoD to swiftly deliver innovative AI-enabled capabilities and effectively experiment with new operating concepts in support of US DoD&rsquo;s disaster and humanitarian response to the pandemic.</li>
</ul>

Governments have had two years to learn from grappling with the pandemic. They have improved stability to the point where they are no longer forced to think minute-to-minute but can look into the future and imagine what &ldquo;shocks&rdquo; may come next.&nbsp;

What do we mean by &ldquo;shocks&rdquo;

Shocks are events with severely disruptive consequences. They could be rapid- or slow-onset, or regional or global. While the scope and nature of a particular shock can vary, each requires governments to be prepared to coordinate a response (see figure).

Shock events typically begin locally, and their impacts spread rapidly through contamination or contagion to societies and economies. Regional shocks are limited to a specific geographic area or sovereign state(s) and include events such as climate-related or other natural disasters and cyber events/attacks on economies or critical infrastructure.

Rapid-onset shocks, such as wildfires, have immediate impacts requiring urgent action. However, not all shocks are immediate and come as a surprise. Slow-onset shocks, including environmental risks resulting from climate change, provide more time for impacted governments and societies to adjust, react, and mitigate impact.

&nbsp;

<img alt="" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/n_Dp_A_qr_DL_1x_Vrv_Geq_RTXKSSJ_fdb292cbc2" style="height:684px; width:753px" />

The bottom line is that future shocks of all kinds are likely to happen more and more frequently, and governments can&rsquo;t afford to assume a reactive posture. The time to act&mdash;the time to prepare&mdash;is now. If the pandemic taught us anything, it is that governments have a responsibility to anticipate and be ready for the worst.&nbsp;

Preparation priorities

In our client conversations, we have distilled the lessons captured from pandemic-era experiences&mdash;both positive and negative&mdash;into <a href="https://www.businessofgovernment.org/node/4547" target="_blank">four core themes</a> that are fundamental to continuing and accelerating government transformation and to preparing for the future:&nbsp;

<ul>
	<li>Rapid innovation and agility&mdash;Many governments, even those caught off-guard by the pandemic, quickly shifted to rapid innovation and modernization.</li>
	<li>Trust and transparency&mdash;Providing essential services and averting economic collapse are further complicated by demands from citizens for protection, personal liberty, and equity.</li>
	<li>Security&mdash;The stress of the pandemic exposed existing gaps in cybersecurity and critical infrastructure security and created new ones.</li>
	<li>Talent and transformation&mdash;The workers of today need to become the workers of tomorrow by learning the new skills and technologies that are expected to become ubiquitous among government workforces.</li>
</ul>

Within each of these areas, governments need to develop insights as to what is required to continue to build resiliency and anticipate future shocks. Readiness requires governments at all levels to prioritize leadership attention and investments as well as define and orchestrate strategies to address challenges in several key domains. Governments need to build a set of core capabilities to be better prepared for the future. Those capabilities can be organized within the following 6 strategic domains:

<ul>
	<li>Emergency preparedness</li>
	<li>Supply chain</li>
	<li>Cybersecurity</li>
	<li>Sustainability</li>
	<li>Workforce development</li>
	<li>Cross-border coordination.</li>
</ul>

Let&rsquo;s look at each domain in more detail.

Renewed investment in emergency preparedness is required to cope with the increased frequency of regional and global rapid-onset events. Nations need to be ready to cope with a serial outage in the Critical National Infrastructure (for example, power supply, gas). Potential vulnerabilities touch all parts of government and society, including the 16 sectors whose &ldquo;assets, systems, and networks, whether physical or virtual are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety&rdquo; as identified by the <a href="https://www.cisa.gov/critical-infrastructure-sectors" target="_blank">Cybersecurity and Infrastructure Security Agency</a>. Emergency and preparedness response can&mdash;and must&mdash;be improved to withstand the threats of the today&rsquo;s world.&nbsp;&nbsp;&nbsp;

Another key focus area is modernizing supply chains. Supply chain leaders have struggled with how to maintain supply chain continuity in the face of current disruptions. While many agencies felt that they had diversity in their supplier base, they realized that most of those suppliers were actually going to the same source&mdash;companies with distribution centers located in China. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/smarter-supply-chains" target="_blank">In IBM Institute for Business Value (IBV) research</a> we found that 93% of organizations have faced challenges associated with demand volatility. Leaders are expressing new urgency in redesigning supply chains for control, integrity, and dynamic agility while identifying new models that can avoid breakdowns better than the traditional &ldquo;just-in-time&rdquo; approach. To mitigate the risks of future disruptions, supply chains must be reimagined to allow for real-time visibility and auditability as well as dynamic, AI-enabled responsiveness, all while helping to manage the integrity and security of the supply chain ecosystem. Opportunities for modernization exist from the front end to the back end of the supply chain and everywhere in between.

Reinforcing the security imperative and cybersecurity for Critical National Infrastructure is another critical domain. 2021 was a record year for cyberattacks. <a href="http://www.fastcompany.com/90715622/cyberattacks-ransomware-data-breach-new-record-2021" target="_blank">Data breaches jumped 23%</a> over the previous all-time high set in 2017, and <a href="https://www.fastcompany.com/90715622/cyberattacks-ransomware-data-breach-new-record-2021">ransomware attacks doubled</a> the past 2 years in a row. High-profile attacks through SolarWinds and Microsoft Exchange Server, and on the Colonial Pipeline infrastructure, to name just a few, demonstrated how closely <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/government-digital-transformation" target="_blank">cybersecurity is tied to business continuity and operational resilience</a>. <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/zero-trust-security" target="_blank">A recent IBV report</a> found that &ldquo;70% of organizations are unable to secure data that moves across multiple cloud and on-premises environments&rdquo; and &ldquo;92% of organizations lack the ability to securely enable and extend new cloud-native capabilities to their internal and external partners.&rdquo; Governments must act to bolster security capabilities that protect both public- and private- sector institutions&rsquo; assets within the Critical National Infrastructure.

Over the next decade, <a href="https://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2022.pdf" target="_blank">8 of the top 10 global risks</a> identified by the World Economic Forum (WEF) are environmental or societal, with climate action failure, extreme weather, and biodiversity loss topping the list. In a <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/c-suite-study/ceo" target="_blank">recent IBV study</a>, 57% of government CEOs identified increasing sustainability as a top priority in the next 2-3 years compared to just 48% of CEOs from all industries. Government leaders clearly see that it is vital to accelerate the green agenda for sustainability, energy transition, and climate change. Nations and regions need to be prepared to address an increased frequency of rapid-onset climate/environmental catastrophes (such as, flooding and wildfires) and take actions to address slow-onset climate-related events.

Rapid technological advances, increased globalization, and unprecedented industry disruption are destabilizing traditional job roles and fueling a global skills crisis. <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/c-suite-study/ceo" target="_blank">In a recent IBV study</a>, a third of government leaders identified inadequate skills and resources as one of the greatest challenges facing their organization. To avoid negative repercussions within their organizations as well as for individuals and economies worldwide, government leaders must work to deepen the talent pool and build the workforce of the future by upskilling and reskilling talent. <a href="https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/government-digital-transformation" target="_blank">They must build and maintain a workforce</a> with the skills necessary to meet organizational responsibilities in the face of rapid technological advances and increased competition for top talent in local and regional labor markets.

Globalization and the level of interconnectedness between countries has grown for decades. Just as the COVID-19 pandemic ignored borders and boundaries, so must the response systems that governments put in place to prepare for future shocks. They must strengthen cross-border coordination. It is vital that governments work with allies, trading partners, and neighboring sovereign states to help ensure cross-border response systems are constantly ready for fast, rigorous, and efficient responses to global events.

Building on momentum to strenghthen readiness

Governments should prepare for future shocks.&nbsp;IBM, working through the&nbsp;<a href="https://www.businessofgovernment.org/" target="_blank">IBM Center for the Business of Government</a>&nbsp;and the&nbsp;<a href="https://www.ibm.com/thought-leadership/institute-business-value/" target="_blank">IBM Institute for Business Value</a>,&nbsp;and in partnership with the&nbsp;<a href="http://www.napawash.org/" target="_blank">National Academy of Public Administration</a>&nbsp;(NAPA) and other major nonprofit partners, expects that these six domains will be most critical to building resilience.&nbsp;Further, we envision governments carrying the momentum they created from rapid pandemic-driven innovation into their preparation for future shocks.

Collaborative action to address anticipated threats requires focus and cooperation across a broad ecosystem of partners and stakeholders, but every step forward helps build progress toward addressing the <a href="https://napawash.org/grand-challenges/the-12-grand-challenges" target="_blank">Grand Challenges in Public Administration</a> put forth by NAPA. Over the coming months, we plan to convene a series of roundtable discussions with global experts from across the public and private sectors to curate and share lessons learned in each of these domains and to identify strategies and solutions for governments to address the challenges that lie ahead.

We welcome your thoughts and perspectives and invite you to contact us directly (<a href="https://www.linkedin.com/in/mikestone1/" target="_blank">Mike Stone</a>, and <a href="https://www.linkedin.com/in/tim-paydos-857197/" target="_blank">Tim Paydos</a>) to learn more.

<a href="https://www.businessofgovernment.org/node/4547" target="_blank">Listen to the podcast interview with Michael J Keegan</a>, Leadership Fellow, IBM Center for The Business of Government

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Preparing governments for future shocks

With the rise in global warming-induced severe weather events, insurance regulators and institutions have placed a greater emphasis on sustainability. Sustainability drives the need for insurers to mitigate risk in underwriting and help ensure business continuity in case of catastrophic events. And while climate change impacts every industry, it has some of the greatest implications for insurance institutions due to their broader risk exposure. In fact, in 2021 alone, natural disasters <a href="https://www.reuters.com/markets/commodities/natural-disasters-cost-insurers-120-billion-2021-munich-re-says-2022-01-10/" target="_blank">cost insurers</a> $120 billion, <a href="https://www.businessinsider.com/cost-of-climate-change-natural-disasters-homeowners-billions-insurance-fema-2022-1" target="_blank">up from</a> $100 billion in 2020 and $52 billion in 2019.&nbsp;

A recent <a href="https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study/ceo" target="_blank">IBM Institute for Business Value (IBV) study</a> surveyed 3,000 CEOs, including 150 insurance leaders in 40 countries, to better understand their priorities relating to sustainability. The survey found that 44% of insurance CEOs identify increasing sustainability as a top priority over the next 2-3 years. Believing that sustainability is critical in business and financial risk assessments, insurance CEOs are engaging their Chief Financial Officers on sustainability at a higher rate, 55%, compared to their peers at 47% across industries. And 83% of insurance leaders also expect sustainability investments to produce improved business results within the next 5 years.

As underwriters of risk and major institutional investors, insurance institutions are considering sustainability in their business operations in multiple ways:

<ol>
	<li>Insurers are looking at their investment portfolio, beginning to divest from fossil fuels, and increasing their investment in sustainable business models. This investment in sustainability encourages progress in other sectors. &nbsp;</li>
	<li>As severe weather becomes more common, the job of underwriters becomes more complex. To deal with this, insurance institutions are creating stronger underwriting models that gather more data from more sources to predict risk more accurately and to identify hidden risk concentration.</li>
	<li>Insurers are considering how to more actively manage risk, both through policy advocacy and pricing, and by partnering with the insured to build more resilient behavior.</li>
	<li>Regulators are demanding reporting on climate and sustainability exposure more and more, requiring more active data gathering and management by insurers.</li>
</ol>

Advanced technology and green software are at the helm of driving sustainability forward for insurers 

What is the top barrier to achieving sustainability business objectives? Insurance CEOs say it&rsquo;s an unclear ROI and economic benefits of sustainability initiatives. That&rsquo;s where IT and exponential technology can help, including data, artificial intelligence, and cloud.

Artificial intelligence captures, aggregates, and analyzes data that can be used to create personalized solutions to manage climate-related risks in a repeatable, provable way. For example, The Weather Company,&reg; owned by IBM, is using AI capabilities to develop leading-edge technologies that measure and analyze an array of geospatial, water, and climate data. The insights from this data help insurers understand how natural ecosystems are impacted and take preventive actions. AI can also tailor risk alerts to elicit action from insureds to materially reduce their risks.

Cloud computing technology offers another way for insurers to contribute positively to sustainability. Data centers <a href="https://www.computerworld.com/article/3431148/why-data-centres-are-the-new-frontier-in-the-fight-against-climate-change.html" target="_blank">are expected</a> to make up 3.2% of global emissions by 2025, and insurance institutions still own and run many of them. IBM has an end-to-end approach to measure, analyze, and optimize the carbon footprint for sustainable hybrid cloud environments. In the UK, for example, IBM Cloud&reg; already uses a network of data centers that are powered 100% by renewable electricity.

Insurers can tackle the difficulties of climate change with new business models 

Climate change presents an opportunity for the insurance industry. As severe weather wreaks havoc on our world and challenges insurance underwriting, these institutions can leverage hybrid cloud and AI to build more sustainable business models. This approach can ultimately support business continuity and help insurers build new products to meet the needs of our changing world.

1069-blog.jpg

Insurers with a focus on sustainable business operations powered by modern technologies can underwrite and manage climate change risks better.

Climate change is a major challenge for insurers, but AI and cloud can help

In the past decade, companies, their stakeholders, and society at large have focused more attention on business&rsquo;s role in sustainability as the effects of climate change have become more apparent. But over the past year, something changed for CEOs worldwide. Sustainability talk turned into action as continued disruption&ndash;including upheaval from the pandemic&ndash;thrust an even greater spotlight on climate change with society calling for a transformation of economic activities and business priorities.

Transformational sustainability starts with a mindset that makes sustainability an integral part of an organization&rsquo;s values and business strategy, fundamentally reshaping business models as well as delivering on community needs.&nbsp;One way banks and financial institutions can drive this transformation is by embracing digital technologies strategically and operationally to drive sustainability outcomes while expanding economic opportunities.

In this context, unlike most other industries, banking and financial market institutions (BFM) have two key ways they can execute on the world&rsquo;s agenda for transformational sustainability:

<ol>
	<li>Leverage exponential technologies, like data, AI and cloud, to measure and embed sustainability into their IT architectures and applications - looking to opportunities beyond simply responding to regulatory demands to reduce the environmental footprint of their operations (consistent with other industries).</li>
	<li>Aid retail and corporate clients engaged in sustainability and help address return on investment concerns by better allocating financing and investments supporting the world&rsquo;s transition to a &ldquo;green economy&rdquo; and other sustainable outcomes. (BFM-specific)</li>
</ol>

<img alt="" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/r_Av5_IT_Vt_RNVGE_8_Ngdmwp1_Vjr_04664ef55d" style="height:317px; width:700px" />

Therefore, sustainability is both an operational challenge and a business opportunity. In <a href="https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study/ceo" target="_blank">a recent IBM Institute for Business Value study</a>&nbsp;that polled over 3,000 CEOs, including nearly 300 banking and financial market executives in 40 countries, we found that 80% of BFM CEOs expect sustainability investments to improve business results in the next 5 years. BFM leaders also recognize that executing promptly on transformational sustainability is among the top 3 operational challenges, preceded only by heightened cyber security risks and demanding regulations. CEOs feel the pressure from their Board members (72%) and community of investors (57%) who are calling for radical transparency about their sustainability programs. To respond, BFM CEOs are engaging a wide swath of their leadership teams and departments to make the right investments in sustainability initiatives. BFM CEOs have taken a broader approach than CEOs in other industries starting with engagement of their Chief Financial Officer (69%) and Chief Operations Officer (45%).

Accelerating sustainability is about mindset shift in the usage of exponential technologies

The leadership teams of banks and financial services institutions are engaged to reduce the environmental footprint, measuring their own sustainability while investing in exponential technology like data, artificial intelligence, and hybrid cloud.

We know that a company&rsquo;s transition to hybrid cloud is an essential business approach, but it is also an important factor in sustainability. Transforming the operating model - how the workforce collaborates and operates with workflows on hybrid cloud - allows for a more energy-efficient usage of data centers and computing environments. According to the IDC, cloud computing could <a href="https://www.idc.com/getdoc.jsp?containerId=prUS47513321" target="_blank">eliminate a billion metric tons</a> of CO2 emissions over the next four years.

The transformation of banks&rsquo; data centers is an opportunity to further advance sustainability by increasing the adoption of renewable energy sources. In the UK, for example, IBM Cloud already uses a network of data centers that are powered 100% by renewable electricity. In Spain, BBVA <a href="https://www.bbva.com/en/sustainability/bbva-reduces-co-emissions-and-energy-consumption-of-its-data-center-processors-by-50-with-ibm-technology/" target="_blank">upgraded their data centers</a> leading to the reduction of the firm&rsquo;s energy use by 50% and, in a period of five years, expect to cut BBVA&rsquo;s carbon gasses in half.

As financial institutions adopt a hybrid cloud approach, a massive amount of data now exists, which can help financial firms and companies in all industries understand their environmental footprint. However, that data largely remains scattered across different databases, systems, and locations, making it hard for all stakeholders to access and understand. AI-powered software can help businesses take advantage of sustainability insights across their operations. This can make an impact in areas like:

<ul>
	<li>extending the life of physical assets,</li>
	<li>creating more efficient and resilient supply chains,</li>
	<li>understanding the impact of acute climate events and chronic physical climate risk, and</li>
	<li>analyzing and reporting on ESG data and initiatives.</li>
</ul>

This is key as good governance of data, AI and IT leads to better sustainability.

Sustainability data and insights underpin relevant business opportunities for financial services ecosystems

<blockquote>
Sustainability has become an opportunity to differentiate and expand financial services businesses.
</blockquote>

By the end of 2021, 265 banks representing more than 45% of global banking assets had signed up to the UN&rsquo;s &ldquo;Principles for Responsible Banking,&rdquo; leading to the development of products and solutions to meet these sustainability commitments. This commitment has included a greater focus by financial institutions on tracking financed emissions, forcing the companies they invest in, in all industries to examine and reduce their carbon footprint. Sustainability, therefore, has become an opportunity to differentiate and expand financial services businesses.

Our new CEO study reveals that executives in all industries feel pressure about executing on sustainability, amidst business challenges and uncertainty. 59% of the world&rsquo;s CEOs indicate that unclear return on investments (ROI) and economic benefits are the biggest challenges in achieving their sustainability objectives, and 44% mention lack of insights from data.&nbsp;Banks and financial institutions closely monitor and rely on other industries&rsquo; transparency regarding their sustainability initiatives. In this regard, they are instrumental in mitigating the sustainability concerns of all other industries, granting short- and medium-term value in terms of financial levers.

Banks provide sustainable financing and prioritized access to capital markets through preferred inclusion in sustainable investment products for institutional and retail clients. Banks and fintechs are also collaborating to orchestrate sustainability-oriented data platforms that allow their ecosystem of clients and partners to extract value from participating in a standardized and transparent exchange of information.

An action guide to accelerate sustainability as a business opportunity

In <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/2022-banking-financial-markets-outlook" target="_blank">a 2022 global outlook report</a>, IBM draws from 12 months of research with leaders in the financial services industry and found a top imperative for banks today is in finding viable sustainability models that balance business value and stakeholder expectations. &nbsp;The industry is now developing and deploying initiatives to meet these commitments, while helping ensure targeted investments deliver on overall business and financial objectives.

These initiatives are emerging across 4 broad areas:

<ul>
	<li>Incorporating climate and sustainability data and insight to help manage risks,</li>
	<li>addressing the sustainability of banking operations&mdash;the financial industry&rsquo;s journey to net-zero,</li>
	<li>developing new products and services to support the sustainability agenda, and</li>
	<li>reporting on sustainability performance.</li>
</ul>

&nbsp;

Shanker Ramamurthy is the Managing Partner of IBM&rsquo;s Global Banking &amp; Financial Markets consulting practice, President of the IBM Industry Academy and a board member of the Banking Industry Architecture Network.

Brigid McDermott leads IBM&rsquo;s industry technology focus as General Manager, Global Financial Services at IBM.

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Financial institutions hold the keys to unlocking sustainability within their own operations and across industries 

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Pathways in transformative sustainability: banking CEOs own their impact

Women hold up half the sky &ndash; a phrase first uttered by Mao Zedong in 1949, popularized in <a href="https://en.wikipedia.org/wiki/Half_the_Sky" target="_blank">a 2009 book</a>, and well known to any parents who, like me, adopted girls born in China &ndash; is accurate, if not true.

<a href="https://statisticstimes.com/demographics/world-sex-ratio.php" target="_blank">49.6% of the people in the world are women</a>, but that&rsquo;s where the equality ends. <a href="https://www.payscale.com/research-and-insights/gender-pay-gap/" target="_blank">Women still make less than men</a> &ndash; 82 cents on the dollar, and that ratio gets worse as they climb to executive ranks. Women of color, mothers, older women, and those who have been unemployed are penalized further. Last year, the World Economic Forum estimated it would take more than <a href="https://www.weforum.org/reports/global-gender-gap-report-2021" target="_blank">135 years to close the gender pay</a> gap, a generation more than was expected before COVID.

Makes women&#39;s half of the sky seem a lot heavier, doesn&rsquo;t it?

Even so, there&rsquo;s some good news coming out of the pandemic, based on the <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2022" target="_blank">latest research from the IBM Institute for Business Value</a>. The pipeline of women poised to take on leadership roles in the U.S. is expanding &ndash; up roughly 10 points over 2021 at the professional and manager levels. As you might expect, there&rsquo;s news that&rsquo;s not so good as well. When we look at the most senior levels in an organization, the pipeline is still shrinking &ndash; down 1 point over last year in the C-suite and among boards of directors.

However, when a woman sits in the corner office, that organization&rsquo;s leadership pipeline is filled with 23% more women than other organizations, perhaps because 72% of women CEOs say they make advancement of women a top business priority (versus just 16% of men CEOs). So here&rsquo;s an idea: let women lead. &nbsp;&nbsp;

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&nbsp;

If you follow <a href="https://chief.com/" target="_blank">Chief</a>, the women&rsquo;s power networking group, they will tell you March is more than Women&rsquo;s History Month, it&rsquo;s Women&rsquo;s Future Month. <a href="https://fortune.com/2022/03/01/it-is-past-time-for-women-to-lead/" target="_blank">Founder Lindsay Kaplan puts it bluntly</a>: &ldquo;There are 5 million executive women in the United States right now&mdash;women who are ready to take the helm of companies, to serve on boards, to run for office. If we want to do it, we can change the world today. Promote them. Open the doors. Give them a seat at the table.&rdquo;

And that&rsquo;s smart business. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2021" target="_blank">Our study</a> found that organizations can achieve a 61% higher rate of revenue growth when they make active changes to reach gender equity, including making the advancement of women a top strategic priority.

If we have any hope that our granddaughters&rsquo; granddaughters will be holding up a sky under which they have equal pay and equal opportunity, we need to start letting women lead today. Read our research to learn about <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2021" target="_blank">5 steps organizations can take</a> to build gender equity in leadership.

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It's time to let women lead

Over the past several months, we have shared a series of articles&mdash;from building a robust <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-foundation-stronger-resilient" target="_blank">analytic foundation</a> for increasing situational awareness to transforming <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-digital-citizen-services" target="_blank">digital citizen services</a>&mdash;focused on how governments can emerge stronger and more resilient from the COVID-19 pandemic. Here we focus on process innovation and agility.

The pandemic has forced nearly every organization to change the way that it works. In some cases, organizations have had to completely reinvent their operating models to continue delivering mission-critical services. Some government agencies faced massive workload increases and had to address huge increases in demand for services. They faced this challenge even as their own workforces were directed to leave government facilities and work remotely.

Initially, things went poorly and many government systems designed to provide critical services <a href="https://reason.org/commentary/state-unemployment-websites-crash-as-covid-19-shines-light-on-government-technology-failures/" target="_blank">crashed</a>. After this stuttering start, many leaders used digital technology to make <a href="https://nextcity.org/urbanist-news/entry/from-the-covid-19-crisis-to-rebuilding-our-public-technology-infrastructure" target="_blank">significant strides</a> in resolving delivery issues. Some became agile. They <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">cut cycle times</a>, reduced costs, and improved services. They deployed new capabilities in weeks, not months or years.

Digital engagement across all industries jumped ahead by years during COVID-19, and government was no exception. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-future-business" target="_blank">Research</a> from the IBM Institute for Business Value found that the COVID-19 pandemic accelerated digital transformation at 59% of surveyed organizations. Similarly, over half of government executives surveyed said digital transformation was a priority.

Focusing on agility and redesigning workflows

Embracing the new urgency to harness technology, leading governments scaled to meet demand, delivered entirely new services, and supported new ways of working.

At <a href="https://www.ibm.com/blogs/watson-health/social-security-scotland/" target="_blank">Social Security Scotland</a>, a social program management platform underlies user-centered, agile transformation. More than 2,400 citizens, civil servants, and non-profits collaborated to build a single case management platform for social benefits. Over the course of 2 years, 7 social programs were deployed on the platform designed to ultimately deliver benefits to about 1.8 million people. The cloud-based platform integrates a variety of technologies to deliver a virtually seamless citizen experience. It scales up and down to meet demand and eliminates the ongoing expense of purchasing, housing, and maintaining an on-premises infrastructure for these programs.

The <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">US Department of Veterans Affairs</a> applied process automation and intelligent workflows to help improve citizen service and cut costs associated with manual, paper-driven processes. The Department uses AI and process automation to digitize incoming benefits packages and correspondence, cutting processing times from <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">5 to 60 days</a> to hours. Within just 8 months, <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">200</a>&nbsp; people handling piles of paper were retrained for new positions. While modern technology played a huge role, these changes were underpinned by a fundamental culture shift that embraced innovation. Innovation was a must. There was no other way.

Tapping into modern technologies on the transformation journey

Looking ahead, government transformation and continued investment in modernization initiatives will remain imperatives. <a href="https://www.idc.com/getdoc.jsp?containerId=US47907021" target="_blank">IDC reports</a> that, for both public and private sector organizations, customer satisfaction, operational efficiency, and innovation are the three top focus areas for the future. By building on lessons learned from the COVID-19 response, governments can continue to cost-effectively improve service delivery.

During the height of the pandemic, the most successful governments identified critical priorities and rolled up their sleeves to focus on core issues. They commissioned diverse teams of people from across their organizations and communities to define issues and opportunities for improvement. They used <a href="https://www.ibm.com/garage?utm_content=SRCWW&amp;p1=Search&amp;p4=43700055082249585&amp;p5=b&amp;gclid=CjwKCAjw7--KBhAMEiwAxfpkWIp23ImkpKw_AyiN6RWN61XT3PW0J_u81-liLeCcpbyJTPSTdSS5uRoCn5oQAvD_BwE&amp;gclsrc=aw.ds" target="_blank">Design Thinking</a> to focus on end users and develop solutions that people would adopt.

Many organizations also discovered that <a href="https://searchsoftwarequality.techtarget.com/feature/Low-code-app-platforms-prove-essential-in-times-of-crisis" target="_blank">low-code platforms</a> can provide the agility to quickly deploy new capabilities and minimum viable products (MVPs). These platforms also can enable fast iteration and rapid deployment of new functionality beyond MVPs. They are transforming citizen engagement, internal processes, and transactions across the ecosystem.

Cloud computing has also proven to cost-effectively support the pace required for progress. Cloud servers and resources can be added in minutes&mdash;far faster than deploying new hardware on premises. That speed and associated scalability can deliver cost efficiencies. Users pay for what they need when they need it and can avoid purchasing, maintaining, and managing equipment in a data center.

But cloud is only part of the answer. Governments are complex enterprises and successfully run technologies that are decades old. They maintain large amounts of their own technology while also buying services and solutions that cross many different clouds. This has generated increasingly complex and diverse technical environments. Governments need to cost-effectively manage that infrastructure without creating new ranks of specialized IT operations teams. It can be done, using <a href="https://www.kyndryl.com/services/cloud/multicloud-management" target="_blank">new technologies</a> that make it possible to run workloads across multiple clouds and government data centers from &ldquo;a true single pane of glass.&rdquo;&nbsp;&nbsp;

Maintaining momentum and moving forward with purpose

The pandemic has provided a massive stress test for business and operating models, new technologies, and agile deployment methods. In confronting this generational challenge, leaders around the world have found ways to improve citizen services, streamline processes, and even reduce back-office costs. They have demonstrated the power of technology to boost government performance and meet unprecedented demands for services and benefits. They have crafted road maps of success and foundations for sustainable improvement. Governments must persist and build on this momentum to continue transforming operations to enrich citizen services.

While there have been many positive lessons, some governments have experienced unsettling new challenges, such as expanding complexity, security gaps, and a sense of loss of control. All of these can be addressed. We encourage you to contact us (<a href="https://www.linkedin.com/in/paul-dommel" target="_blank">Paul Dommel</a> and&nbsp; <a href="https://www.linkedin.com/in/mikestone1/" target="_blank">Mike Stone</a>) directly to discuss and learn more.

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COVID-19 Phase III—Process innovation and agility to emerge stronger and more resilient

Health is a shared value. As we map out a more equitable future for <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/healthcare-mapping-sustainable-future" target="_blank">healthcare beyond the pandemic</a>, advancing health equity and improving community health must be part of the conversation.

Health disparities are the unfair differences in health and health outcomes that result from unequal access to goods, services, or opportunities. They can occur because of race, ethnicity, gender, income, disability status, or geography, among other factors.

It is <a href="https://www.ncbi.nlm.nih.gov/books/NBK425844/" target="_blank">widely recognized</a> that health disparities are associated with a higher burden of disease. The COVID-19 pandemic laid bare the underlying issues that put vulnerable populations and community health at increased risk. For example, Latino, Indigenous, Black, and Pacific Islander Americans die of COVID-19 at <a href="https://www.apmresearchlab.org/covid/deaths-by-race#data" target="_blank">double or more the rate</a> of white and Asian Americans. What&rsquo;s more, 10 upper-income countries have received the vast majority of COVID-19 vaccines, according to the <a href="https://www.who.int/campaigns/vaccine-equity" target="_blank">World Health Organization</a>. If only vaccines had been distributed equitably, it says, there would have been enough shots to immunize every healthcare worker and older person in the world.

Despite many valiant efforts, health equity remains elusive. But data and technology can help. To channel their power toward addressing health disparities, the healthcare and life sciences industries should consider 3 core principles:

1. Commit to transparent, complete data collection

Organizations that collect, store, manage, or process data have an obligation to handle it responsibly. IBM, for example, outlines its beliefs and practices in the <a href="https://www.ibm.com/blogs/policy/dataresponsibility-at-ibm/" target="_blank">IBM Commitment to Data Responsibility</a>.

Organizations that commit to responsible data stewardship can better address health disparities and social inequities by re-examining how they collect, disaggregate, analyze, and report data. Broad data categories such as Black, white, Hispanic, Asian American/Pacific Islander, and American Indian/Alaska Native ignore variations in risk, exposures, and resilience within populations. Likewise, excluding relevant characteristics that influence health, such as income, education, neighborhood social capital, or income, further perpetuates inequities.

Accurate, complete data is critical to helping organizations monitor the impact of their health equity programs, understand the real drivers behind improved health outcomes, and allocate their resources appropriately.

Complete data collection also can help create health equity in biomedical research, particularly when it comes to <a href="https://www.hlth.com/digital-content/hlth-matters/blog/prioritizing-women-in-scientific-and-clinical-research" target="_blank">prioritizing women in scientific and clinical research</a>. For instance, underrepresentation of women as clinical trial participants, researchers, and leaders has contributed to incomplete data, poorer health outcomes, and what <a href="https://doi.org/10.1186/s13293-020-00308-5" target="_blank">one research team</a> called &ldquo;sex inequality that hides in plain sight.&rdquo;

2. Collaborate to enable patient-centered care for all

Achieving health equity requires <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/phm" target="_blank">collaboration across multiple stakeholders</a>, including healthcare providers, payers, employers, life sciences companies, and government agencies, all of whom must work together to create a healthier future.

For example, healthcare providers can partner with community organizations to help address social needs. Healthcare payers, meanwhile, can prioritize and pay for patient-centered care teams. And life sciences companies can use <a href="https://www.ibm.com/blogs/watson-health/the-future-of-clinical-trials-is-now/" target="_blank">decentralized trials</a> to help vulnerable populations participate in studies. Patient-centered care should be integrated into virtually all aspects of care delivery, including value-based payment models.

Access to and integration of data are the 2 most essential requirements for successful population health management, <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/phm" target="_blank">according to providers</a>. Enabling secure access and shared data can help facilitate more personalized care. Combining several types of data&mdash;for example, claims, clinical, labs, genomics, wearables, and <a href="https://www.ibm.com/blogs/watson-health/5-examples-of-using-social-determants-for-population-health/" target="_blank">social determinants of health</a>&mdash;enables a more comprehensive longitudinal health record with which to make more informed healthcare decisions.

When organizations collaborate with communities, more accurate and comprehensive data sets are possible. Essential to this collaboration is a meaningful discussion around data <a href="http://www.ibm.com/thought-leadership/institute-business-value/report/ai-ethics" target="_blank">trust, transparency, and ethics</a>. Organizations that exercise social responsibility can be a powerful influence on the values of their members or stakeholders.

3. Use artificial intelligence (AI) and analytics to measure what matters and surface new insights

Organizations must measure progress toward health equity as they would any other aspect of performance. As part of its 100 Top Hospitals&reg; program, for example, IBM Watson Health recently introduced a <a href="https://newsroom.ibm.com/2021-04-27-Fortune-and-IBM-Watson-Health-Recognize-Top-Performing-U-S-Hospitals-and-Health-Systems" target="_blank">new measure</a> of hospitals&rsquo; contributions to community health. This measure focuses on equity, along with measures of clinical outcomes, operational efficiency, patient experience, and financial health.

There is great potential value in <a href="https://www.ibm.com/blogs/watson-health/applying-machine-learning-to-population-health/" target="_blank">applying machine learning to population health challenges</a>, especially as organizations collect and manage larger and more diverse types of data. For instance, machine learning helped IBM uncover correlations between COVID-19 mortality rates with sociodemographic traits such as race, HIV prevalence, and unemployment rate.

Discovering correlations between social determinants of health and population health challenges can help healthcare providers tailor interventions. We must, however, remain vigilant that AI and machine learning do not inadvertently perpetuate biases. IBM Research has therefore developed&nbsp;<a href="https://www.ibm.com/blogs/research/2018/09/ai-fairness-360/" target="_blank">AI Fairness 360</a>, a comprehensive open-source toolkit of metrics to check for unwanted bias in data sets and machine learning models.

The time to act is now

A more equitable future in healthcare and life sciences is possible&mdash;if we work together to achieve it. Please <a href="mailto:idankwa@us.ibm.com">contact me</a> or <a href="mailto:wfelix@ibm.com">Winnie Felix</a> to learn more about how IBM Watson Health can help your organization innovate in pursuit of health equity.

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Healthcare beyond the pandemic: Innovating to advance health equity

In many countries, the COVID-19 pandemic exacerbated the long-present and wide gap in service quality between the private and public sectors. Governments suddenly faced enormous pressures on some services. For example, as many as <a href="https://tcf.org/content/commentary/1-in-4-workers-relied-on-unemployment-aid-during-the-pandemic/?agreed=1" target="_blank">1 in 4 workers</a>&mdash;more than 46 million people&mdash;received a form of unemployment insurance.

System failures across the US and countries <a href="https://www.anao.gov.au/work/performance-audit/services-australia-covid-19-measures-and-enterprise-risk-management" target="_blank">around the world</a> were common. After a crush of newly jobless residents overwhelmed Florida&rsquo;s online and phone systems, citizens <a href="https://www.cnn.com/2020/04/07/politics/florida-unemployment-benefits-covid/index.html" target="_blank">lined up</a> to obtain paper applications for unemployment benefits. <a href="https://www.theguardian.com/australia-news/2020/mar/23/queues-at-centrelink-offices-and-mygov-website-crashes-ahead-of-coronavirus-shutdowns" target="_blank">Australia</a> and other countries experienced similar hardships. Many people had never filed for unemployment benefits or interacted with unemployment insurance systems or processes. Few were impressed.

Both private and government organizations had to adapt&mdash;and quickly. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-future-business" target="_blank">Research</a> from the IBM Institute for Business Value found that the pandemic accelerated digital transformation at 59% of surveyed organizations. Similarly, given the pandemic&rsquo;s impact on government, just over half of government executives surveyed said digital transformation was a priority.

Although their initial response was slow, many public sector organizations made <a href="https://nextcity.org/daily/entry/from-the-covid-19-crisis-to-rebuilding-our-public-technology-infrastructure" target="_blank">significant strides</a> to resolve service issues. Numerous governments achieved years of changes in months. Leaders identified new ways to educate students and shift work from offices to homes. Administrations implemented massive changes in process and technology to scale up and meet unprecedented demand for social benefits services. Skyrocketing fraud added to the challenges, but investigations and counter-fraud solutions have led to <a href="https://www.oig.dol.gov/doloiguioversightwork.htm" target="_blank">hundreds</a> of indictments and convictions.&nbsp; &nbsp;

Digital engagement across all industries jumped ahead by years during COVID-19, and government was no exception. Governments need to build on this progress to cost-effectively improve service delivery going forward. By capturing lessons learned, they can continue their advancements to drive further impact.

Innovating with modern technology to meet citizen need.&nbsp;

Embracing the new urgency to harness technology, leading governments scaled to meet demand, delivered entirely new services, and supported new ways of working. For example, governments across the globe set up <a href="https://newsroom.ibm.com/watson-assistant-thrive" target="_blank">AI-powered virtual assistants</a> to answer millions of questions per day. Some agencies went even further and used the technology to seamlessly conduct transactions like scheduling appointments, paying for licenses, or even processing paper benefit applications. This approach can not only improve citizen service, but, according to <a href="https://www.gartner.com/smarterwithgartner/rethink-customer-service-strategy-drive-self-service" target="_blank">Gartner</a>, effective self-service channels can be 80 to 100 times less costly than time-consuming live interactions.&nbsp;

The <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">US Department of Veterans Affairs</a> applied process automation and intelligent workflows to help improve citizen service and cut administrative costs associated with manual, paper-driven processes. The Department used AI and process automation to digitize incoming benefits packages and correspondence, cutting processing time from <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">5 to 60 days</a> to hours. Within just 8 months, <a href="https://www.aptiveresources.com/case-study/veteran-intake-conversion-and-communication-services-viccs-mail-automation-services" target="_blank">200 people</a> handling piles of paper were retrained for new positions. Improvements continued and the Department began to use a similar solution to speed <a href="https://www.g2xchange.com/statics/va-awards-40m-vba-foia-pa-processing-services-task-to-ibm/" target="_blank">Freedom of Information Act (FOIA) Request processes</a>. While modern technology played a huge role, these changes were underpinned by a fundamental culture shift that embraced innovation. Innovation was a must. There was no other way.

Keep moving forward with lessons learned

Not every new system deployed during the pandemic was a success. In fact, some vaccine scheduling tools were considered <a href="https://www.theguardian.com/world/2021/jan/28/coronavirus-vaccine-appointments-older-americans" target="_blank">difficult to use</a>. What&rsquo;s more, many citizens <a href="https://spectrum.ieee.org/telecom/internet/to-close-the-digital-divide-the-fcc-must-redefine-broadband-speeds" target="_blank">lacked access</a>&nbsp;to broadband internet and were not able to easily get into these systems.

The more successful governments identified critical priorities and rolled up their sleeves to build resilient solutions. They created diverse teams of people from across their organizations and communities to define issues and opportunities for improvement. They used <a href="https://www.ibm.com/garage?utm_content=SRCWW&amp;p1=Search&amp;p4=43700055082249585&amp;p5=b&amp;gclid=CjwKCAjw7--KBhAMEiwAxfpkWIp23ImkpKw_AyiN6RWN61XT3PW0J_u81-liLeCcpbyJTPSTdSS5uRoCn5oQAvD_BwE&amp;gclsrc=aw.ds" target="_blank">Design Thinking</a> to focus on end users and develop solutions that people would adopt. They kept things simple, often eliminating steps that should not exist. Finally, they teamed with technology partners that brought insights, experience, and tools for the journey.

The transformation imperative and need for continued investments is not over. In fact, leaders in both government and the private sector are continuing to focus on customer experiences and efficiency. <a href="https://www.idc.com/getdoc.jsp?containerId=US47907021" target="_blank">IDC reports</a> that the top 3 focus areas for the future, for all organizations, are customer satisfaction, operational efficiency, and innovation.

Yet, as governments have become more comfortable with transformation at pace, some have experienced unsettling new challenges: security gaps, expanding complexity, and a sense of losing control. All of these can be addressed. Disciplined approaches can drive fast results and address important considerations for long-term success. We will be writing more on these themes over the next several months.

We encourage you to contact us (<a href="https://www.linkedin.com/in/paul-dommel" target="_blank">Paul Dommel</a>, <a href="https://www.linkedin.com/in/nick-holmes-3b0a6915/" target="_blank">Nick Holmes</a>, and <a href="https://www.linkedin.com/in/mikestone1/" target="_blank">Mike Stone</a>) directly to learn more. Although we can&rsquo;t predict the future, we can forge a path forward that is productive, improves the lives of taxpayers, and can be more secure for all of us.

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COVID-19 Phase III—Digital citizen services to emerge stronger and more resilient

The world&rsquo;s problems are complex.

Extreme weather events. Food insecurity. A global health crisis. These intricate, interconnected challenges require intelligent solutions&mdash;tools, systems, and approaches that have been developed with discipline and rigor.

In its search for answers, the world is turning to science. A recent IBM Institute for Business Value survey found that nearly 9 in 10 (88% of) global consumers believe advances in science and technology are critical to making the world a better place.

The survey of more than 14,500 adults in 9 countries found that consumers are overwhelmingly confident that technology can help address many of the problems facing society today. And 79% of those surveyed say the rapid development of the COVID-19 vaccines increased this confidence. People are most optimistic about the potential impact of AI, robotics, and semiconductor technology.

<img alt="86% of consumers believe AI will help solve the most pressing challenges facing the human race and societies today." src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/I_x55_WXNBVY_3_ITOF_0_G5_z3vy_4d408edb80" style="height:451px; width:800px" />

The US leads the way

While addressing complex challenges like climate change and COVID-19 will require international collaboration, global consumers say the United States is best positioned to tackle the world&rsquo;s toughest problems. 58% believe the US is leading the world in science and technology innovation today and 45% believe the US is most prepared to address the pressing challenges currently facing society. In both cases, global consumers ranked the US higher than all other countries.

To improve the United States&rsquo; ability to leverage advances in science and technology to manage crisis and change, adults in the US believe it&rsquo;s important for their country to:

<ul>
	<li>Encourage public/private partnerships (89%)</li>
	<li>Promote policy and regulation that encourages innovation (91%)</li>
	<li>Improve collaboration and information-sharing across the scientific community, showing they are ready for research institutions to collaborate on innovation (93%)</li>
</ul>

Most global consumers believe governments bear the greatest responsibility for advancing science and technology in their country today. What&rsquo;s more, they expect governments to continue to carry the torch in the future, and the strongest agreement comes from consumers in Brazil, Spain, and Mexico.

<img alt="9 in 10 US adults surveyed believe it's important to encourage public/private partnerships, or promote policy and regulation that encourages innovation to improve US ability to leverage advances in science and tech." src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/r472_El7_SWD_Pd_KW_4_T5i_Y_Ph_N_x_50f79c5e4f" style="height:451px; width:800px" />

Science and tech skills will enable future career success

For some respondents, the rays of hope that emanate from science and technology also cast shadows of doubt and anxiety. 61% of employees surveyed&nbsp;are concerned that technology will ultimately make their jobs obsolete.

However, 85% are confident they can keep up with future advances, and for many, the pandemic jumpstarted this process. 4 in 5 employees worldwide say the pandemic required them to learn both new ways of working and new technologies. Cloud computing (41%) is the top tech used by employees in their jobs today, followed by 5G (37%), IoT (32%), and AI (28%).

Overall, employees are demanding skill development&mdash;and they&rsquo;re ready to make sacrifices to prepare themselves for the future. 59% say they would be willing to take a pay cut to work for an employer that provides training on new technologies. 72% would be willing to switch employers to get this type of training.

<blockquote>
Nearly all employees say they&rsquo;re willing to invest personal income (95%) and personal time (97%) to develop new skills.
</blockquote>

To deliver on these evolving expectations, business leaders need to invest in helping employees gain new skills. But while 74% of executives believe they have been helping their employees learn the skills needed to work in a new way, only 38% of employees agree, according to 2020 research from the <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/hr-3" target="_blank">IBM Institute for Business Value</a>.

<img alt="59% of consumers surveyed report they would be willing to take a pay cut to work for an employer that provides training on new technologies." src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/6_Qgm6_O_Hzu_Knc_T_Tg03n_O8aoq_A_69b198a358" style="height:451px; width:800px" />

Taking a science-forward approach

Advancements in science and technology have already done so much to help humanity understand and address incredibly complex challenges. And what scientists learn today will help the world overcome the obstacles it will face tomorrow.

As renowned astrophysicist Carl Sagan noted decades ago, science is a candle in the darkness. It reveals surprising truths and highlights opportunities for transformational change. In this vein, business leaders who take a <a href="https://www.ibm.com/policy/science-forward/" target="_blank">science-forward approach</a> to adopting new technologies, including AI, hybrid cloud, and quantum computing, will be better positioned to adapt to ongoing disruption and change.

Exponential technologies&mdash;and the new business models they enable&mdash;promise to build resilience and enable growth even as new challenges arise. As entire industries are threatened with extinction, companies that evolve will be better positioned to find new ways to thrive, no matter what the future might hold.

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Global consumers say science and technology are helping solve today’s toughest problems

The globalized supply chain is a &ldquo;hidden hand&rdquo; underpinning our economy and society. For the last several decades, a vast ecosystem of suppliers, logistics providers, and buyer brokers has partnered to optimize this extended supply chain and increase efficiency while cutting the cost of capital.

We all depend on this global supply chain for our food, clothing, fuel&mdash;indeed, our very livelihoods and security. And it has become increasingly complex, integrated, and fragile.

The domino effect

In March 2021, strong winds helped cause a single ship, the <a href="https://www.bbc.com/news/business-56559073" target="_blank">Ever Given</a>, to run aground and block the entire Suez Canal&mdash;through which 12% of global trade passes each day, representing 30% of all global container traffic and over $1 trillion worth of goods annually. As a result, 369 massive cargo ships came to a complete standstill&mdash;holding up an estimated <a href="https://www.bbc.com/news/business-56533250" target="_blank">$9.6 billion</a> in trade along the waterway per day. What&rsquo;s more, the global price of oil spiked <a href="https://www.usnews.com/news/top-news/articles/2021-03-25/oil-prices-rebound-on-fears-suez-canal-blockage-may-last-weeks" target="_blank">4%</a>, and commodity price indices in Europe grew 5%.

The fact that a single vessel can impact the cost of beef on the other side of the world underscores supply chain interdependence in a globalized world.

That had become clear a year earlier, when the Black Swan COVID-19 hit with all its attendant challenges. Almost overnight, we saw <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-supply-chains" target="_blank">disruptions to the supply of goods</a> that were unimaginable just days prior. As consumers, we all have our personal stories to tell&mdash;perhaps you were unable to purchase paper products or eggs at your local grocery store.

The problem was not that the world had run out of toilet paper or poultry, but rather that we had too much product packaged in transit in the commercial supply chain&mdash;hotels, restaurants, and office buildings&mdash;and not enough in the retail and consumer supply chain.

On March 12, 2020, demand for consumer <a href="https://fortune.com/2020/05/18/toilet-paper-sales-surge-shortage-coronavirus-pandemic-supply-chain-cpg-panic-buying/" target="_blank">paper products</a> jumped 734%. The following month, US dairy farmers reportedly were dumping 3.7 million gallons of <a href="https://www.nytimes.com/2020/04/11/business/coronavirus-destroying-food.html" target="_blank">milk</a> a day. The worldwide crude oil surplus reached an <a href="https://www.nytimes.com/2020/04/20/business/oil-prices.html" target="_blank">all-time high</a>. And while the global food distributor <a href="https://www.supplychaindive.com/news/Sysco-earnings-warehouse-truck-driver-hiring-pandemic-recovery/594579/" target="_blank">Sysco</a> furloughed 33% of its workforce in the summer of 2020, <a href="https://www.thepennyhoarder.com/make-money/amazon-hiring-spree/" target="_blank">Amazon</a> hired 100,000 new employees, mostly in delivery and logistics.

Given the complexity of our interdependent supply chain, 80% of the <a href="https://www.resilinc.com/blog/download-now-resilinc-2020-annual-report/" target="_blank">failures</a> we saw were in the 2nd and 3rd subtier ecosystem of raw material and component suppliers.

Bearing the brunt

Leaders in healthcare and government, more than any other sector, faced the full force of this disruption. The most visibly impacted area was the medical equipment supply chain, as demand skyrocketed for personal protective equipment (PPE), ventilators, and even hospital beds. But the impact to the public sector went far beyond that, as government leaders sought to keep the economy open and the supply of goods flowing.

As a result, leaders faced 4 core challenges:

Volatile demand: Extreme volatility in critical materials and supplies that public sector leaders needed to address the pandemic, and entirely new demand patterns the world had never seen.

Inventory fluctuations: Stockouts of high-demand goods and stockpiles of low-demand items, with little visibility in inventory count and location.

Logistics constraints: Partial loads, capacity-constrained warehouses, lower fill rates, fewer on-time deliveries, and constrained labor flexibility.

Increased global supply network complexity: The supply chain became even more dependent on tier 2 and 3 suppliers, creating limited visibility into raw or work-in-progress (WIP) inventory, coupled with a rising need to onboard new suppliers and a growing concern around supply chain integrity.

Forging stronger supply chains

Government and healthcare leaders have been focused on supply chain issues for decades. More than 20 years ago, when the September 11 terrorist attacks shook the world and shaped an entire generation, agencies became much more aware of how global risk and uncertainty affect supply chains. Those events moved the issue of supply chain resiliency to the fore.

As the global community focuses on rebuilding and emerging from the most recent crisis, there are 4 key actions that governments must take to modernize and strengthen supply chains. These actions can help ensure increased agility and resiliency for the future and protect against foreign adversaries and other potential risks:

1. Harness data and build visibility across multitier supply chains to smooth volatility.&nbsp;

Organizations gather vast amounts of data to monitor and measure risk. That trove of information can, with improved transparency, provide the ability to identify both relationships and resulting dependencies in integrated chains.

A trusted data exchange secured and enabled by blockchain technology can allow organizations to collect internal and external data from partners across their extended supply chain ecosystem. Once synthetized, that data can offer vital insights shared across partner networks on critical transactions, external and internal events, and shared risks.

2. Monitor the supply chain and drive collaboration to actively plan for future disruption. 

No supply chain is without risk. But increased access to information in a timely manner provides greater decision-making options.

Before an agency can craft a strategy, it must identify the risks inherent in its integrated supply chain. From suppliers and production flows to transactions and operations, organizations must examine the details of each interconnected relationship and segment of the supply chain to pinpoint vulnerabilities and bottlenecks. By creating a common operating picture based on information from all suppliers, organizations can model and test different scenarios to evaluate the plans of action that best align with shared goals.

Increased visibility into supply chain disruptions enables organizations to be better prepared. Moreover, this information can provide organizations insights to help achieve essential supply chain objectives (such as sustainability or supplier diversity) by surfacing information on where and by whom commodities are sourced.

3. Build integrity and trust by measuring performance and risk, and compare results over time.

Measuring the supply chain is as critical as monitoring it. Organizations must identify measurements to gauge and quantify risks, and to better understand the impact and potential exposure of disruptions across their integrated supply chain. Data management solutions can help categorize certain aspects of supply chain risks as high, medium, or low. Transparency across ecosystem partners provides shared insights on the reliability of the entire integrated supply chain.

Extending a measurement system to external partners allows organizations to benchmark themselves against leading organizations in both the public and private sectors&mdash;and drive continuous improvement efforts. Regardless of the data collection frequency, a regular measurement and analysis cadence helps ensure quality findings. This data set is pivotal to shaping a risk management strategy and prioritizing resources for the greatest return.

Combining these findings with the right analytics tools can further enhance the reliability, quality, and repeatability of organizational processes.

4. Improve the resiliency and reliability of supply chains.

With a foundation of data-driven insights for monitoring and measuring the integrated supply chain, organizations can put preventive and proactive strategies in place and continuously iterate to <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/supply-chain-resilience" target="_blank">improve reliability and resilience</a>. With a robust data set, organizations can better monitor their integrated supply chain as they implement new strategies and evaluate the results of new initiatives and interventions.

Introducing new technologies such as artificial intelligence (AI) can further amplify results. AI can help identify suppliers that have room for improvement, prioritizing based on highest impact and predicting new scenarios through simulations.

Improving resiliency also requires building a diverse supplier base. Understanding and mitigating supply chain risks involves gaining visibility into tier 2 and 3 suppliers which&mdash;as we&rsquo;ve seen&mdash;can quickly and significantly disrupt production and delivery. Over <a href="https://www.dnb.com/content/dam/english/economic-and-industry-insight/DNB_Business_Impact_of_the_Coronavirus_US.pdf" target="_blank">90%</a> of Fortune 1000 companies depended on tier 2 suppliers in regions most affected in the initial phase of the global COVID-19 pandemic or operated in potentially adversarial nation states. Impediments to interaction and engagement with these suppliers greatly complicate risk management.

Governments should pursue policies and strategies that reduce dependence on single sources of supply (suppliers and regions) for critical goods and services, and limit geopolitical exposure. Supply chain repatriation should be part of the discussion.

Critical capabilities

Building a deep and comprehensive understanding of your organization&rsquo;s integrated supply chain strengths and weaknesses can enable business continuity planning and rapid response strategies. The last 19 months have been a harsh reminder of the risks inherent in our interconnected world and further demonstrated the criticality of supply chains to economies, organizations, and individuals. As such, it&rsquo;s imperative that governments can crowdsource feedback from stakeholders across the extended value chain&mdash;from suppliers to citizens&mdash;on what they need and what changes impact them most.

We are committed to helping governments build these critical capabilities. We encourage you to contact us directly to learn more and discuss how we can work together to help further protect and promote the safety, security, and economic prosperity of regions and countries.

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COVID-19 Phase III — The new urgency in modernizing supply chains for control, integrity, and dynamic agility

In the heat of the moment, governments around the world responded to the COVID-19 crisis with rapid innovation &ndash; by creating more frictionless citizen experiences, accelerating digital business transformation, expanding cloud footprints, transitioning to hybrid or remote work models, and integrating global supply chains. In many cases, government leaders surprised themselves with their ability to rapidly innovate. In the rush to launch new capabilities to meet increased demand, however, critical security and protection measures may have been deprioritized, overlooked, or ignored altogether. As a result, many government organizations have further increased their exposure to security threats. The trick now is to sustain the pace of innovation and build even more momentum, while simultaneously closing any security gaps.

Moving government services, communication, and personal interactions to digital has significantly increased potential attack surfaces, resulting in a <a href="https://www.ibm.com/security/data-breach/threat-intelligence" target="_blank">dramatic surge in cybersecurity incidents</a>, including the recent series of ransomware attacks and exposure of personal and sensitive citizen data. This risk has intensified even more as a result of organizations leveraging data and artificial intelligence (AI) to accelerate COVID-19 recovery plans across multiple levels of government. This required moving workloads to the cloud&mdash;along with their associated threats and vulnerabilities. In fact, research indicates <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/zero-trust-security" target="_blank">upwards of 90% of cyber-related incidents originated in cloud environments in 2020</a>.

In addition to increasing risk, cyber incidents also had significant financial impacts on governments. According to <a href="https://www.ibm.com/security/data-breach?utm_medium=OSocial&amp;utm_source=Blog&amp;utm_content=000000NJ&amp;utm_term=10013747&amp;utm_id=SI-Blog-Inline" target="_blank">IBM&rsquo;s Cost of Data Breach Report</a>, public sector organizations are the 6th most frequency attacked among all industries, and the average cost per cyber security incident is nearly $2 million. And what&rsquo;s even more alarming is that attacks on public sector organizations have the 2nd longest attack lifecycle, with the average organization taking 330 days to contain a breach once identified. While you can&rsquo;t point to a singular cause, a dearth of security experts with the right skills is a key gap and a likely contributing factor to the security woes of many public sector organizations.

Securing critical infrastructure with zero trust principles

The very nature of critical infrastructure implies a dynamic relationship between trust and risk. Understanding the amount of risk governments carry and being able to <a href="https://www.ibm.com/security/services/security-governance/risk-management" target="_blank">quantify that risk</a> into financial terms provides a clear picture for implementing security in the most efficient and effective way possible. This is even more important when government operations move online, exposing both IT and operational technology (OT) networks to potential compromise. The May 2021 <a href="https://www.bloomberg.com/news/articles/2021-06-04/hackers-breached-colonial-pipeline-using-compromised-password" target="_blank">Colonial Pipeline ransomware attack</a> led to fuel shortages across the East Coast of the United States. Reliance on IT and OT environments means mission-critical infrastructure is increasingly vulnerable to new threats. For example, GPS-enabled navigation systems that we take for granted are at risk of breakdown, which can negatively impact the deployment of emergency services vehicles, maritime navigation, and operation safety of many services consumed by citizens every day.

With the number of risks and security events growing exponentially, government security operation teams are adopting the zero trust security approach. The <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/zero-trust-security" target="_blank">IBM Institute of Business Value</a> concluded that organizations with mature zero trust capabilities have reduced their security capital and operational expenditures and increased the effectiveness of their cybersecurity operations. This zero trust approach enables the protection of the IT and OT at the foundation of government services by adopting key zero trust principles:

<ul>
	<li>Preserve citizen private and sensitive data with a focus on simplifying and securing user onboarding, managing user preferences and consents, and enforcing privacy regulations controls.</li>
	<li>Reduce the risk of insider threat by enforcing least privilege access, discovering risky user behavior, and embedding threat intelligence.</li>
	<li>Protect the hybrid cloud by managing and controlling all accesses, monitoring cloud activity/configurations, and securing cloud native workload.</li>
	<li>Secure the remote workforce by securing bring your own (BYO) and unmanaged devices, eliminating VPNs, and providing &ldquo;passwordless&rdquo; experiences.</li>
</ul>

Cognitive roadmap to zero trust

Government organizations can&rsquo;t simply spend or hire their way to a healthy security posture. To close critical capability and skills gaps, several approaches and technologies are needed. As security technologies have evolved over the years, they have moved from simple perimeter controls (such as focusing on static defenses) to more advanced security intelligence capabilities (such as focusing on real-time threat information and deviations from patterns).

These new technologies have ushered us into the cognitive era of security. Cognitive security solutions can understand context, behavior, and meaning by analyzing both structured and unstructured data. Cognitive security looks to unlock a new partnership between security analysts and their technology. These solutions can interpret and organize information and offer explanations of what it means, while offering a rationale for conclusions. They also learn continuously as data accumulates and insights are derived from interaction.

These next-gen cognitive security solutions, can enable government security teams to:

<ul>
	<li>Enhance the capabilities of junior security operations center (SOC) analysts by giving them access to best practices and insight that used to require years of experience.</li>
	<li>Improve the response speed by applying external intelligence from blogs and other sources in an effort to take action before threats materialize.</li>
	<li>Quickly identify threats and speed detection of risky user behavior, data exfiltration, and malware infections using advanced analysis methods.</li>
	<li>Gain greater context around security incidents through automation of local and external data gathering and reasoning.</li>
</ul>

Cognitive security solutions can be used in combination with automated, data-driven security technologies, techniques, and processes to help ensure the highest levels of context and accuracy.

Improving collaboration for better security

While traditional approaches to cybersecurity relied on permissions and discrete network boundaries, today&rsquo;s networks are defined by dynamic services and diffuse boundaries. Today&rsquo;s digital platforms generate value by virtue of being interconnected, by sharing information across multiple parties. One leading example is the <a href="https://mediacenter.ibm.com/media/Los+Angeles+Cyber+Lab+/1_hee4ejbp/98865812" target="_blank">LA Cyber Lab</a>, a first of its kind threat intelligence sharing platform, which allows city government officials, businesses, and private citizens to share cyber threat intelligence. In support, IBM deployed the <a href="https://www.ibm.com/security/xforce/research-hub" target="_blank">X-Force Threat Intelligence Research Hub</a>, which is using cognitive services and tools to correlate many parallel cyber events.

This collaborative approach to security helps governments increase their responsiveness while reducing complexity. Cognitive security technology helps to identify primary cyber weaknesses and vulnerabilities across government operations and government-controlled supply chains. Success requires a holistic approach and a deep understanding of the value that cognitive security solutions can provide.

We encourage you to contact us (<a href="https://www.linkedin.com/in/holecy/" target="_blank">Miro Holecy</a>, <a href="https://uk.linkedin.com/in/julianmeyrick" target="_blank">Julian Meyrick</a>, <a href="https://www.linkedin.com/in/tim-paydos-857197" target="_blank">Tim Paydos</a> and <a href="https://uk.linkedin.com/in/mikestone1" target="_blank">Mike Stone</a>) directly to learn more. While we can&rsquo;t predict the future any more than we could predict the last months, we can work together to help forge a path forward that is prosperous, productive, and more secure for all of us.

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COVID-19 Phase III— Amplifying the security imperative to emerge stronger and more resilient

Public Sector leaders must build a robust analytic foundation for increasing situational awareness, predicting potential policy impacts, and providing transparency

As governments and healthcare leaders have strained to respond to the COVID-19 &ldquo;black swan&rdquo; event, they quickly realized the need to not only provide expanded and better services. This had to be accomplished in a way that keeps economies afloat, helps protect national security, preserves personal liberty, and improves equity across the population. At the end of the day, trust in government has become a defining challenge&mdash;only 41% of people say they <a href="https://www.edelman.com/sites/g/files/aatuss191/files/2021-01/2021-edelman-trust-barometer.pdf" target="_blank">trust</a> government leaders to do what is right.

In reflecting on the <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-governments-emerge" target="_blank">4 themes</a> that have emerged over the past several months, a key implication has become clear&mdash;Public Sector leaders must build a robust analytic foundation for increasing situational awareness, predicting potential policy impacts, and providing citizen transparency. In this way, data serves as the new raw material that institutions need to mine and refine to rebuild trust.&nbsp;&nbsp;

Digital data is now virtually everywhere&mdash;across sectors, countries, organizations, and in the billions of digital devices that citizens and businesses use daily. And now with 5G, the amount of data globally is expected to <a href="https://www.opensignal.com/2020/10/21/5g-users-on-average-consume-up-to-27x-more-mobile-data-compared-to-4g-users" target="_blank">nearly triple</a>. The challenge is that more than <a href="https://www.seagate.com/news/news-archive/seagates-rethink-data-report-reveals-that-68-percent-of-data-available-to-businesses-goes-unleveraged-pr-master/" target="_blank">two-thirds</a> the amount of data available to enterprises goes unused or is effectively wasted. The act of creating insights and value from this increasingly abundant resource is essential.

However, governments, healthcare institutions, and societies are still facing significant headwinds that prevent them from fully capitalizing on this opportunity. To address these challenges, governments should continue to invest in data preparedness, including the policies, relationships, communication streams, technologies, and physical infrastructure. This can not only expedite future response efforts, but also contribute to increased economic vitality and prosperity.

<blockquote>
Data and artificial intelligence (AI) can be key to accelerating these recovery plans across levels of government.
</blockquote>

Public Sector leaders need to:

<ul>
	<li>Develop robust data management and analytics capabilities built for situational awareness, decision support, and greater transparency</li>
	<li>Better understand potential policy impact on economy, personal liberty, and equity through modeling</li>
	<li>Identify and target underserved communities</li>
	<li>Embrace data sharing and data interchange standards</li>
	<li>Protect citizen privacy as social services evolve</li>
	<li>Integrate eligibility by transferring entitlements amongst agencies effectively</li>
	<li>Create services that are accessible for those most in need (for example, the elderly).</li>
</ul>

The challenges of closing the data understanding gap

During the early phases of the pandemic, we may have felt like a sailor on a stranded ship, where water (data) was everywhere yet there was not a drop (of information) to quench our thirst. While the curve of available data continues to grow at an exponential rate and many governments struggle to help ensure the curve of &ldquo;understood data&rdquo; keeps pace, it is imperative for Public Sector institutions to address 2 key questions:

<ol>
	<li>How can we connect data from different sources, agencies, and departments and combine it in such a way where anyone&mdash;with the right authorization&mdash;can access it, and extract insights to inform critical decisions?</li>
	<li>How can we simplify the underlying complexity of data silos and advance citizens to an era where they can ask direct questions and get relevant answers at virtually any time, any place?&nbsp;</li>
</ol>

These are not easy challenges to address. And they&rsquo;re further complicated by the fact that the data needed to build and operate an end-to-end view of the citizen is unlikely to reside in any single platform.

What Public Sector leaders need is a robust data fabric

Tackling this problem will take a data fabric. Fabric is literally the structure of something&mdash;the parts that hold it together and make it what it is. In a textile fabric, it is defined as fibers made by either weaving or knitting. In a data fabric, it is the connection and unification of data points that lead to the whole structure.

A data fabric provides seamless access across hybrid clouds, data centers, and edge systems to ingest, explore, prepare, manage, govern, and serve petabyte-scale data for organizational-ready AI. This enables <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/data-fabric-multicloud" target="_blank">dynamic and intelligent data orchestration across a hybrid cloud</a>, creating a network of near-instantly available information. The data fabric helps us consume the data when it is the most relevant and valuable to support mission-critical decision making. In other words, because data quickly ages, it needs to be consumed at the right time.

<blockquote>
Data fabric provides new ways to manage the boundaries separating applications, data, clouds, and the people who design and create them.
</blockquote>

Not surprisingly, IBM has invested in supporting our clients with much more than a data fabric. We have created a new kind of data and analytics platform with built-in governance and AI. Using federated search, the platform helps our government and healthcare partners experience flexibility, enhanced security, and control over their data without having to re-arrange their data storage. It delivers&mdash;out-of-the-box&mdash;a broad range of core data microservices with the option to add more from a growing services catalog. It is an agile, resilient cloud native platform that enables clients to predict and automate outcomes with trusted data and AI.

The perfect marriage between data and AI

Data is a foundation from which both governments and businesses can drive smarter decisions. However, it is AI that unleashes the full power of that data. This is why AI is poised to transform governments, organizations, and enterprises with the potential to add almost <a href="https://www.forbes.com/sites/greatspeculations/2019/02/25/ai-will-add-15-trillion-to-the-world-economy-by-2030/?sh=727bae311852" target="_blank">16 trillion dollars to the global economy by 2030</a>. It is our belief that, in the very near future, virtually all data will be infused with AI: the linchpin capability that will help deliver automation and actionable insights from the data, close the &ldquo;understanding gap,&rdquo; and unleash innovation.

The lessons we have captured during the pandemic underscore the importance of both quantity and quality of data. To gain visibility into both problems and solutions, the Public Sector needs strong systems and governance. This is to capture and organize information for situational awareness, and to turn it into actionable, shareable intelligence that can inform decision making across levels of government. More than that, though, the Public Sector needs to commit to data integrity and data transparency as a means of rebuilding citizen confidence and trust in government and turning lessons captured into lessons learned.

We encourage you to contact us (<a href="https://www.linkedin.com/in/cristina-caballe-77516938/" target="_blank">Cristina Caballe</a>, <a href="https://www.linkedin.com/in/mikestone1/" target="_blank">Mike Stone</a>, and <a href="https://www.linkedin.com/in/tim-paydos-857197/" target="_blank">Tim Paydos</a>) directly to learn more. Although we can&rsquo;t predict the future any more than we could predict the last months, we can forge a path forward that is prosperous, productive, and more secure for all of us.

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COVID-19 Phase III—Building a robust analytic foundation to emerge stronger and more resilient

As the COVID-19 pandemic has marched relentlessly across the globe over the past 18 months, both the healthcare and life sciences sectors have faced a crisis of proportions never before seen. From doctors and nurses in intensive care units caring for the sickest of the sick to scientists in laboratories looking for a seemingly elusive cure for this deadly disease, healthcare systems have been stretched beyond our imaginations.

And the challenges we have faced are certainly not over yet. In May 2020, we predicted the pandemic&rsquo;s footprint would stretch across <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-healthcare-ireland" target="_blank">4 waves</a>, starting with the initial morbidity and mortality, then progressing to a backlog of delayed treatment for patients with urgent and chronic conditions. We also considered the psychological impact on society, including burnout of healthcare staff.

What we did not factor in at that point was the eruption of multiple variants of the virus. Nor did we understand the <a href="https://www.nature.com/articles/s41598-021-95565-8?fbclid=IwAR2hUY71w1mH8P93_MfbfghxuuG2wfttA9k4uGmYTZPX0MBeSN4XSKY_HqI" target="_blank">lasting impact of COVID</a>, with 80% of patients developing 1 or more long-term symptoms. And the extent of vaccine hesitancy was certainly beyond the comprehension of those of us working in healthcare.

As we take tentative steps out of this pandemic, it&rsquo;s important to reflect on what has worked well and can be used in the future. As identified in a recent IBM Institute for Business Value (IBV) <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-governments-emerge" target="_blank">blog</a> post, the core requirements for governments to transform and emerge stronger and more resilient&mdash;rapid innovation and agility, trust and transparency, security, and talent and transformation&mdash;are equally applicable to rebuilding the healthcare and life sciences sectors.

Building on those criteria, we believe there are 6 ways to help create a stronger, more resilient healthcare system:

1. Balance rapid innovation with a highly regulated framework

Early in the pandemic, finding a <a href="https://www.nature.com/articles/d41586-020-02416-z" target="_blank">cure for COVID-19</a> was critical. Closer collaboration among academia, life sciences organizations, hospitals, payers, tech companies, and regulatory bodies resulted in a more streamlined innovation process. The lessons learned now need to be applied to the delivery of effective treatments in the future. For example, the design of clinical trials could be improved by using digital technology such as AI to analyze patterns across previous trials along with real-world data.

2. Build platforms supporting an ecosystem of healthcare partners

If we just digitize existing processes as a result of the pandemic, we will have missed a once-in-a-lifetime opportunity. Future <a href="https://www.ibm.com/downloads/cas/5YAM9A6D" target="_blank">service design and delivery</a> requires reimagining healthcare&mdash;making it more personal, collaborative, and integrated with and enabled by digital capabilities such as AI and cloud, in addition to other emerging technologies. We need design-driven technology, not technology-driven design.

3. Place the consumer at the heart of the healthcare ecosystem

Protecting individuals, particularly the old and vulnerable, from catching and spreading the virus has been a key objective for healthcare and governments. The industry quickly assembled apps to conduct <a href="https://www.ibm.com/watson/health/resources/smart-assisted-contact-tracing/" target="_blank">contact tracing</a> and <a href="https://www.ibm.com/products/digital-health-pass" target="_blank">keep individuals safe while also opening up society and allowing a level of freedom</a>. For life after COVID, these chat and speech interfaces can be repurposed to triage individuals&rsquo; health concerns and direct them to the most appropriate healthcare professionals, with potential time, cost, and efficiency savings.

4. Reimagine healthcare delivery of the future

<a href="https://electronichealthreporter.com/telemedicine-isnt-just-here-to-help-its-here-to-stay/" target="_blank">Virtual health services</a> have been available for many decades, but it took a pandemic for healthcare professionals and patients to recognize the value of telemedicine. As we transition to a new normal, providers must help ensure their virtual infrastructure is robust and secure and fully integrated with other delivery channels. These platforms and services must be designed for all levels of digital literacy.

5. Consider wider societal issues in future plans

The pandemic led to the unexpected consequences of <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/mental-health-tech" target="_blank">mental health</a> problems and a <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/loneliness" target="_blank">loneliness</a> epidemic amid multiple lockdowns&mdash;societal issues that had a lower priority than COVID treatments. Data and technology can be used to democratize access to virtual services, helping to reduce stigma, enhance engagement and continuity with treatments, and improve long-term outcomes.

6. Make security a top priority 

Devices connected to cloud apps run the risk of exposing health networks to malware and other threats. With the growth of virtual consultations during the pandemic, keeping sensitive and personal patient records safe has become even more vital. Robust and borderless <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/medical-device-security" target="_blank">cybersecurity for healthcare</a> can both prevent operational disruption and protect patient safety and privacy. Just as the goal of healthcare is wellness and prevention, the goal of cybersecurity is resilience and avoidance.

Finally, we believe the following 4 key actions can help build the healthcare ecosystem of the future:

1. Predict outcomes by optimizing data understanding. Scientists working on COVID-19 mined data and used modeling and simulation techniques to predict the impact of variants on disease progression and the vaccine programs.

2. Automate processes using AI technology. With long waiting times for in-person triage of COVID symptoms, <a href="https://newsroom.ibm.com/2020-04-02-IBM-Offers-Watson-Assistant-for-Citizens-to-Provide-Responses-to-COVID-19-Questions" target="_blank">the assistance of a virtual agent</a> helped bolster the reliability and resilience of health services.

3. Secure and <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/medical-device-security" target="_blank">protect patient and operational data</a> from cyber and physical threats&mdash;and keep healthcare and life sciences organizations running smoothly.

4. Modernize healthcare operations and supply chains through real-time, flexible access, helping to future-proof businesses.

To find out more about how IBM is helping to build stronger, more resilient healthcare ecosystems, please contact me, Patty Carrolo, at <a href="mailto:carrolo@us.ibm.com">carrolo@us.ibm.com</a>.

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Healthcare beyond the pandemic: Mapping a sustainable future

In the 19 months since the World Health Organization announced a peculiar coronavirus-related pneumonia in Wuhan, China, COVID-19 has turned families, businesses, and communities upside-down and inside-out. And also governments. From the US to the UK, from France to the Philippines, and from South Korea to South Africa, they were as thrown off-guard as anyone. More so, even. While the rest of us were mere passengers, they were the public-health pilots of an aircraft that had to be designed, engineered, and rebuilt&mdash;all in mid-flight.

There was ample turbulence, to be sure. Remarkably, though, government leaders managed to keep the plane aloft through the first two phases of what IBM predicted would be a three-phase pandemic.

Top challenges: Then and now

<a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government" target="_blank">Phase I</a> was devoted to emergency response and business continuity. Together, IBM and governments collaborated to track the pandemic&rsquo;s spread, to support underprivileged students who suddenly shifted to virtual learning, and to modernize unemployment agencies&rsquo; systems to accommodate surging requests for citizen benefits.&nbsp;&nbsp;

<a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government-rebuild-recover" target="_blank">Phase II</a> was all about recovering and rebuilding. Again, IBM teamed up with its government partners to tackle mission-critical problems like contact tracing, return-to-workplace, and exposure notification.

Now, most of the world finds itself waist-deep in <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government-response" target="_blank">Phase III</a>, during which governments must build strength and resilience in order to emerge from the pandemic more ready for the next global crisis than they were the last. But that&rsquo;s easier said than done. Before they can graduate from near-term reaction to long-term resilience, governments of all sizes and types must contend with at least four grand challenges that the pandemic has exposed like open wounds that need swift dressing:

<ul>
	<li>Exploding demand for&mdash;and a near breakdown of&mdash;services. The public health implications of the pandemic and their economic consequences made citizens around the world more dependent than ever on governments for critical information and services. In March 2020, for example, Australia&rsquo;s federal human services department, Services Australia, directed citizens to file claims for welfare payments online. When nearly 100,000 people tried to access it simultaneously just after 9 a.m., however, the government&rsquo;s MyGov website <a href="https://www.theguardian.com/australia-news/2020/mar/23/queues-at-centrelink-offices-and-mygov-website-crashes-ahead-of-coronavirus-shutdowns" target="_blank">crashed</a>. In the US, 26 state unemployment websites likewise had <a href="https://itif.org/publications/2020/04/15/most-state-unemployment-websites-fail-mobile-and-accessibility-tests" target="_blank">crashed</a> by April 15, 2020.</li>
	<li>A shift in fiscal priorities. Exploding demand for support and services during the pandemic forced governments to pivot from fiscal austerity, such as reducing spending to make government more efficient, to citizen stewardship, such as increasing spending to make government more effective. In fact, governments around the world collectively added nearly <a href="https://www.bloomberg.com/graphics/2021-coronavirus-global-debt/" target="_blank">$20 trillion</a> to the global debt load in 2020 alone. And it will not be long before a shift back to reduced spending and debt recovery begins to emerge.</li>
	<li>An adapting workforce. It&rsquo;s no secret that the pandemic changed how people work. But remote working is only one chapter in a bigger story. The deep and lasting changes that the pandemic has created in homes, businesses, and social institutions require new knowledge and skills that many workers&mdash;including government workers&mdash;need to develop. In fact, a recent global survey of more than 10,000 employees by the IBM Institute of Business Value found that 80% of them had to learn new ways of working during the pandemic, and three out of four had to learn new technologies. Meanwhile, the World Economic Forum says that 40% of current workers&rsquo; core skills will change within the next five years, and that half of all workers will have to be <a href="https://www.weforum.org/reports/the-future-of-jobs-report-2020/digest" target="_blank">reskilled</a> by 2025.</li>
</ul>

<blockquote>
The deep and lasting changes that the pandemic has created in homes, businesses, and social institutions require new knowledge and skills that many workers&mdash;including government workers&mdash;need to develop.
</blockquote>

&nbsp;

<ul>
	<li>Eroding trust in government. The pandemic has required the public sector not only to provide more and better services, but to do so in a way that keeps economies afloat, protects national security, preserves personal liberty, and improves equity across the population. In that context, trust in government has become a defining challenge for governments. And so far, they&rsquo;re failing at it: Only 41% of people say they <a href="https://www.edelman.com/sites/g/files/aatuss191/files/2021-01/2021-edelman-trust-barometer.pdf" target="_blank">trust</a> government leaders to do what is right.</li>
</ul>

Core themes to transform government

These are big challenges. And big challenges demand big solutions. As we reflect on the many lessons learned during Phases I and II of the pandemic, we can distill this new knowledge into 4 core themes that will be fundamental to transformation of government in Phase III.

<ul>
	<li>Rapid innovation and agility &ndash; Many governments, even those caught off-guard by the pandemic, quickly shifted to rapid innovation and modernization.</li>
	<li>Trust and transparency &ndash; Providing essential services and averting economic collapse are further complicated by demands from citizens for protection, personal liberty, and equity.</li>
	<li>Security &ndash; The stress of the pandemic exposed existing gaps in security infrastructure and created new ones.</li>
	<li>Talent and transformation &ndash; The workers of today need to become the workers of tomorrow by learning the new skills and technologies that will become ubiquitous among government workforces.</li>
</ul>

Against the backdrop of the grand challenges facing governments today, informed by lessons learned during the pandemic, these four underpin the highest priorities for governments as they continue the fight against Covid. We believe that there are seven implications government leaders need to consider to emerge from Phase III with strength and resilience.

Becoming stronger and improving resilience

1. Renew investment in emergency preparedness.

COVID-19 may be a once-in-a-century pandemic, but emergencies of its size and scale are not once-in-a-century events. Given the myriad threats confronting governments in the 21st century&mdash;everything from cybersecurity to climate change, for example&mdash;local, national, regional, and global disruptions are a near certainty. As the pandemic consumes less of their bandwidth going forward, governments must therefore continue to invest and reinvest in emergency preparedness, including the policies, relationships, communication streams, technologies, and physical infrastructure that will expedite future response efforts.

2. Balance faster innovation with stronger governance, control, and cost takeout.

An oft-cited &ldquo;silver lining&rdquo; of the pandemic is that it forced governments to innovate and modernize at breakneck speeds. Governments that are used to moving slowly learned that they&rsquo;re quite capable of moving quickly. Unfortunately, they sometimes embraced speed at the expense of other critical priorities, like security. 
 
Going forward, governments must learn how to maintain a rapid pace of innovation while also exercising strict governance and controls that allow them to be good stewards of data and dollars&mdash;for example, by moving to a hybrid cloud approach that facilitates DevSecOps in a way that marries innovation with control and governance. And considering the need to pay down the debt accumulated throughout the pandemic, avoiding shortsighted decisions to cut or constrain digital programs will not only deliver greater citizen engagement, but also deliver cost savings in the mid- to long-term.

3. Accelerate modernization of supply chains for control, integrity, and dynamic agility.

From shortages in consumer products, to the price of commodities, to insufficient access to N95 masks and ventilators, the pandemic exposed the fragility and interdependence of global supply chains. The public and private sectors must collaborate to modernize and regionalize supply chains in ways that make them more agile, adaptive, and resilient. In addition, governments need to design with a focus on supply chain integrity. 
 
The pandemic exposed just how dependent organizations were to singular sources of supply. Essentially, governments and private sector organizations alike are now rightly seeking to diversify their supply chains. But in the case of governments, they also need to consider industrial strategies to protect sovereign needs.

4. Reimagine citizen engagement models and supporting government operations.

Even before the pandemic, consumers were pampered with unprecedented levels of convenience. From online shopping and streaming media to ridesharing and mobile banking, they&rsquo;ve gotten used to getting what they want, when they want it, and with a frictionless customer experience. That became especially apparent during the pandemic, when quarantined consumers became even more reliant on convenience, &nbsp;thanks to services like food delivery and telehealth.

<blockquote>
Unfortunately, people did not encounter the same convenience when they were transacting with governments as citizens as when they were transacting with private companies as consumers.&nbsp;
</blockquote>

Big steps forward have been taken, but much more can be done. And through this, governments will have an opportunity to become more efficient, more effective, and even more trusted.

5. Build a robust analytic foundation for increasing situational awareness, predicting potential policy impacts, and providing transparency.

The actions required to respond and recover from the pandemic underscore the importance of both quantity and quality of data. To gain visibility into both problems and solutions, the public sector needs strong systems and governance, both to capture and organize information for situational awareness, and to turn it into actionable, shareable intelligence that can inform decision making at all levels of government. More than that, though, it needs to commit to data integrity and data transparency as a means of rebuilding citizen confidence and trust in government.

6. Amplify the security imperative.

Government modernization during the COVID-19 pandemic has yielded essential new systems and services. The speed at which governments stood them up, however, means security in some cases might have been overlooked, ignored, or abridged. 
 
As a result, government infrastructure has become a vulnerable and attractive target for cyberattacks. The lesson is clear: Governments can no longer afford to treat security as an afterthought and must bake it into new services and systems from their inception&mdash;preferably with a &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/zero-trust-security" target="_blank">zero trust</a>&rdquo; posture .

7. Upskill and reskill the workforce through adaptive learning programs.

Many governments that began the pandemic in an analog world are poised to emerge from it in a digital world. Just because their technology has evolved, however, doesn&rsquo;t mean their workforce has done the same. In government agencies where it hasn&rsquo;t, legacy employees can be just as handicapping as legacy systems. To bridge the gap, governments must invest in public servants by giving them the knowledge and skills they need to be effective in a post-COVID world. Adaptive learning that uses artificial intelligence (AI) to tailor training and education to individual workers is one tool that can help them do so.

To be successful, we believe governments should approach these seven objectives from the vantage point of four architectural touchstones:

<ul>
	<li>Predict outcomes;</li>
	<li>Automate at scale;</li>
	<li>Secure everything; and</li>
	<li>Modernize with ease.</li>
</ul>

How does this look in practice? Consider, for example, supply chain modernization. Healthcare providers and governments need to collaborate with manufacturers of ventilators, for instance, to mine for data, model and simulate&mdash;and, ultimately, predict&mdash;the impacts of potential changes and future scenarios. Next, they need to automate response processes with AI-assisted workflows to achieve increased reliability and resilience, build in security to protect it from physical and cyber threats, and modernize industrial operations and policies to support automation and sovereignty.

Whether they produce ventilators or citizen services, businesses and governments alike should embrace the challenges and opportunities before them with exactly this type of framework. If they do, they&rsquo;ll be positioned to&nbsp; emerge from COVID-19 stronger and more resilient than they were before it.

I encourage you to <a href="https://www.linkedin.com/in/mikestone1/" target="_blank">contact me</a> directly to learn more. Although we can&rsquo;t predict the future any more than we could predict the last 19 months, together we can forge a path forward that is prosperous, productive, and more secure for all of us.

<hr />

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As the pandemic consumes less of their bandwidth going forward, governments must therefore continue to invest and reinvest in emergency preparedness, including the policies, relationships, communication streams, technologies, and physical infrastructure that will expedite future response efforts.

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COVID-19’s final phase: How governments can emerge stronger, more resilient

As automation and data collection turn company processes into streamlined and efficient workflows, many insurers are being forced out of their comfort zones to survive. Typically, insurers are slow to make substantial changes to how they operate, yet their value propositions continually evolve as access to data increases. They continue to focus on &quot;near-term&quot; cost reductions to impact current earnings while driving growth and improving customer retention with longer-term projects.

In the report &ldquo;<a href="https://www.ibm.com/downloads/cas/8ZOKKO9X" target="_blank">Insurance breaks the mold: The case for AI, automation, and intelligent workflows</a>,&rdquo; we examine three themes that are currently taking hold:

<ul>
	<li>Insurers may be slow-moving, but swift to employ innovation</li>
	<li>Integrating data changes everything</li>
	<li>Creating a better insurance experience becomes essential</li>
</ul>

Intelligent workflows based on next-generation automation and exponential technologies can be the basis for the insurance operations of the future. They represent an actionable way to integrate change using a value-based approach as the &quot;big idea&quot; connecting processes and data across functional towers. When optimized by the right tooling and technology platforms, the company incorporating these workflows builds value.

<img alt="The cognitive enterprise requires embedding intelligence into workflows." src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/o_Yvs6xeienut_Vn_EP_3_Tl_Qv5_C_701d8b33bb" style="height:394px; width:700px" />

The following actions can establish a target state that helps shorten the time to process core insurance work and expedite the transition to enterprise digitization:

<ul>
	<li>Define a strategy that promotes change based on how processes are actually performed, a.k.a. &quot;process mining.&quot;</li>
	<li>Invest in a pro-automation mindset shift, engaging across the organization and ecosystem of partners.</li>
	<li>Utilize a flexible architecture that can adapt to real-time events.</li>
	<li>Have a plan to reskill talent while discovering and enhancing skill sets to work with machines eventually.</li>
	<li>Break the big vision into logical, value-based steps driven by intelligent workflows.</li>
	<li>Think of data as a commodity, basing risk assessments on rich data profiles.</li>
	<li>Collect data as broadly as possible, whether from third-party data-collection firms, social media, industry intelligence, or other sources.</li>
	<li>At the same time, be transparent with customers about your use of their data; earn trust with openness and convenience.</li>
</ul>

To also learn more about Intelligent workflows in general, download the IBV Study &quot;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/automation-workflows" target="_blank">Automation and the future of work.</a>&quot;

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The case for AI, automation, and intelligent workflows in insurance

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts&mdash;members of IBM&rsquo;s Industry Academy and Academy of Technology&mdash;to reflect on key trends driving investments and actions in 2021. We expect the following 8 trends to drive investment and push banking and financial markets leaders to move toward new cloud-based business architectures:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/muted-financial-performance-banking-financial-markets" target="_blank">Muted financial performance</a></li>
	<li>Accelerated digital adaptation</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/cloud-based-business-architectures" target="_blank">New cloud-based business architectures</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/escalating-competition-banking-financial-markets" target="_blank">Escalating competition</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">Operational resilience challenge</a><a href="http://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">s</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/banking-financial-markets-data" target="_blank">Increasing open and free data</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/security-fraud-risks-banking-financial-markets" target="_blank">Security and fraud risks</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/new-ways-of-working-banking-financial-markets" target="_blank">New ways of working</a></li>
</ul>

Let&rsquo;s explore why accelerated digital adaptation is capturing a top spot on the joint agenda for business and IT.

In 2020, government-mandated actions in response to the pandemic required financial institutions to temporarily close many of their branches, operations offices, facilities, and call centers. Clients, employees, vendors, and other partners had to adapt to new ways to continue interacting.

Clients quickly adapted to digital channels, including web, mobile, and call centers. In the first months of the lockdown, some financial institutions reported a 30-40% increase in mobile and web volumes and a 300-400% increase in call center volumes. And it seems that increased digital activity is here to stay. In a recent BAI study, almost 90% of clients who increased their digital usage during the pandemic plan to maintain that use. (See &ldquo;<a href="https://www.bai.org/research/bai-banking-outlook/covid19-digital-banking-update/" target="_blank">BAI Banking Outlook. COVID-19 Digital Banking Update&rdquo;. Banking Administration Institute</a>).

Working from anywhere &nbsp;&nbsp;

Driven by social distancing and closures of physical locations, employees embraced remote working. The financial institutions not only had to deal with the upsurge in transaction volumes in digital channels that far exceeded their existing capacity. They also had to quickly enable their employees and vendor partners to work remotely without compromising security. A recent IBM study shows 83% of people want to work from home in some capacity after lockdown&rsquo;s end. As working from home gains popularity, it&#39;s also redefining work-life balance. Yet, continued remote working can&rsquo;t be sustained without digitization at virtually every level of an organization, and from front- to back-end. This will require banks to transform their processes, operations, systems, and culture&mdash;all at the same time.

Banks are simultaneously contending with muted financial performance that&rsquo;s undermining their market evaluations when compared with payment providers and fintech that were capable of keeping and increasing client proximity through the periodic lockdowns. Compare the market capitalization, or private equity evaluation, of the top 500 global banks, payment providers, and fintech unicorns at the end of 2020, and you&rsquo;ll see a clear trend implying a shift in power.

Downward trend of global banks: A shift in power

<img alt="Downward trend of global banks: A shift in power" height="407" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/fa0acdc183ae473e9ef5f5bac337b075.png" width="750" />

What&rsquo;s different now with digital transformation?

For financial institutions, digital transformation isn&rsquo;t new. They&rsquo;ve been progressively transforming for several years, driven by a host of forces: changing customer expectations, pressures to reduce costs, threats from fintech and the neo-banks, emerging business models (online marketplaces and banking-as-a-service), and innovations enabled by technologies such as cloud, AI, and blockchain. So what&rsquo;s different now?

3 things:

<ul>
	<li>The pandemic has drastically accelerated the need to change. Banks need to transform now.</li>
	<li>Transformation must lead to multiple outcomes. These include superior customer experience, higher efficiency, agility, and stability. To achieve these, transformation has to be end-to-end, including front-office, middle-office, and legacy core applications.</li>
	<li>However, such programs are typically long-drawn and require a level of investment that is not sustainable unless it is self-funded.&nbsp;&nbsp;</li>
</ul>

Traditional approaches to transformation aren&rsquo;t good enough to overcome the unexpected or unanticipated hurdles that could increasingly characterize a post-pandemic world. New approaches will be needed to mitigate challenges and still stay focused on the big picture.

Guiding principles for sustainable digital transformation

My experience indicates most banks have either started planning or have already embarked on a transformation journey. Some are looking at commercially available packages for replacing selective functions, some are attempting to refactor them, while a few are re-writing from scratch. In general, most banks are attempting to transform by domains and user journeys. Some are even exploring standing up a new digital bank with the hope that they&rsquo;ll be able to migrate existing customers once it is up and running and the supporting software stack is stable.

While there&rsquo;s no magic bullet for a successful transformation, here are some guiding principles for approaches that work.

Most banks have initiated multiple discrete projects to respond to specific challenges posed by the pandemic. Banks that adopt a sustainable transformation approach can go beyond tactical responses to the pandemic. IBM recently interviewed Piyush Gupta, CEO of DBS Bank in Singapore, to discuss how to thrive in a post-pandemic reality. He said, &ldquo;If you can embrace agile setups, experiments, and constantly nurture a learning culture, then you become adaptive and nimble, which means you can respond a lot more quickly to opportunity and changes in the environment.&rdquo; (See IBV report <a href="https://w3.ibm.com/services/lighthouse/spotlight/documents/165116?listId=sfkqa" target="_blank">&ldquo;Find your essential.&rdquo;</a>)

Banks that adopt a business outcome-driven transformation paradigm can shift from building business cases to justify a technology-driven transformation program to designing transformation programs that deliver business value, based on priorities driven by the business.

Banks that adopt an agile transformation approach can do so in waves of discovery and execution. Each wave results in demonstrable business value. In most cases, waves are designed around customer experience journeys.

Banks must have an&nbsp;architecture vision&nbsp;that acts as the North Star.&nbsp;While it is na&iuml;ve to assume that the target-state architecture will remain static, it is important to have a foundation based on principles such as modularity; agility; portability across private and multiple public clouds; interoperability; and an intelligent, secure architecture that remains compliant to the core. Using a &ldquo;design once&rdquo; approach boosts performance with exponential technologies and unlocks business value across the ecosystem platforms.

Target state architecture vision

<img alt="Target state architecture vision" height="527" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/ba09329b36864420bafb184e45ca2094.png" width="750" />

Attempting a transformation to replicate the old business architecture and processes based on new technologies is bound to fail. Good design for transformation liberates businesses to re-imagine processes and customer experience.

As banks think about the modernization and migration of back-end applications, many are considering a mixed fit-for-purpose approach of build, buy, and adapt. Build to differentiate. Buy when what&rsquo;s needed is a commodity. Use an adapt-not-adopt approach for third-party applications.

For a given domain and customer experience journey, an end-to-end transformation delivers the highest benefit. Some banks may be able to wrap around their legacy core applications and expose APIs, but for most, these legacy applications can limit the ability to innovate on product features. Resilience and stability issues in core applications, combined with the erosion of the workforce that knows these applications, and difficulties in attracting new talent to work on these technologies pose operational risks. This has attracted the attention of regulators. Moreover, legacy core systems inhibit the ability to move to the cloud. Lift-and-shift strategies do not work with these hyper-integrated monoliths while maintenance and support of legacy core systems consume a significant portion of the IT budget.

At the same time, it&rsquo;s true that core modernization efforts have not been very successful. IBM estimates 70% of the programs fail to deliver the intended outcomes. Combined with the cost of such programs (they could range from hundreds of millions to over a billion dollars in some cases), long duration (5-7 years or more), and long ROIs (often more than 4 years), it&rsquo;s easy to understand the predicament of the CIOs. The approaches listed above help mitigate the risks.

Last, transformation programs require strong leadership, governance, and change management. These programs are complex, with far-reaching implications across business and technology. Underestimating the complexity of digital transformation can undermine a bank&rsquo;s success&mdash;but a pragmatic approach can position it for the future and deliver value for customer, employee, and shareholder.

For more insights on a practical approach to de-risking your modernization program, I encourage you to download the latest IBV paper &ldquo;<a href="https://www.ibm.com/industries/banking-financial-markets/core-banking-digital-transformation" target="_blank">Digital transformation in banking</a>,&rdquo; take a brief digital maturity evaluation, and see where you stand among your peers on your journey to the cloud.

&nbsp;

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Accelerated digital adaptation in banking

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts&mdash;members of the Industry Academy and Academy of Technology&mdash;to reflect on key trends driving investments and actions in 2021. We identified the following eight trends that will likely dominate and push banking and financial markets leaders to move toward new cloud-based business architectures:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/muted-financial-performance-banking-financial-markets" target="_blank">Muted financial performance</a></li>
	<li>Accelerated digital adaptation</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/cloud-based-business-architectures" target="_blank">New cloud-based business architectures</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/escalating-competition-banking-financial-markets" target="_blank">Escalating competition</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">Operational resilience challenges</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/banking-financial-markets-data" target="_blank">Increasing open and free data</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/security-fraud-risks-banking-financial-markets" target="_blank">Security and fraud risks</a></li>
	<li>New ways of working</li>
</ul>

Let&rsquo;s explore why new sources of talent and collaboration models emerge as financial institutions are shifting from the traditional front-office to back-office segmentation, and guide operational transformation to new business architectures.

<div class="ckeditor-html5-video" data-responsive="true" style="float:left; margin-right:10px; text-align:left">
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&nbsp;

Banking is one of the oldest industries and has weathered significant transformations from the great depression to the global financial crisis, and still faces challenging business environments. One thing has remained constant, until now, the propensity of financial institutions to work from centralized locations and concentrated financial centers. However, this is changing.

When the pandemic hit in 2020, banks were forced to temporarily close physical branch networks, asking customers to use digital channels. At the same time, most bank employees were required to work from home.

Recently, Business Times <a href="https://www.businesstimes.com.sg/banking-finance/banks-eye-permanent-telecommuting-for-some-staff" target="_blank">estimated that 70% to 90% of banking staff transitioned to remote working</a> within days of government lockdowns, paving the way for accelerated use of virtual communication. Banks quickly realized the possibility to enable a remote workforce, while providing better and consistent client experiences through digital channels.

The extended network of bank vendors and contractors were also forced to adjust their ways of working. Suppliers offering zero-touch digital solutions had a clear competitive advantage.

Internal and external digital collaboration quickly became the option for conducting banking business in the short term. Today, long-term sustainability concerns remain, but they can be addressed by a change in business culture, revisiting risk management frameworks, and leveraging exponential technologies.

The resilience and adaptability of a traditional workforce and operations have been jointly tested, elevating the chief human resources officer (CHRO) role as an important counterpart to the chief information officer (CIO).

Enabling a flexible workforce to collaborate virtually and leverage intelligent workflows

The pandemic put the CHRO in the boardroom spotlight to navigate business uncertainties as &nbsp;&nbsp;employees&rsquo; and clients&rsquo; safety and wellness became mission critical. This renewed focus on how people work and collaborate also intensified the HR realization of the need to engage talent and source the skills required to drive through an accelerated digital adaptation.

CHROs are pointing to a new technology stack that enables collaborative models of &ldquo;working from anywhere.&rdquo; Access to centralized artificial intelligence (AI) models without duplication of business-critical datasets can be enabled on secured cloud environments that include digital workers (see, <a href="https://www.ibm.com/downloads/cas/6EGOKGNX" target="_blank">Digital Workers and the Hybrid Workforce</a>).

As banks get more comfortable with employees working remotely, the requirement for office space and fixed workstations may be significantly reduced. All the benefits of a remote workforce can be achieved, &nbsp;provided new collaborative models are implemented with the adoption of technology in a way that complies with a risk-aware design and delivers a secured experience.

<img alt="New ways of retaining, hiring and motivating talent" height="415" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/bd48158126724108af483682a0987167.png" width="750" />

Banks are asked to take three strategic actions:

<ul>
	<li>Enhance value propositions for talent acquisition. Banks are competing with Big Tech firms to source a skilled workforce outside of the mainstream (gig workers, part-time workers) without constraints of geography. They need to enhance their value propositions by implementing flexible work and modular compensation schemes. Remote talent acquisition can be supported by AI to be more personal and efficient that transforms candidate experience overall.</li>
</ul>

&nbsp;

<ul>
	<li>Build virtual venues for talent development. Fast digital adoption of clients&rsquo; and employees&rsquo; expectations expose banks&rsquo; talent gap and calls for rigorous discipline to upskill the workforce and weather business disruption. Flexible learning curriculums ensure that the employees stay engaged and productive. 
	 
	A digital academy is a way to develop talent remotely and recognize achievements. For example, <a href="https://www.straitstimes.com/business/banking/dbs-launches-digital-training-institute-to-groom-tech-talent" target="_blank">DBS Bank recently launched a digital training institute</a> to groom tech talent, while <a href="https://www.hsbc.com/who-we-are/our-people-and-communities/hsbc-university" target="_blank">HSBC announced the launch of a learning experience platforms and talent marketplace</a> to help transform the digital skills across the organization. 
	 
	In the <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/ceo" target="_blank">IBV 2021 CEO Study, &ldquo;Find your essential,</a> CEO&rsquo;s in 61% of outperforming organizations noted empowering the remote workforce as their top concern in a post pandemic environment and emphasized industry specific skills 79% more frequently than underperformers.</li>
</ul>

&nbsp;

<ul>
	<li>Implement new ways of collaborating. A flexible workforce enabled to perform and learn from anywhere is becoming the norm. Some banks anticipate a <a href="https://www.bloombergquint.com/business/deutsche-bank-considering-40-permanent-work-from-home-policy" target="_blank">working from home rate as high as 50%</a> &nbsp;The key challenge is to transform operating models to fit a hybrid workplace and align with regulatory requirements, employees&rsquo; propensities, and client expectations. 
	 
	Unlocking the value of a hybrid workplace requires focus on a cultural environment that encompasses human development and the transparent enablement of technology. Intelligent workflows make digital workers an automated reality, boosting efficiency and reliability for reusable services within banking ecosystems. Seamless workforce interactions with AI-augment technology will become commonplace as employees shift their focus to higher-value, customer-focused innovation.</li>
</ul>

A partnership for leading workplace change

Change requires a conscious strategy and business capability to measure progress, while being well aware that the nature of change requires rethinking the way performance data is captured and analyzed. Physical, emotional, and financial well-being for a motivated, engaged, and productive workforce becomes centerpiece. Also, addressing individual staff constraints is vital, such as limited workspace at home and slow connectivity.

Many international banks have taken the first steps to provide employees with the flexibility to work from anywhere with commitment to the delivery of a valued business outcome. For example, <a href="https://www.theguardian.com/business/2021/feb/23/hsbc-looks-to-asia-after-profits-plunge-34" target="_blank">HSBC announced its plan</a> to enable a 40% reduction in office footprint globally.

The emerging hybrid workplace requires a partnership between CHRO and CIO to lead change at both the strategic and tactical levels. Financial institutions that think differently about the workplace and workforce talent, skills, and support will accelerate business performance, maximize return on investment, and increase employee engagement through an ecosystem of digital services, AI, and intelligent workflows.

For more insights about new ways of working, I encourage you to download the IBV paper<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/trading-floors-cloud" target="_blank"> The future of trading floors</a>, and learn how banks can compete on cloud platforms with a remote workforce.

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New ways of working in banking and financial markets

At the beginning of the year, the IBM Institute for Business Value (IBV) invited 44 IBM global experts&mdash;members of the Industry Academy and Academy of Technology&mdash;to reflect on key trends driving actions and investments across the industry in 2021. We identified the following top themes that will likely dominate and push banking and financial markets leaders to act:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/muted-financial-performance-banking-financial-markets" target="_blank">Muted financial performance</a></li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/escalating-competition-banking-financial-markets" target="_blank">Escalating competition</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">Operational resilience challenges</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/banking-financial-markets-data" target="_blank">Increasing open and free data</a></li>
	<li><a href="http://www.ibm.com/thought-leadership/institute-business-value/blog/security-fraud-risks-banking-financial-markets" target="_blank">Security and fraud risks</a></li>
	<li>New ways of working.</li>
</ul>

From the perspective of embracing new business architectures, three essential preconditions emerge for banks to transform swiftly, securely, and efficiently:

<ul>
	<li>Leveraging and protecting proprietary data</li>
	<li>Augmenting in-house development with ecosystem partners</li>
	<li>Automating and integrating front and back-office functions.</li>
</ul>

To support business-critical digital transformation, most banking organizations are committed to a cloud strategy, and are well aware of the flexibility, agility, integration, and scalability benefits of an open hybrid multicloud approach. First movers already recognize that existing architectures simply cannot deliver the cost and agility required to compete in a disrupted landscape and feel impeded to deliver returns demanded by investors.

In our experience, financial institutions seeking higher expected returns would target 40-50% of workloads on specific public cloud, 20% on traditional public cloud, and the remaining 30-40% on-premises based on a modern mainframe infrastructure. This hybrid multicloud strategy would enable banks to leverage cloud native, API-driven banking functionality to easily and quickly source added-value capabilities from banking and non-banking ecosystems.

<blockquote>
&ldquo;Open hybrid multicloud is a foundational environment enabling effective digital transformation that integrates traditional computing platforms with private, public, and managed cloud platform services. In essence, a hybrid cloud becomes a virtual computing environment spanning multiple landing zones that aligns workloads and digital interfaces with the most appropriate computing platform. All these services need to be managed as though they were designed to behave as a single unified environment.&rdquo;

&ndash; <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/banking-hybrid-multicloud" target="_blank">definition of open hybrid multicloud</a> 
</blockquote>

Migrating to a new business architecture

How does open hybrid multicloud add value? Yesterday&rsquo;s banking architectures are illustrated below as a pyramid with most of the costs pooling at the bottom, such as core banking (see Figure). However, key revenue generation mechanisms are serviced at the top, such as intermediation with customers and relationship management.

Winning on digital economies requires an inversion of the pyramid, making core banking a utility that scales efficiently with intelligent workflows, matching each workload to the most effective computing platform (open, hybrid, multi), and expand the investments and capabilities supporting the next generation of customer experiences. The path to open hybrid multicloud is clear.

Journey to open hybrid cloud architecture: Business outcomes include agile, digitally transformed operations.

<img alt="Journey to open hybrid cloud architecture: Business outcomes include agile, digitally transformed operations." height="468" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/ef2799f11b8744bfad6eb968abe18799.png" width="760" />

Optimize banks&rsquo; business critical workloads on specific public cloud

Today, <a href="https://cloudsecurityalliance.org/artifacts/cloud-usage-in-the-financial-services-sector/" target="_blank">less than 10% of application workloads</a> have migrated to public cloud computer platforms, with the remainder in on-premises platforms. Clearly, a public cloud alone may not necessarily be the optimal environment for hosting all mission critical application workloads.

As banks started adopting cloud platforms, they learned the importance to access industry-specific attributes about security and compliance requirements that only an open hybrid multicloud framework would facilitate. Banks recognized the need to match the complexities of their operations and multi-faceted regulatory demands with the right cloud platform. More advanced institutions are not stalled anymore. They are honing their cloud migration strategy to new business operating models that only an open hybrid multicloud architecture can address.

Business leaders and regulators understand the inherent risks of relying on a single vendor for all situations. It makes sense to operate with more than one provider to mitigate risks of operational resiliency, the risks of de-platforming by platform providers, and to enhance data security.

There are mission-critical workloads leveraging strategic datasets that businesses are not eager to place on the public cloud. Therefore, well-informed decision makers demand to be supported by a business architecture that combines a variety of public and private clouds, hosted services, edge computing, and data center capabilities from a number of different vendors.

Rewire for agility and scale with the right moves

Financial institutions do not just need to restructure operations, cut costs, and simply survive. They need to win with new business architectures enabling expansion and reclaim market leadership. This is dependent on making the right moves by blending business and IT priorities toward a more collaborative operating model supporting agility, mobility, and resiliency. This collaborative operating model is underpinned by 5 enablers and ways of working:

<ul>
	<li>Next-generation operating models. The business of banking demands high levels of efficiency and openness. Adoption, deployment, and evolution of new operating models&mdash;including architecture, technology, processes, people, partnership models, and even culture&mdash;are needed to support new and disruptive business models and prepare banks to succeed in an ever-changing environment.</li>
	<li>Agility. Business agility is a core capability to generate ideas, realize meaningful experiences through intelligent processes, and operationalize to rapidly deliver business outcomes. Avoiding vendor lock-in with strategic optionality on an open hybrid multicloud platform is a must have to compete.</li>
	<li>Secure container technology. Workloads can be moved across competing environments allowing banks to use multiple cloud providers as back-up, switching in case of disruption. Full portability with security embedded into the container pipeline is reliable technology; it is compliant, scalable, and trusted for defense of the infrastructure.</li>
	<li>DevSecOps for compliance. Developers can leverage the strengths of both&nbsp;security compliance&nbsp;teams and DevOps teams, yielding a process that works better for both. A solid&nbsp;DevSecOps&nbsp;solution embeds compliance best practices, policies, and tools into each phase of the development lifecycle.</li>
	<li>Site reliability engineering (SRE). Enable and empower a SRE discipline to focus on how to scale and maintain uptime in a distributed environment and minimize outages. Implement SRE to offer consistent service level support, logging, management, and delivery across cloud environment with intelligent automation and real-time alerts for responsive operations.</li>
</ul>

Engage with the ecosystem and take advantage of industry scale

New operating models are just one step to change the way of working within a bank. The next step is about engaging with ecosystem players (including independent software vendors, other financial institutions, other industries) through industry-wide secured solutions to take advantage of industry scale.

As banks migrate business critical workloads to an open cloud environment, they can couple application modernization with the sharing of business-critical capabilities. Speed can be achieved by identifying a valuable ecosystem of partners to leverage and shorten time to market, or by forming coalitions to create an industry utility. For example:

<ul>
	<li>Business critical banking partnerships. The five largest Nordic banks founded a know your customer (KYC) utility named <a href="https://invidem.com/index.php/about-invidem/" target="_blank">Invidem</a> to be commercially launched in 2021. The digital platform manages and administers public KYC information to prevent money laundering and terrorist financing. This type of partnership delivers increased security through enhanced KYC capabilities, identity validation, and fraud detection by identifying unusual patterns in payments traffic that individual banks cannot identify.</li>
	<li>Rise of information banks. Satellite broadcaster <a href="https://asia.nikkei.com/Business/Business-trends/Japan-s-information-banks-to-let-users-cash-in-on-personal-data" target="_blank">Sky Perfect JSAT Holdings and personal loan provider J. Score</a> gives customers more control over their personal account data and offers a transparent solution to compensate customers for the provision of data. Banks striking data-sharing deals with businesses like J. Score can simplify credit extension and glean insights at the &ldquo;moment of decision,&rdquo; and arrive at more precise risk-scoring and credit-underwriting decisions.</li>
</ul>

Getting ready for open hybrid multicloud

An organization has decisions to make about which workloads to prioritize for public cloud, which ones to prioritize for private cloud, and which to leave on a more traditional enterprise platform. They also need to separate what can be done&mdash;in terms of ease and feasibility&mdash;from what should be done from a strategic standpoint.

A robust multi-criteria framework can help determine the optimal platform for each workload. Both operational and business criteria should be considered in each workload evaluation: resiliency; responsiveness; digital maturity; risk, security, and compliance; and business case application.

Here are the key steps to develop a strategy to determine your optimal platform:

<ul>
	<li>Consider a &ldquo;big picture&rdquo; view of the industry specifics and complexities related to a large-scale migration to alternative cloud environments</li>
	<li>Evaluate approaches and build a business case that considers criteria that matters&mdash;completeness and depth of platform; hybrid and multicloud interoperability; total cost of owners/lifecycle economics; operating model; and experience, ecosystem and partnerships&mdash;to substantiate the business case with an ROI estimate</li>
	<li>Determine which workloads to prioritize for public cloud, which ones to prioritize for private cloud, and which to leave on a more traditional platform</li>
	<li>Build &ldquo;islands of stability&rdquo; on the journey to cloud that have value&mdash;and avoid technical debt&mdash;and continue to build and evolve a cloud environment suited to the business of banking.</li>
</ul>

Part of the appeal of an open hybrid multicloud approach is the resulting flexibility, agility, and ability to scale. And because one size does not fit all, open hybrid multicloud can enable a bank to embrace cloud services without restricting it to a single technical solution platform or provider. To be successful, businesses that focus on a hybrid cloud and open-source plan are in the position to grow their business and protect their customers.

To learn more about key actions for banks migrating to cloud, please download the IBV report &ldquo;<a href="https://ibm.co/banking-hybrid-multicloud" target="_blank">Banking on open hybrid multicloud</a>.&rdquo;

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New cloud-based business architectures in banking and financial markets

We live in a world driven by data. The ability to harness that information for insights allows businesses to make smarter, more cost-effective decisions. In the wake of the pandemic, <a href="https://ibm.co/c-suite-study-ceo" target="_blank">CEOs emphasize</a> the need to &ldquo;aggressively pursue&rdquo; operational agility and flexibility over the next two to three years. However, they must adopt a new operating model to sift through the data and uncover valuable insights to optimize performance. Digitally connected assets allow businesses to facilitate remote monitoring of high-value physical equipment, resulting in a mass repository of real-time data. As detailed in &ldquo;<a href="http://www.ibm.com/thought-leadership/institute-business-value/report/connected-operations" target="_blank">A new model for connected assets</a>,&rdquo; a&nbsp;recent report&nbsp;by the&nbsp;IBM Institute for Business Value, intelligent assets, machine learning, and digital twins help organizations build more resilient and efficient operations.

A new intelligent operating model

According to the study, businesses will be heavily investing in technology such as cloud, advanced analytics, automation, and the Internet of Things (IoT). Under pressure to maximize performance, companies are looking at these technologies to help streamline and transform operations for the next generation of their business. Instead of starting from the ground up, organizations can create an intelligent workflow by adding AI, machine learning, and automation to their existing systems, allowing business leaders to benefit from data insights and improve operations. &nbsp;

<img alt="Large level of investment planned in the next two to three years" height="240" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/0fa2dab7e56b44b6bc6e1dfa2861085c.png" width="700" />

Process industries lead in connected operations 

Process industries, particularly those with continuous processes such as chemicals and petroleum and oil and gas, have been adversely impacted by the volatility in the supply chain. Resilience is key in these industries due to the unpredictability of demand and uncertainty of feedstock. Because companies in these industries are typically asset intensive and intent on operational safety and stability, it is crucial they utilize their assets to the maximum potential, including production processes (like reactors or columns), physical equipment (compressors, pumps, and exchangers) or personnel executing the operations.

Sustainability in manufacturing is becoming more of a priority goal than a &ldquo;good-to-have.&rdquo; In process industries, cost of operations, including the cost of information management, is under scrutiny due to the push toward net zero targets, making businesses shift toward alternate and new energy options.

New technology is being adopted and leveraged for innovation in all these priority areas. This includes collecting large volumes of new information through connected assets, managing the information in the cloud, and enabling AI at scale. Metrics are being assessed to address financial (for example, EBITDA) and sustainability-focused areas (for example, worker health, emissions monitoring, asset utilization, and energy management). Understanding how each connected asset correlates to the process, whether it is engineering, design, construction, or operation, is vital. Digital representations such as digital twins play a key role in streamlining asset maintenance and adding transparency in the manufacturing space.

Being proactive with digital twins

Digital twin technology for asset maintenance can facilitate remote monitoring, predictive planning, and the proactive management of physical assets so businesses can make smarter, more efficient decisions. However, lack of access to maintenance information can make it difficult for companies to adopt digital twin technology. For example, factory equipment can come from an OEM, or original equipment manufacturer, but the OEM may not have shared all the required maintenance information. It may be contracted with the factory to come and maintain the equipment, or it might charge money to provide physical copies of maintenance documents.

These gaps can be filled by consolidating and streamlining OEM maintenance information for customers. Platforms such as IBM&rsquo;s <a href="https://www.ibm.com/products/digital-twin-exchange" target="_blank">Digital Twin Exchange</a> manage content provided by OEMs, such as service manuals and parts lists for consumer use. Customers can browse, purchase, and download digital twin information to better inform their maintenance and operations. In turn, OEMs are freed from the costs associated with managing a website to host their manuals and have another avenue for generating revenue and improving customer satisfaction.

Reducing the knowledge gap 

Many businesses face a common obstacle: how to capture the institutional knowledge of the retiring baby-boomer generation that has been built over many years and transfer it to the new workforce. Baby boomer technicians came into the workforce with deep, almost intuitive, mechanical knowledge, whereas today&rsquo;s technicians are coming in with less mechanical and much more digital expertise.

Technicians on average spend <a href="https://www.accelix.com/community/predictive-maintenance/predictive-maintenance-explained/">80% of their time</a> performing reactive maintenance work, much of which requires looking up information. Proactively providing them all with the information needed to do their job via a mobile device can greatly streamline the time it takes to complete a task and help improve their experiences as employees. Interactive, self-learning (improving) systems that can guide the worker and provide suggestions are part of the new employee experience.

Creating a repository of digital twin information, including lessons, insights, pictures, and videos, can help companies capture the valuable data they need for their workforce. Leveraging AI and machine learning can help to understand and sort through all the information and tie it back to the equipment to help every technician optimize performance.

Read <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/connected-operations" target="_blank">more</a> about how intelligent assets can optimize performance and transform business processes.

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The power of connected assets for intelligent operations 

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts&mdash;members of the Industry Academy and Academy of Technology&mdash;to reflect on key trends driving actions and investments across the industry in 2021. We identified 8 trends that will likely dominate and push banking and financial markets leaders to act:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/muted-financial-performance-banking-financial-markets" target="_blank">Muted financial performance</a></li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">Operational resilience challenges</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/banking-financial-markets-data" target="_blank">Increasing open and free data</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/security-fraud-risks-banking-financial-markets" target="_blank">Security and fraud risks</a></li>
	<li>New ways of working</li>
</ul>

Let&rsquo;s explore the industry&rsquo;s intensified competition both inside and outside of financial services, that which is blurring the line between banking and non-banking.

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&nbsp;

A decade ago, the fintech global startup movement found itself at the intersection of maturing exponential technologies and the emergence of new business models in financial services. Captive user experiences are start-ups&rsquo; competitive advantage, tearing down barriers to entry, winning clients&rsquo; trust on frictionless interactions, and hyper-personalizing contextual experiences.

Today, the London Tube can be entered by waving a smart phone, tapping a credit card, or unloading spare pocket change instead of holding physical travel documents. Spare money can be retained on digital wallets and invested on automated trading solutions customized with financial goals and ethical preferences.

Digital competitors have made significant inroads into payments, retail deposits, consumer lending, wealth management, and asset management, offering end-to-end customer experiences focused on convenience. Competition continues to escalate with Big Tech giants and other non-banking industries, such as telecommunications, consumer products, and leisure, which are offering digital financial services on cloud native platforms. Many of these competitors bring innovative thinking for user-oriented engagement within nonbanking ecosystems, offering a truly customer-centric perspective to banking that adapts to changing client expectations and market conditions, without the burden of legacy technologies.

Banking and financial markets are besieged (but not yet conquered), as financial institutions strike back by creating innovation labs, building links with fintech ecosystems, and advancing new platform-oriented offers. As artificial intelligence (AI) models and advanced analytics continue to improve, banks can prioritize better use of data and analytics, digitize end-to-end internal processes, and invest in front-end innovation to leverage key advantages of platform economies. Banks can also contextualize user experiences inside competing industries to generate business value.

It&rsquo;s a blurry business

Today&rsquo;s competition is intensifying and changing in nature. Platform players are moving their strategies &ldquo;outside-in,&rdquo; expanding their businesses to include financial services by leveraging privileged touchpoints with banking clients.&nbsp;Platform companies, such as Facebook and Apple, have been flexing their digital muscle. They leverage the power of their non-banking ecosystems to reduce friction between customer value chains across multiple industries, including banking and financial markets.

Platform companies connect with banking clients by embedding financial services inside their customers&rsquo; digital lives and businesses in a progressive process that bundles travel, commerce, entertainment, communication, and many others.

China has been at the forefront of this transformation. Alipay and WeChat are used by over 1 billion Chinese residents to communicate, make payments, book a restaurant, buy insurance, and even hail a taxi on a digital venue that resembles a &ldquo;super-app.&rdquo; In recognition of their pervasive capabilities, the digital prowess of these companies has attracted stricter regulatory oversight, triggering a holistic review of digital financial services.

Competition is also shaping collaborative models and forming partnerships between banks and Big Tech. For example, Google recently announced the launch of Google Plex checking accounts, as an initial partnership with 11 financial institutions (3 big banks, 4 community banks, 2 credit unions, and 2 digital banks). The intent is to facilitate entry to a digital banking relationship based on a 360-degree view of customers&#39; payments and financial management activities.

Financial institutions that partner with Big Tech players beyond banking interfaces understand the advantages of embedded products and services within a non-banking ecosystem platform. The choices for a strong digital capability will likely be to build, acquire, or participate in external platform models in ways that allow financial institutions to retain value and remain relevant&mdash;but for how long? As customers adapt more and more to a digital life, is it the digital enabler that becomes the primary source of trust?

Striking back 

Leading institutions are taking the reins to innovate &ldquo;inside-out&rdquo; and retain ownership of client engagement on non-banking platforms. Successful responses to intensifying competition is clearly illustrated by developing differentiated value propositions that address new models for consumption of financial services.

The recent <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/ceo" target="_blank">IBV &ldquo;2021 CEO Study: Find your Essentials&rdquo;</a> &nbsp;reveals CEOs&rsquo; key objectives over the next 2-3 years. They will likely focus on shared purpose, open ecosystems for platform access, and secure sharing of data. By tapping into partner ecosystems, banks&rsquo; can expand their source of revenues and optimize the competitive advantages that open innovation enables.

The firms that aggressively pursue and establish flexible partnerships can proactively provide real-time responsiveness and relevant customer feedback, which are essential with shaping a relationship and defining a differentiated experience. Evidence from the CEO Study indicates that banks are taking a more outward-looking perspective to improve performance.

For example, the State Bank of India (SBI) launched an online marketplace named YONO (You-Only-Need-One), which connects the bank to non-banking client journeys offering lifestyle products. The convenience is a one-stop-shop solution for their banking, shopping, lifestyle, and investment needs, capturing the customer at the moment of decision. Clients can onboard seamlessly to a digital bank with access to a financial superstore for investments and other services. All services are connected end-to-end by AI-advanced analytics generating timely customer insights that lead to tailor-made offerings and campaigns (see,&nbsp;&ldquo;<a href="https://www.ibm.com/case-studies/state-bank-of-india/">The rise of a financial tiger</a>&rdquo;). 
 
DBS Bank is another example. With a goal of <a href="https://www.dbs.com/lm/digital-transformation-making-banking-invisible.html" target="_blank">&ldquo;making banking invisible</a>,&rdquo; DBS Bank offers online marketplaces for multiple lifestyle needs, from property and travel, to cars and utilities. In a recent <a href="https://www.linkedin.com/pulse/responsive-responsible-banking-interview-piyush-gupta-chatrath/">IBM interview</a>, DBS Bank CEO Piyush Gupta affirmed that, &ldquo;If you can embrace agile setups, experiments, and constantly nurture a learning culture, then you become adaptive and nimble, which means you can respond a lot more quickly to opportunity and changes in the environment.&rdquo;

Payment providers have also responded to demands for better customer experiences, fueling the need to modernize and digitally transform. Payment contextualization is typically the starting point to re-build customer engagement inside non-banking ecosystems.

Consumers have heightened expectations that digital payments can be fulfilled immediately using any device, network, and channel. Partnering within and across ecosystems on open banking platforms permits sharing the costs of running business-critical, yet standard, operations.

In late 2020, US fintech start-up Stripe teamed up with four banks to propose offerings to merchants and vendors that use Stripe&#39;s platform for the small business marketplace. Stripe&#39;s clients will be offered Federal Deposit Insurance Corporation (FDIC)-insured debit cards and bank accounts through banking partnerships.&nbsp;

Leading banks move &ldquo;inside-out&rdquo; connecting with consumers on non-banking platforms. They leverage new cloud-based business architecture, underpinned by data and AI, to operate intelligent connections across practically any businesses and any users. Essentially, they compete with omni-intelligent connections, on omni-businesses, and omni-users value-generating interactions. 
 
To stay relevant, banks that define a clear sense of purpose and marry this purpose to the success of their customers, beyond the digital touchpoint, can be winners in the platform economy.

An action guide for the road ahead

Innovation is never simple, especially when attempting to transform established business models inside-out. Innovation is a journey that requires inclusive culture and open mindsets to align multiple stakeholders&rsquo; interests through a continuous process made of design thinking, convenient customer journeys, quicker processes, and fast-tracking approvals. A good starting point is to explore and leverage the four pillars of digital transformation:

<ul>
	<li>Build a digital bank and transform the business model around core business and purpose</li>
	<li>Create a financial hub that blurs the line between business units, and display a 360 view of client across bank products and services</li>
	<li>Launch an online platform that engages clients in non-banking activities to stay relevant in key segments of their personal and business life</li>
	<li>Enable end-to-end (E2E) digitization of bank processes and customer journeys.</li>
</ul>

A strong digital capability foundation is founded on purpose and anchored on trust. It requires the trust of your employees, customers, partners, and of regulators in the reimagining of your business. It also requires shifting the organizational mindset with well-informed&mdash;and always bold&mdash;moves that matter.

Digital platform players have realized the power of building around customer ecosystems, reducing friction across industry value chains to deliver on customer needs. Financial institutions can learn&mdash;by going beyond banking&mdash;to integrate their products and services into customer ecosystem platforms. Building or participating in platform business models allows financial institutions to capture a greater share of the broader value incorporated into ecosystems.

It takes courage to bet on a big idea&ndash;that moment is now.

To learn more about how to set up a platform strategy to digitize financial services on user ecosystems, you can download the IBV report, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/platform-banking" target="_blank">Banking on the platform economy&quot;</a>.

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Escalating competition for banking and financial markets

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts&mdash;members of the Industry Academy and Academy of Technology&mdash;to reflect on key trends driving investments and actions in 2021. We identified eight trends that will dominate and push banking and financial markets leaders to take action toward new cloud-based business architectures:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/muted-financial-performance-banking-financial-markets" target="_blank">Muted financial performance</a></li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/operational-resilience-banking-financial-markets" target="_blank">Operational resilience challenges</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/banking-financial-markets-data" target="_blank">Increasing open and free data</a></li>
	<li>Security and fraud risks</li>
	<li>New ways of working</li>
</ul>

Let&rsquo;s explore why security and fraud risks continue to rise as financial institutions shift operating models deployed in response to the pandemic.

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Are you reacting or responding in this post-pandemic world?

The pandemic outbreak was a moment of reckoning for security and fraud prevention programs in the financial services industry. Although many aspired to embark on a digital transformation journey to unify business processes and customer interactions with intelligent risk operations, only a handful were ready in 2020.

As most economies were forced into lockdown, CEOs had to promptly react to enable employees&rsquo; remote work, to customers&rsquo; request for virtual support, and respond to rising concerns of business continuity. An unplanned remote workforce implementing weak security frameworks was expected to increase the likelihood of data breaches and incident response times. According to the recent IBM survey &ldquo;<a href="https://www.ibm.com/security/digital-assets/cost-data-breach-report/#/" target="_blank">Cost of a Data Breach Report 2020</a>,&rdquo; having a remote workforce was found to increase the average total cost of a $3.86 million data breach by nearly $137,000, for an adjusted average total cost of $4 million.

The C-suite has been challenged to blur the imaginary lines separating business benefits from security and fraud prevention practices as customers demand 24/7 digital access to banking in the post-pandemic reality. Knowing fraud and security breaches have become a multidimensional problem, what is needed are holistic strategies that combine data across security functions, to predict and respond proactively. The implications of an interconnected environment need to be understood and managed for success by making well-informed risk decisions that drive business performance.

Financial crimes are a high risk/high reward business

Financial institutions today are in a position where they can (and should) look back and reevaluate their risk profiles, specifically around cybersecurity and financial crime programs: fraud, counter fraud, know your customer (KYC), and anti-money laundering. Operational activities that were done in haste may have unknowingly enabled an escalation of risk, resulting in significant financial impact.

Current threats span the customer lifecycle, from application and account opening, to payment transactions and non-monetary account changes, harming both the customer confidence and the bank reputation. These current threats include:

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<ul>
	<li>Protecting customer lifecycles in altered operating environments. The number of incidents emanating from insiders, especially around theft of credentials, have <a href="https://www.ibm.com/security/digital-assets/services/cost-of-insider-threats/#/">tripled since 2016 from an average of 1 to 3.2 per company</a><a href="https://www.ibm.com/security/digital-assets/services/cost-of-insider-threats/#/" target="_blank">. The average cost has increased from $493,000 to $871,000 in 2019</a>.</li>
</ul>

As a hypothetical example, a regional bank with a small online presence allows customers to view account balances, conduct direct deposits, and offers online payment processing. When lockdown restrictions required them to close their doors, several critical functions had to be adjusted, such as identify authentication, onboarding new accounts, and originations for loan applications. However, when customer interactions and operational activities moved to digital, many hastily implemented security processes and controls that could contain easily exploitable vulnerabilities.
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<ul>
	<li>Responding proactively to cyberattacks in expanded operating environments. In our &ldquo;<a href="https://www.ibm.com/security/digital-assets/cost-data-breach-report/#/" target="_blank">Cost of a Data Breach Report 2020</a>,&rdquo; we identified that 70% of business respondents report that remote work became a major security consideration and might increase the time to identify and respond to data breaches. The average time to identify and contain a data breach, or the &quot;breach lifecycle,&quot; was already 280 days in 2020.</li>
</ul>

Speed of containment can significantly impact breach costs, which can linger for years after the incident with significant harm to the firm&rsquo;s reputation. In an uncertain environment of highly complex threats accompanied by information stovepipes, forward-looking executives are investing in capabilities to efficiently identify, evaluate, and manage cyber and fraud-related risks.
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<ul>
	<li>Unifying business approaches to create value. Efficiencies can be gained in fighting financial crime by sharing data and intelligence, and unifying security operations across financial crimes functions. According to PWC&rsquo;s <a href="https://www.pwc.com/gx/en/services/forensics/economic-crime-survey.html" target="_blank">Global Economic Crime and Fraud Survey 2020</a>, in the past 24 months, US businesses lost a reported $42 billion, with 13% losing more than $50 million.</li>
</ul>

These numbers are astounding when you think about the bottom line being impacted, in addition to the billions spent on security and compliance. Cybercrime, economic espionage, and state sponsored activities are proving to be too much for the outdated tactics, techniques, and procedures companies have relied upon previously.
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Fighting financial crimes with AI

The onus to spot financial crimes falls on the banking and financial institutions that can face significant fines for failures to detect, report, and pre-empt criminal activities. Existing approaches and systems typically detect suspicious activities that align to predefined rules and controls. For example, they would detect users sending over a certain amount of funds or sending funds with a certain degree of frequency. Unfortunately, traditional transaction screening systems fail to identify how criminals tend to work today. To fly under the radar, financial criminals often launder funds between multiple and seemingly unrelated accounts, often across institutions and geographies.

To combat this trend and tie together suspicious webs and patterns, leading financial services organizations are developing unique AI models that fuse together criminal patterns across institutions. Similar to building a &ldquo;six degrees of separation&rdquo; network, these AI models can detect activity that would otherwise go uncovered. As these algorithms are trained on patterns, not data, they allow banks to share insights while avoiding the dissemination of sensitive data outside of their firewalls in the name of detecting suspicious activity&mdash;further protecting customer privacy and data.

Forward-looking executives who focus their security operations solely on avoiding losses and protecting assets, may fail to see opportunities to achieve business benefits, drive innovation, and mitigate operational resilience challenges. Integrated security and risk management processes unlock business value. Cybersecurity, fraud, and money laundering risk have transcended from capabilities of siloed financial crimes management functions, evolving to a more intelligent risk enterprise.

Connecting the dots

Fraud, anti-money laundering, and cybersecurity programs protect the same customers, but often information is not well connected or shared between each group. While each program analyzes a portion of an incident, they may not see all the relationships between behaviors and interactions, increasing the likelihood that bad behavior goes undetected and the bank&rsquo;s business is compromised. It is no longer economically viable to defend the enterprise using isolated risk management techniques.

Mobilizing a financial crimes center becomes a unifying force behind a common goal, reducing costs, process redundancies, duplication of activities, and delivering more informed risk management decisions to combat financial crimes.

Targeted financial crimes operating model

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Closing viewpoint and recommendations

I recognize this move toward building a holistic security strategy represents a significant challenge as organizations evolve to collaborate, share data, and leverage data sets and technologies. It requires a clear vision, an actionable path forward for joint understanding, and enforcement of an effective financial crimes fusion center. It demands that cohesive processes, people, and technologies are in place for proactive interventions and that well-informed decisions are made by the right people at the right time.

Here are my recommended actions for getting started, and aiming for success:

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<ul>
	<li>A unified mission: A shift in leadership mindset toward a collaborative and community-driven culture will boost innovation and secure client trust to help improve the firm&rsquo;s competitive advantage. 
	&nbsp;</li>
</ul>
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	<li>A practical approach. Success starts with stakeholder &ldquo;buy-in&rdquo; and can be achieved through implementation of a few, simple minimally viable product use cases that can demonstrate immediate value and return on investment (ROI). 
	 
	Many companies prefer the identification of use cases (Nominal User Behavior by Role, Nominal User Behavior by Session, or Session Trust Score), to guide the overall business architecture, and prioritize initiatives demonstrating immediate value add and operational expense reduction. Recently, one of our European customers was able to drive $21.3 million in loss avoidance and $3.9 million in reduced operating expenses through the implementation of just four use cases. 
	&nbsp;</li>
</ul>
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<ul>
	<li>A cloud-based integrated platform and business architecture. A strong, open hybrid multicloud foundation leverages systems, tools, and technologies to enable the business of risk management, intelligent risk operations, and data protection across the customer engagement lifecycle. 
	&nbsp;</li>
</ul>
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<ul>
	<li>Use of &ldquo;Intelligent&rdquo; insights. Implement enhanced analytics and well-informed decision making powered by embedded AI models, and leveraging increasingly open and free data.</li>
</ul>
</div>
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</div>

Financial crimes continue to plague the global economy. In a rapidly changing world, using a cloud-based, integrated platform&mdash;unifying operating models and using data to model &ldquo;intelligent&rdquo; insights&mdash;creates an opportunity to gain competitive advantage. It helps to keep data safe, cybercrime at bay, and makes financial services more accessible to expand operations and improve customer experiences.

To learn more about how AI can help fight financial crimes by analyzing high volumes of risk data, I encourage you to download our recent IBV study, &ldquo;<a href="https://www.ibm.com/security/artificial-intelligence" target="_blank">Artificial intelligence for a smarter kind of cybersecurity</a>.&rdquo;

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Security and fraud risks in banking and financial markets

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts &mdash; members of <a href="https://www.ibm.com/industries/industry-academy" target="_blank">Industry Academy</a> and <a href="https://www.ibm.com/blogs/academy-of-technology/about/" target="_blank">Academy of Technology</a> &mdash; to reflect on key trends driving investments and actions in 2021. We identified eight trends that will dominate, and push banking and financial markets leaders to take action toward new cloud-based business architectures:

<ul>
	<li>Muted financial performance</li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li>Operational resilience challenges</li>
	<li>Increasing open and free data</li>
	<li>Security and fraud risks</li>
	<li>New ways of working.</li>
</ul>

Let&rsquo;s explore together the challenges of operational resilience as everyone&rsquo;s responsibility.

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With mid- and post-pandemic uncertainty, financial services CEOs and senior managers are learning the importance of digitizing at a faster speed. Leaders are also being proactive and anticipating impacts on their businesses. Business continuity plans are being revised and cybercrime is up significantly.

No firm is immune to disruptions. Outages in the financial services industry occur more often than governments, regulators, and boards are comfortable with (see Reuters article, <a href="https://www.reuters.com/article/euronext-stocks-outages-factbox-int/factbox-from-hungry-squirrels-to-cyberattacks-exchange-outages-roil-markets-idUSKBN27501U" target="_blank">&ldquo;Factbox: From hungry squirrels to cyberattacks, exchange outages roil market</a>&rdquo; for some public examples).

From a controls point-of-view, this acceleration introduces new risks, and it has never been more important to:

<ul>
	<li>Have strict evidence-based practices</li>
	<li>Have a traceable, expeditious means for handover and delegation of processes</li>
	<li>Comply with stricter cloud and other outsourcing obligations</li>
	<li>Focus on potentially winding down business and engage in exit planning for your organization, as well as key suppliers, in the event of failure.</li>
</ul>

An everlasting barrage of new regulation is coming in 2021 as many regulators are tightening industry standards to withstand the effects of pandemics, cyber events, natural disasters, and technology failures. For example, <a href="https://www.bankofengland.co.uk/news/2018/july/discussion-paper-building-the-uk-financial-sectors-operational-resilience" target="_blank">discussion papers are available</a> from the UK&rsquo;s Prudential Regulation Authority (PRA), Financial Conduct Authority (FCA), and Bank of England (BOE) on operational resilience.

Also in the European Union (EU), the <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020PC0595" target="_blank">Digital Operational Resilience Act</a> (DORA), was recently announced as part of the new digital finance strategy, which is designed to &ldquo;consolidate and upgrade information and communication technology (ICT) risk requirements&rdquo; across financial entities to ensure all firms are &ldquo;subject to a common set of standards to mitigate ICT risks.&rdquo; <a href="https://www.bis.org/bcbs/publ/d509.htm" target="_blank">The Bank for International Settlements</a> itself, which coordinates work globally for the banking industry, is planning to create its own standards.

Operational excellence and resilience in an increasingly interdependent and complex world

We know the world is more interconnected than ever. There are more technology domains appearing and new technologies being created, resulting in a limited pool of skilled workers in a competitive financial services environment. There is a constant need to adapt to change with people, processes, technologies, services and suppliers also all presenting risks to organizations.

Financial markets are the backbone of the overall economic system. There is a clear obligation to fulfil the expectations of the market, shareholders, governments, and regulators. Their failure could disrupt the ability to supply goods and services and impact the pace of economic activities. But really, it is about people. If a cash/payments system goes wrong, someone doesn&rsquo;t get paid. Then that person can&rsquo;t meet their financial obligations, can&rsquo;t buy food, can&rsquo;t buy medicine, triggering a potential domino effect.

Businesses may never feel totally comfortable because there will always be changes that threaten to hinder resilience outcomes. Therefore, it is critical to learn from near misses, incidents, and service outages. Financial institutions have to continuously invest and evolve to tame an increasing trend of diverse disruptions.

For example, as reported by the Reserve Bank of Australia (RBA) in 2020, the number of <a href="https://www.rba.gov.au/publications/annual-reports/psb/2020/pdf/2020-psb-annual-report.pdf" target="_blank">banking outages surged to about 2,300 total hours in Australia</a>, and the number is up over each of the past three years, from less than 1,000 incidents in 2017.

Outages in Australian retail payments

<img alt="Outages in Australian retail payments" height="698" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/cde6f63b7b9e421c94b2600260a8d8e8.png" width="720" />

A key challenge in financial services exists because the industry is highly interconnected and dynamic in nature, whether that be cash flows, securities movements, or other technology dependencies. Financial regulators in the UK, for example, recognize the &ldquo;system of systems&rdquo; complexity within an organization. Therefore, there is a unique need to define and map important business services.

Financial institutions need to consider the chain of activities that make up an important business service, from taking on an obligation to delivery of the service. They must also determine which part of the chain is critical to delivery. Regulators require that all resources necessary to deliver each part of the service be operationally resilient.

How and when to address operational resilience?

Ideally, efforts to improve operational resilience are considered a common, business-as-usual function. Financial services institutions will always be confronted with trigger points. For example:

<ul>
	<li>A significant outage to a critical service after an upgrade that didn&rsquo;t go as planned</li>
	<li>External scrutiny from regulators leads to a full reassessment of policies and practices</li>
	<li>A change in management invites a reassessment of C-suite awareness of resilience</li>
	<li>A new business or a change in technology &mdash; for example, migrating business critical workflows to cloud &mdash; can require reprioritizing resilience practices.</li>
</ul>

Financial services institutions need to examine typical causes of operational disruption and regularly consider how best to invest time and resources to improve. The <a href="https://www.nist.gov/cyberframework" target="_blank">National Institute of Standards and Technology</a> (NIST) offers a framework that helps organizations get started with a capability assessment to identify, prevent, detect, respond, and recover from cyber incidents. This type of framework fosters communication between technical teams and business stakeholders. It helps to develop an organizational understanding of managing cybersecurity risk across systems, people, assets, data, and capabilities. It is just as relevant for operational resilience as it is purely for cyber-resilience.

Who addresses operational resilience?

Operational resilience should not be considered a point-in-time activity, but instead part of a cornerstone set of principles and behaviours within the firm&rsquo;s DNA and culture. It must be considered everyone&rsquo;s responsibility, and planning starts at the top of the firm. A board wants actions and progress across the business, and enforcement of a unified approach to achieve resilient services. This should translate to senior level engagement and critical thinking across the organization, resulting in appropriate investments, accountability, and continuous oversight.

Because operational resilience is linked to change, financial institutions should perform continuous assessments and constantly adapt to defeat new threats and enact new solutions. A few people can understand a system in detail, but even fewer can truly understand the complexities of a business and technical &ldquo;system of systems.&rdquo; Therefore, navigating the uncharted waters of operational resilience requires financial firms to:

<ul>
	<li>Start planning at the top of the firm</li>
	<li>Establish operational resilience as an ongoing business-as-usual activity</li>
	<li>Encourage everyone to play their parts.</li>
</ul>

An action guide to succeed in the operational resilience journey

I encourage and recommend a consistent set of actions founded on three pillars:

<ul>
	<li>Take an organizational perspective. Put sufficient operational resilience expertise at the board level. Senior management should demonstrate measurable progress and implement appropriate KPIs for execution and control.</li>
	<li>Prioritize a shared culture and common understanding. Use a multidimensional operational resilience framework as a guide to establish better practices among people, process, governance, and technology domains.</li>
	<li>Seek an external independent market perspective. Seek alternative, independent views from similar organizations and adjacent industries to complement your in-house expertise.</li>
</ul>

Operational resilience is a critical component of a financial institution&rsquo;s value proposition. Successful operational resilience is not a program, but a business-as-usual capability, supported with investment in skills and technology that empower everyone in the ecosystem.

For additional insights about how to consider resilience in the new age of risk where amplified risk and overlapping disruptions demand a new approach to strategy development, I encourage you to download the recent IBV paper, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/risk-and-resilience" target="_blank">Resilience in the new age of risk</a>.&rdquo;

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Operational resilience challenges in banking and financial markets

The shock rippled into virtually every corner of the globe&mdash;a sudden jolt and then a year of unfolding upheaval. Since the start of 2020, the pandemic has disrupted the world economy and the lives of countless people. It did so with a force of historic proportion, though not in equal measure.

A particularly withering blow was dealt to working women, with millions cleaved from the global labor force over a single year. In the US alone, <a href="https://www.forbes.com/sites/maggiemcgrath/%202021/01/12/american-women-lost-more-than-5-million-jobs-in-2020/?sh=700af14b2857" target="_blank">more than 5 million women were pushed from their jobs</a>, putting female participation in the workforce at its lowest rate since 1988.

In <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2021" target="_blank">our new report</a>, we examined leadership ranks across 10 industries and 9 geographic regions. What we found should set off alarm bells. Advancing women is not a top priority for the majority of global organizations. Employees feel &ldquo;gender equity&rdquo; fatigue over ineffective programmatic efforts to address the problem. And there is a clear need for new models of empathetic leadership.

For years, studies&mdash;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/womeninleadership" target="_blank">including our own</a>&mdash;have called attention to the systemic barriers to career advancement facing women. Still, the percentage of women in top leadership roles has not budged. There are fewer women in the pipeline today than in 2019, a situation made worse by the pandemic.

We are releasing <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2021" target="_blank">the findings of this report</a> on International Women&rsquo;s Day 2021. Though it is my hope that in the future we will not need designated days to raise awareness about the importance of women in the workforce. Rather, they will represent moments to celebrate women&rsquo;s achievements.

As organizations become more serious about achieving gender equity among their leadership teams, they will realize good intentions are not good enough. The time to act is now. This is the year organizations must commit to moving from talk to action, from action to accountability, and from accountability to results.

Without a doubt, the events of the past year exacerbated existing gender and diversity inequities in leadership ranks. But they also present businesses with a golden opportunity to course correct and deliver exponential impact. Doing so will carve a brighter path for women, for men, and for a recovering global economy now and far into the future.

<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/women-leadership-2021" target="_blank">Read the full report.</a>

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Women, leadership, and missed opportunities: Executive point of view

At the beginning of the year, the IBM Institute for Business Value (IBV) invited 44 IBM global experts&mdash;members of the <a href="https://www.ibm.com/industries/industry-academy" target="_blank">Industry Academy</a> and <a href="https://www.ibm.com/blogs/academy-of-technology/about/" target="_blank">Academy of Technology</a>&mdash;to reflect on key trends driving actions and investments across the industry in 2021. We identified&nbsp;the following top themes&nbsp;that will dominate and push banking and financial markets leaders to act:

<ul>
	<li>Muted financial performance</li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li>Operational resilience challenges</li>
	<li>Increasing open and free data</li>
	<li>Security and fraud risks</li>
	<li>New ways of working</li>
</ul>

In reviewing the first theme, the industry&rsquo;s muted financial performance will drive structural cost reduction, a search for new revenue streams, and improved capital efficiency.

The financial performance of the global banking industry remains muted as it tackles a recessionary environment, low interest rates, the expectation of rising non-performing loans, and other macroeconomic events (including, Brexit, China-US tensions, and lockdowns). The structural weaknesses of many financial institutions have translated into poor financial performance across many key industry metrics.

For example, the industry&rsquo;s overall return-on-equity has been below its cost-of-equity since the global financial crisis in 2008. According to a recent report by the Bank of International Settlement (see, &ldquo;<a href="https://www.bis.org/publ/work907.pdf" target="_blank">Low price-to-book ratios and bank dividend payout policies</a>&rdquo;), this is reflected in current market valuations. The industry&rsquo;s price-to-book has traded at a discount to the average of other industries since the financial crisis, and as much as a 50% discount recently.

Quarterly price to book ratio of major international banks from 2000 to 2020

<img alt="Quarterly price to book ratio of major international banks from 2000 to 2020" height="657" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/1fbe80cc2ca04d99a87b1f25e6f95c6b.png" width="720" />

Most banks still traded at a significant discount since 2008 compared to non-banking and cloud-native financial competitors, and their valuations continued to diverge during the pandemic. European banks appear most disadvantaged compared to many other regions. In early January 2021, the <a href="https://www.stoxx.com/index-details?symbol=SX7E" target="_blank">EURO STOXX Banks index</a> was down almost 85% compared to its peak in 2008.

A fragile economic recovery

During the pandemic, protracted under-performance has been compounded by a decline in revenues and rising loan loss provisions in virtually all economies.

A global increase in impairments and provisions has already affected bank net profits in 2020, as evidenced in the Euro zone by the European Central Bank (see, &ldquo;<a href="http://www.bankingsupervision.europa.eu/press/pr/date/2020/html/ssm.pr201006~e14289abd6.en.html" target="_blank">Supervisory banking statistics for the second quarter of 2020</a>&rdquo;). Although non-performing loan (NPL) ratios had been declining globally after the height of the global financial crisis (GFC), that financial institutions took substantial loan loss provisions in the first three quarters of 2020.

The industry has not yet taken significant actual write-offs due to government stimulus actions and forbearance programs designed to support individuals and businesses. However, loan losses are likely to materialize in almost every segment of the industry including credit cards, commercial real estate, and small businesses.

Nonperforming total loans (NPL) ratios for US banks

<img alt="Nonperforming total loans (NPL) ratios for US banks" height="301" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/c6ecc4061b2747bba8e5f238d6bf81f9.png" width="720" />

Nonperforming total loans (NPL) allowances of US banks

<img alt="Nonperforming total loans (NPL) allowances of US banks" height="308" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/5b2c15a3b2c648cdb7ef100f6531ab87.png" width="720" />

A gloomy outlook for a further dip in revenues through a recessionary economic cycle is reinforcing concerns of poor return on equity (ROE) performance in 2021.

Notwithstanding the many weaknesses, banks appear better equipped and in a stronger capital position compared to 2008, partly because of regulatory reforms implemented in the last decade, operational transformation initiatives, and a protracted effort to de-risk credit portfolios. We learned from the GFC that financial institutions which reacted quickly and took decisive operational and financial actions, achieved faster recovery in financial performance.

While financial institutions have endeavored to diversify away from lending-driven revenues, credit continues to be a mainstay for the industry. As reported in the US <a href="https://fred.stlouisfed.org/series/USNIM" target="_blank">Federal Reserve statistics</a>, net interest margins for US banks have halved in the last 15 years, from almost 5% in 1994 to a meager 2.8% at the end of 2020. The decades-long compression of net interest margins was accelerated during the pandemic, creating an urgency for the industry to find new sources of revenue.

The current business and technical architectures of many financial institutions is simply not designed to respond to a challenged macroeconomic environment with a new competitive landscape. They must drive transformational changes to their business and operating models to deliver ROE expectations of investors.

Leading institutions take actions to emerge stronger

Banks can steer returns to acceptable levels by focusing on the three following areas: new revenue streams, radical cost reduction, and improved capital efficiency and risk management.

1. Search for revenue growth. Net interest income has always been a core driver of the industry&rsquo;s revenues. However, central banks&rsquo; expectation of a long period of low-to-negative interest rates is inducing a severe erosion of net interest income. To mitigate margin compression, banks can focus across several areas:

<ul>
	<li>Targeting fee-based services around customer needs. A clear imperative is to create customer-centric, fee-based income streams. This may be achieved by developing a deeper understanding of clients to gain more accurate insights into their financial needs. As an example of this type of move, <a href="https://eminetra.co.za/standard-bank-shifts-to-customer-centric-with-executive-shake-up/60071/" target="_blank">Standard Bank</a> is digitizing its systems to fend off fintech companies invading its customer base with a redesigned management structure split into customer focused segments&mdash;consumers, high net worth individuals, and wholesale client business&mdash;to develop more segment specific propositions.</li>
	<li>Capturing value beyond banking. Digital platform players have realized the power of building around customer ecosystems, reducing friction across industry value chains to deliver on customer needs. Financial institutions can learn&mdash;by going beyond banking&mdash;to integrate their products and services into customer ecosystem platforms. Building or participating in platform business models allows financial institutions to capture a greater share of the broader value incorporated into ecosystems. For example, <a href="https://www.dbs.com.sg/personal/marketplace/" target="_blank">DBS</a> has launched several marketplaces to serve property, travel, cars, and utilities ecosystems. And the&nbsp;State Bank of&nbsp;India&rsquo;s <a href="https://www.sbiyono.sbi/index.html" target="_blank">YONO</a> (You-Only-Need-One) application connects to non-banking client journeys offering lifestyle products. Clients can onboard to a digital bank with access to a financial superstore for investments and other services, all connected end-to-end by analytics.</li>
	<li>Optimizing funding. Banks can improve their net interest income revenues by seeking ways to lower funding costs through improving stability of their deposit base and minimizing liquidity buffers.</li>
</ul>

2. Radically and structurally reduce costs. The improved maturity and accelerated adoption of exponential technologies has created more potential value and business opportunities for banks with an open hybrid multicloud architecture (see, &ldquo;<a href="https://ibm.co/banking-hybrid-multicloud">Banking on Open Hybrid Multicloud</a>&rdquo;). This move to a modular architecture allows banks to scale to demand with higher automation, platform-oriented interactions, cloud-native interoperability, and agile configurations.

Specific ways financial institutions can reduce costs with technology include:

<ul>
	<li>Accelerating digitization of engagement. &nbsp;Accelerating the digitization of customer engagement and the reconfiguration of branch networks and contact centers can deliver a significant reduction in distribution costs while responding to changed customer behaviors and expectations.</li>
	<li>Implementing intelligent workflows. Aligning data, customer experience, and technologies can reduce or eliminate the use of traditional processes (such as, design for no operations). This can create intelligent workflows that leverage cognitive tools to enhance automation paths and enable authorization across multiple devices to enhance the employee and customer experience.</li>
	<li>Modernizing the application portfolio. Cost and complexity are the main inhibitors when approaching modernization of legacy applications. Leveraging next generation DevOp tools, accelerators, and artificial intelligence (AI)-driven automation for more seamless application management, financial institutions can drive the modernization of existing applications and infrastructure to create the development and deployment of workloads that run on any computer platforms.</li>
	<li>Migrating to open hybrid multicloud architecture. Hybrid cloud architectures can release the value of trapped data and functionality, along with handling the transition between old and new applications on multiple compute platforms. Hybrid cloud can also de-risk architectural choices through &ldquo;build once, deploy anywhere&rdquo; approaches.</li>
	<li>Lowering costs with new collaboration models. Banks are shifting from the traditional front-office and back-office working models to multidisciplinary teams of employees, subcontractors, vendors, partners, and automated robots working together in new collaboration models, accelerated by remote working. New working models enable greater employee productivity at lower costs.</li>
</ul>

3. Improve capital efficiency. Facing macroeconomic uncertainty and a fast-evolving industry structure, financial institutions are asked to deploy improved capital management capabilities to make tactical and strategic decisions on their business portfolio. They are steering credit exposures to appropriate levels of risk appetite, improving asset-liability management, calibrating risk models to the emergence of a new economic and financial normal, better risk management of credit exposures, and planning for sustainable capital management.

Conventional sources of data to support risk-based decision making became meaningless overnight due to the pandemic outbreak and its impact on global economies and capital markets. New unstructured data points and the real-time monitoring of client behavior and interactions became even more important. Banks embracing new data-driven processes and forward-looking approaches to credit risk management might gain clear competitive advantage.

Looking beyond the pandemic

In contrast to the overall financial services industry, cloud-native institutions and payment providers are emerging stronger from the pandemic. These types of businesses, along with new entrants, are equipped <a href="https://www.antfin.com/exploration.htm" target="_blank">with the latest AI and cloud technologies</a> and can deliver services faster and at a lower cost per transaction, which has increased the urgency to modernize for many organizations.

Segments that did well

According to <a href="https://www.ft.com/content/f8251e5f-10a7-4f7a-9047-b438e4d7f83a" target="_blank">The Financial Times</a>, only two financial services firms ranked in the top 15 large companies in terms of rising market cap in 2020: Visa and PayPal. Both companies are seeking to embed themselves in new business models. Most financial institutions underperformed, with the bottom 15 featuring a set of well-known names among tier one financial institutions.

Payment providers lead with digital transformation

Demands for better customer experiences or cost reduction are fuelling the need to modernize and digitally transform. For example, consumers have an expectation that digital payments can be immediately fulfilled using any device, network, and channel. Competition and regulators have reduced processing fees, and corporate treasurers are increasingly expecting better experiences from faster payments and richer data, thereby making liquidity management easier and more transparent.

Industry consolidation

Not surprisingly, mergers and acquisitions re-emerged in 2020, potentially signaling the start of a new wave of consolidation for scale efficiencies. In Spain, mergers were announced by Bankia and Caixabank, as well as <a href="https://www.unicajabanco.com/en/inversores-y-accionistas/informacion-general/proyecto-comun-de-fusion-entre-unicaja-banco-y-liberbank" target="_blank">Unicaja and Liberbank</a>. In Italy, <a href="https://group.intesasanpaolo.com/en/newsroom/news/all-news/2020/intesa-sanpaolo-bid-for-ubi-banca--statement-by-ceo-carlo-messin" target="_blank">Banca Intesa Sanpaolo acquired UBI Banca</a>. In the US, <a href="https://www.bbva.com/en/bbva-sells-u-s-subsidiary-to-pnc-for-11-6-billion/" target="_blank">PNC acquired BBVA USA&rsquo;s operations</a>.

Amid all this uncertainty, one thing appears certain: Financial institutions can improve financial returns with the acceleration of the financial sector&rsquo;s digital transformation and migration to a new business architecture.

To learn more about key actions for banks facing muted financial performance in a post-pandemic business reality, you can download the IBV report, &quot;<a href="https://ibm.co/post-pandemic-bank" target="_blank">Essentials for the post-pandemic bank</a>.&quot;

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Muted financial performance in banking and financial markets

It&rsquo;s obvious that the COVID-19 pandemic has increased costs and pressure on after-sales support functions. As the pandemic began and has continued, pretty much everyone strives to limit contact with each other&mdash;it&rsquo;s a safety issue.

Simultaneously, COVID-19 has resulted in device and machine owners demanding more self-serve capabilities, or the ability to execute remote repairs, even if they do it themselves with support. If a technician is needed on site, clients want the issue resolved quickly and expect a solution on the first visit. Service technicians also need to follow evolving COVID-19 safety protocols, which require training, and therefore, add to costs.

These calls are expensive. So, the pressure is on to make service better&mdash;and make it right the first time. Yet, our research with the IBM Institute for Business Value (IBV), <a href="https://ibm.co/electronics-service-delivery" target="_blank">&ldquo;Empowered electronics service and support,&rdquo;</a> shows that more than 1 in 4 calls are not resolved on the first visit.

In 28% of repair tickets studied, companies were paying dramatically more than they should. There are multiple reasons for a second call, or even a second truck roll, and that&rsquo;s taking away funding for other much-needed service enhancements. And that&rsquo;s why the 28% finding pains me so much.

I have sat in almost every seat in the service and support center chain of command&mdash;including the one driving to customers to make repairs. Whether I was in a contact center, field delivery organization, or managing service operations, having access to data I could trust was critical.

Optimize the customer experience and save money

The more I knew about my customers, their devices, current issue, and service history, the better my chances were of resolving their issue. One thing I&rsquo;ve learned is that it&rsquo;s not impossible to both optimize the customer experience and save money for the organization.

As a matter of fact, when you use data from across your electronics enterprise, you can significantly improve service quality and improve root cause analysis. This is essential to managing client satisfaction, improving internal processes, and forecasting future warranty costs.

In our survey of electronics executives, predictive analytics was ranked the third most valuable technology, following only cloud and mobile tech (see, &ldquo;Leaders of the pack&rdquo;). This action-oriented approach to diagnosing and replacing issues before they become a problem brings the power of collected root cause analysis, service, repair, and wear data together in an efficient package for service experts.

Leaders of the pack

The most effective after-sales support technologies.

<img alt="Leaders of the pack" height="505" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/180179a83e7946e9bb3b3fff25d03691.png" width="720" />

Data helps better diagnose device failure, bringing agents and field personnel to the right solution as fast as possible. Service data can also provide valuable insights into internal process or delivery problems, predict potential future warranty and service costs, and provide options or scenario analysis to mitigate cost increases.

Make data and service insights accessible to everyone 

Electronics companies are responding to accelerating industry trends with new service-delivery models and exponential technologies to improve after-sales support functions. The best after-sales support organizations invest in technologies that get the data and service insights to front-line personnel and make them accessible across the organization. Data and technology must be tied together with collaboration across service partners or through a combination of delivery models to optimize results.

Service delivery managers need to continually focus on the details: Do I know where all my clients&rsquo; assets are installed? Does the technical support team have the skills needed to serve our customers? Do I have the right parts in the right places to support the expected failures? Even with the best-laid plans, there are often surprises.

When problems occur on the service side, it&rsquo;s not simply a matter of fixing them. Sometimes you have only an outcome and you need to find the real problem first&mdash;this describes the detection-to-correction (D2C) cycle. <a href="https://ibm.co/electronics-service-delivery" target="_blank">Our research indicates that, across electronics machines and devices</a>, when a large-scale problem occurs, the average D2C cycle is 32 days.

I faced a global quality issue on a new PC with higher-than-expected failure rates affecting hundreds of thousands of devices around the world. This could have been catastrophic to our clients and our service costs if we didn&rsquo;t have the data we needed to respond early.

Product install data, device configuration, device failure data, and call center records allowed us to determine what was failing, where, and why. Service data and remote monitoring allowed us to predict and prevent failures, which achieved two critical service delivery goals: delight customers and reduce warranty and service costs. As we are reminded now, data for early detection and diagnosis helps to coordinate actions to contain the problem.

Manage the numbers

Transforming support and service functions won&rsquo;t happen without a solid business case and getting there means managing the numbers. One of the more interesting aspects of our research is about a class of leading support and service teams and it&rsquo;s worth considering how they are improving their businesses.

When we look at the technologies <a href="https://ibm.co/electronics-service-delivery" target="_blank">in our research</a>, we find:

<ul>
	<li>
	97% of those who have implanted augmented reality say it has improved the efficiency and quality of their after-sales support processes
	</li>
	<li>
	90% apply mobile technologies in their after-sales support processes, making them the most prevalent in the industry
	</li>
	<li>
	85% of those who have implemented cloud computing in after-sales support processes say it has reduced their time to execute
	</li>
	<li>
	84% of those who have implemented cognitive/AI technologies rate them as most effective at improving electronics after-sales support performance
	</li>
	<li>
	72% of those who have implemented predictive analytics in their after-sales support processes rate it as most effective at reducing the organization&rsquo;s costs
	</li>
</ul>

Our research revealed how executives are planning to apply exponential technologies. They shared how their current implementations enhance aspects of after-sales support performance in terms of quality, performance, cost, and time saved.

While we didn&rsquo;t have room in the report for all the details, we are happy to discuss it with you, based on your organization&rsquo;s unique needs. The research also revealed how developing and applying insights from after-sales support data drives improvements throughout the organization. It&rsquo;s possible to use tech to save money, improve customer satisfaction, and develop new agile processes across your organization.

For more details and a deeper perspective on how after-sales service organizations are transforming operations, see <a href="https://ibm.co/electronics-service-delivery" target="_blank">&ldquo;Empowered electronics service and support: Creating data-driven human-technology interactions.&rdquo; </a>You can also reach out to me. I have over 30 years&rsquo; experience in after-sales support and I&rsquo;m happy to share what I&rsquo;ve learned with you.

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NextGen electronics support and service: How technology drives data, devices, and delivery

At the beginning of the year, I was invited by the IBM Institute for Business Value (IBV) to join 44 IBM global experts&mdash;members of the <a href="https://www.ibm.com/industries/industry-academy" target="_blank">Industry Academy</a> and <a href="https://www.ibm.com/blogs/academy-of-technology/about/" target="_blank">Academy of Technology</a>&mdash;to reflect on key trends driving investments and actions in 2021. We identified the following eight trends that will dominate and push banking and financial markets leaders to move toward new cloud-based business architectures:

<ul>
	<li>Muted financial performance</li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li>Operational resilience challenges</li>
	<li>Increasing open and free data</li>
	<li>Security and fraud risks</li>
	<li>New ways of working</li>
</ul>

Let&rsquo;s explore together why increasing open and free data is creating opportunities for cloud-native competition.

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</div>

&nbsp;

We are aware that the financial services industry has access to vast amounts of rich data about clients&mdash;data that is becoming cheaper and increasingly open. This prompts new opportunities to differentiate on personalized services improving business performance, and fast-track innovation to compete on platform economies (see, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/platform-banking" target="_blank">Banking on the platform economy</a>&rdquo;). In doing so, well-designed and compliant data strategies are required to enable a transparent balancing act between ownership of data and sharing data, and insights across entire ecosystems.

A data strategy needs to address regulatory requirements and anticipate any change across jurisdictions to harness the benefits of ecosystem interactions. Oversight on data openness varies geographically but typically includes fundamental consent, privacy expectations, and security requirements (see the recent Bank of International Settlement report, &ldquo;<a href="https://www.bis.org/bcbs/publ/d486.htm" target="_blank">Report on open banking and application programming interfaces</a>&rdquo;).

<ul>
	<li>Prescriptive jurisdictions. EU member states, UK, India, South Africa, and Mexico require, by regulation, that banks share customer-permissioned data, and that third parties register with the assigned supervisory authority.</li>
	<li>Facilitative jurisdictions. Singapore, Hong Kong, South Korea, and Japan had their regulators issue guidance and recommendations, publishing open API standards and technical specifications.</li>
	<li>Under review jurisdictions. In Canada, Australia, and Brazil, regulators are openly discussing the drafting of open-banking requirements and specifications.</li>
	<li>Market-driven jurisdictions. In mainland China, US, and Argentina, open-banking practices are primarily driven by industry implementations.</li>
</ul>

Main open banking initiatives and approaches across jurisdictions

<img alt="Main open banking initiates and approaches across jurisdictions." height="569" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/56d0894791664cbeb5543d493854e379.png" width="758" />

The regulatory context is evolving rapidly and positively, increasing competition and opportunities to deliver value for the client. For example, the <a href="https://ec.europa.eu/transparency/regdoc/rep/1/2020/EN/COM-2020-591-F1-EN-MAIN-PART-1.PDF" target="_blank">European Financial Dataspace</a> promotes data-driven innovation supported by appropriate cloud infrastructure. By design, it will help new entrants become clients&rsquo; main touch point in aggregating data and services&mdash;a function that&rsquo;s currently dispersed across multiple interactions.

All intermediaries are asked to demonstrate full respect of privacy and utmost security standards to build and maintain their clients&rsquo; trust. By working collaboratively and leveraging the strengths of each party, exciting new opportunities can be created with a more open and cooperative outlook that capture the market&rsquo;s attention. For example, banks add regulatory know-how to match fintech agile approaches.

<img alt="A balancing act for data collaboration and data partnerships" height="213" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/ee0eef3ff55e4cb7bb19c9155a9007ac.png" width="700" />

Getting ready for advancing cloud adoption and data usage powered by AI

In this competitive and evolving environment, forward-looking banks are acting on their data to win revenue-generating interactions with open ecosystems. They are designing&mdash;and in many cases, have already deployed&mdash;AI models on open platforms to accelerate business adaptation to changes in the economy and client expectations. They are investing to demonstrate trustworthiness of AI-driven outcomes.

These following three action items allow banks to leverage increasingly open and free data to drive value for all stakeholders (clients, fintech, and financial institutions):

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/report/platform-banking" target="_blank">Open ecosystems of partners, suppliers, and clients</a>. Leading institutions collaborate beyond borders, sharing data and insights with network partners twice as much as less performing competitors (see, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study" target="_blank">Build the trust advantage</a>&rdquo;). They share core skills to engage clients within non-banking ecosystems. The key to success is the ability to share data openly and securely within the community, leveraging open standards and APIs.</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/report/scaling-ai" target="_blank">Open platforms to create and train AI models</a>. The financial services sector is abundant with domain-specific information but also requires client context to deliver the best customized service. Open data is the best way to enrich the data sets required to train the models. To achieve &ldquo;AI readiness&rdquo; in their operations, leading institutions have built platform interactions capable of performing analytics among large sets of data, processes, and people.</li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study" target="_blank">Open and trusted data.</a> Trust is the major currency in financial services. Explaining strengths and weaknesses of predictions, as well as managing modeling risks to make processes robust, transparent, and fair, are quintessential requirements to leverage increasingly open and free data to power AI at scale implementations. Typically, data scientists dedicate significant effort to revising inputs and outputs of machine learning models. Well-designed and transparent open data strategies can accelerate the steps of the process. Availability of trusted sources may be limited at the present time, but the market dynamics indicate that data partnerships and higher collaboration will advance together with open banking agendas.</li>
</ul>

I firmly believe that data-driven decisions, insights, and recommendations based on AI and analytics must be transparent, explicable, and robust. A strong foundation for business transformation starts with a data management strategy that is grounded on open hybrid multicloud business architectures to enable secured and responsive collaboration models for open banking.

A balancing act for data collaboration and data partnerships

Federated learning is&nbsp;a collaborative&nbsp;approach for&nbsp;building&nbsp;AI models&nbsp;across decentralized organizations, holding local data sets without having to formally exchange them. These&nbsp;&quot;open models&quot;&nbsp;are duly&nbsp;trained&nbsp;by a diverse and agile global community making it possible for AI algorithms to gain experience from a broad range of data across various sites.

Users download&nbsp;the model to their devices, then train, compute, and update the model with local data. This type of AI model learning is becoming mainstream in the interactions between private and public users. To a certain extent, it&nbsp;allows&nbsp;mitigating issues, such as data privacy or data access, while delivering the value of an open data approach. Data readiness is a critical pre-condition for capturing value.

Attributes such as cleanliness, standards, openness, and permissions are essential for delivering sustainable innovation and deploying intuitive services. According to a recent IBV study,&nbsp;80% of the effort in deploying AI technology is getting data ready for use (see, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/digital-acceleration" target="_blank">Digital acceleration &ndash; Technology is driving revenue growth in time of crisis</a>&rdquo;). 

To address these compelling issues, the industry has started building data partnerships and launching information banks, and it will continue to do so in 2021.

<ul>
	<li>Business critical data partnerships. Consortium and public-private partnerships enable harmonized data acquisition and sharing to power the application of machine learning models across datasets. For example, <a href="https://www.nvb.nl/english/transaction-monitoring-netherlands-a-unique-step-in-the-fight-against-money-laundering-and-the-financing-of-terrorism/" target="_blank">Transaction Monitoring Netherlands (TMNL)</a> is a cross-banking initiative by five Dutch banks to fight money laundering and the financing of terrorism. TMNL will focus on identifying unusual patterns in payments traffic that individual banks cannot identify.</li>
	<li>The rise of information banks. Consumers increasingly demand transparency, as dissatisfaction grows with how technology giants use personal data. &ldquo;Information banks&rdquo; are business solutions offered to clients that compensate for the provision of data. For example, <a href="https://asia.nikkei.com/Business/Business-trends/Japan-s-information-banks-to-let-users-cash-in-on-personal-data" target="_blank">Satellite broadcaster Sky Perfect JSAT Holdings and personal loan provider J. Score are among the companies setting up information banks</a>, giving users greater control over data distribution.</li>
</ul>

Leadership in the era of data and AI everywhere

I invite all business leaders to act and compete in the digital economy by evolving to modern data architectures. Consider implementing the following recommendations:

<ul>
	<li>Win in the trust economy. Provide transparency and reciprocity in all data operations, giving customers what they value in return for their data.</li>
	<li>Build a human-tech partnership. Empower employees to become citizen scientists. Expanding everyone&rsquo;s horizon about what data can do allows your business to leverage the power of open hybrid multi-cloud to provide scale for data proliferation as data becomes increasingly open and free.</li>
	<li>Share data in the platform era. Be restless and look for deeper insights into clients, markets, and competitors, while creating security, transparency, and accountability for data that runs through your business platforms, well beyond your enterprise&rsquo;s borders.</li>
</ul>

For more insights about how to achieve business excellence with new business architecture that can leverage open and free data on open hybrid multicloud, I encourage you to download the latest IBV paper &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/banking-hybrid-multicloud" target="_blank">Banking on open hybrid multicloud</a>.&rdquo;

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Increasing open and free data in banking and financial markets

Digital communication technology saved the day for many people, in many ways, during the COVID-19 pandemic. In the face of new perils, exponential technologies became absolutely necessary for customer service and after-sales support.

Could you imagine the appliance repair man coming into your home in 2020? And with new viral variants, most of us are still reticent to let anyone come into our house and possibly infect our families.

Scenarios like this play out across home environments and businesses, presenting a rising need for a Next Generation service model. Out of necessity, companies are asking:

<ul>
	<li>How do I distribute my most knowledgeable contact and field service agents to help customers?</li>
	<li>Can I diagnose and fix the product remotely?</li>
	<li>Can technicians use technology to speed up the repair or enable the end user to help perform the repair?</li>
	<li>How do I automate needed warranty and recall repairs without burdening agents?</li>
	<li>How do I keep my work teams and my customers safe?</li>
</ul>

Leveraging human-technology interactions

Necessity may or may not be the mother of invention but it sure can speed up technology adoption. Firms are now pursuing different avenues for handling service issues. They&rsquo;re leveraging human-technology interactions crafted around safety-first principles, placing a new premium on low and no-contact work, alongside speed and quality of service.

The research conducted by IBM Institute for Business Value (IBV) identifies three models that companies are utilizing to deliver after-sales service and support&mdash;with the empowered customer service organization delivering superior customer satisfaction. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/electronics-service-delivery" target="_blank">In this study</a>, we detail issues and call-out guiding principles to become an &ldquo;empowered&rdquo; customer service organization.

I was talking to someone recently and I explained this whole notion of empowered service for electronics like this: The pandemic forced us to reconsider every preconceived notion of service delivery. There was no ability to delay. Work needed to happen, and it had to flow as smoothly through organizations as possible.

It meant trusting partners, providing remote monitoring and self-serve capabilities, removing unnecessary or repetitive steps, considering technology you thought was reserved for video games or specialized purposes, and using data (by design) across the entire enterprise.

I also drew a sketch on the back of &nbsp;a napkin (see below). Sure, there are specifics underpinning all of this&mdash;and copious research&mdash;but this is the heart of empowered service.

<img alt="Collaborative Service and Support Ecosystem and Partners " height="532" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/ab95d8a3ef484b3b9375f1fac7681a2f.png" width="600" />

With a workforce in limited supply and operating remotely, technology has certainly risen to the task. Companies are discovering that the pandemic has laid, wide open, a deep wound for which Band-Aids have been applied for years.

4 guiding principles for transformation

Old ways will no longer work. Companies must now transform their service organization to meet stringent requirements of a post-COVID world. Our paper, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/electronics-service-delivery" target="_blank">Empowered electronics service and support: Creating data-driving human-technology interactions</a>,&rdquo; outlines four guiding principles needed to get there:

<ul>
	<li>Re-evaluate strategic principles. Look in the mirror. Is your corporate culture really &ldquo;customer centric?&rdquo; Is your customer service organization fully integrated in the enterprise? Analyze potential new partnership opportunities, especially around data and collaboration. We&rsquo;ve learned that technology does not replace but augments human involvement.</li>
	<li>Understand interaction improvements between humans and technology. We&rsquo;ve learned that technology does not replace, but augments, human involvement. Are you using &ldquo;exponential technologies&rdquo; to their fullest to support, augment, or alleviate processes to empower both the company and employee who service your cherished customers? Look for improvements to partner and use technology with mobility, such as <a href="https://insights.samsung.com/2020/05/08/how-samsung-is-working-with-ibm-to-engineer-the-5g-future-of-industry-2/" target="_blank">how IBM is collaborating with Samsung Mobile</a> on exponential technologies including 5G and AR/VR, to support field service technicians.</li>
	<li>Specify the next generation business architecture. Infuse intelligent workflows into the design. For new product innovation, focus on <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/drelectronics" target="_blank">how to derive insights from your data from devices</a> and use them to better service clients after-sale.</li>
	<li>Build the business case and workforce plan. Determine what services and functions you do well and consider how to &ldquo;build&rdquo; out that capability internally or outsource. &ldquo;Buy&rdquo; capabilities that are done best by others in your partner ecosystem. Find trusted partners with a deep bench-strength globally. For example, consider IBM&#39;s &ldquo;Support as a Service.&rdquo;&nbsp; </li>
</ul>

Brands that survive and even thrive during the pandemic have learned unimaginable lessons for building deeper trusting relationship and responding in creative ways. Customers are giving empowered service provider&rsquo;s brands higher marks for satisfaction.&nbsp;

Lead the way

In the next decade, a &ldquo;next generation, empowered&rdquo; after-sales and service organization will lead the way. Successful firms will put customer service and support in the center of their company&rsquo;s transformation. Some examples include our work with <a href="https://www.ibm.com/case-studies/netapp-0" target="_blank">NetApp</a> , <a href="https://www.ibm.com/watson/stories/kone" target="_blank">KONE</a>, and <a href="https://www.ibm.com/products/iot-safer-workplace?mhsrc=ibmsearch_a&amp;mhq=Watson%20IoT%20Maximo%20Worker%20Insights" target="_blank">Maximo Worker Insights</a>.

We&rsquo;ve also proven that <a href="https://www.ibm.com/consulting/digital-workplace" target="_blank">AI Powered service desks outperform traditional IT service desks</a> and that <a href="https://www.ibm.com/cloud/ai/customer-service?mhsrc=ibmsearch_a&amp;mhq=Service%20Transformation" target="_blank">AI is for Customer Service</a>. 

We&rsquo;ve shown&mdash;and we use it ourselves&mdash;that augmented reality is reality with <a href="https://www.ibm.com/consulting/resources/5-innovations-for-IT-support/index.html#section-3" target="_blank">IBM Augmented Remote Assist</a>.

Emerging out of this pandemic, we find a new spirit for innovation, using technology &ldquo;for good,&rdquo; and co-creating solutions with others to focus on what is most important. This delights my customer, who responds with a smile and &ldquo;thank you&rdquo; for a great product and service that&rsquo;s fully integrated.

It&rsquo;s personal. It&rsquo;s not just technology inserted somewhere to patch or simply automate a task. It&rsquo;s a re-building of the company with the customer as North Star.&nbsp;

We now recognize the urgency to transform, having dealt with impossible circumstances. There&rsquo;s a path ahead to &ldquo;empowerment&rdquo; that will improve the working environment of employees who are on the front lines interacting with customers, and technologies in use that support the mission of product performance and client satisfaction.

I&rsquo;m excited to share our new IBV study and insights as it touches us all&hellip; as consumers, users, customers, as well as employees of the small or large enterprise.&nbsp;

Take a look at <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/electronics-service-delivery" target="_blank">the paper we just released</a>, where we discuss how NextGen Service delivery boosts operational efficiency and customer retention. We&rsquo;d love to talk to you about how you&rsquo;re empowering post-sales service success.

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Empowered service: How humans and technology deliver for electronics companies

Late last year, 44 members of the IBM <a href="https://www.ibm.com/industries/industry-academy" target="_blank">Industry Academy</a> and <a href="https://www.ibm.com/blogs/academy-of-technology/about/" target="_blank">Academy of Technology</a> in 11 countries reflected on trends that will drive investments and actions in the banking and financial market industries in the new year. They produced a collective point of view based on IBM global experience, and their pulse on what is truly going on in the industry.

The IBM Institute for Business Value (IBV) extrapolated the main themes from these experts that will dominate the agenda of financial services leaders. They agreed that successful financial institutions will be characterized by forward-looking leaders focused on responding to eight trends:

<ul>
	<li>Muted financial performance</li>
	<li>Accelerated digital adaptation</li>
	<li>New cloud-based business architectures</li>
	<li>Escalating competition</li>
	<li>Operational resilience challenges</li>
	<li>Increasing open and free data</li>
	<li>Security and fraud risks</li>
	<li>New ways of working.</li>
</ul>

Let&rsquo;s explore each of these trends in more detail.

Muted financial performance drives structural cost reduction and industry consolidation, and the search for new revenue streams.

The industry price-to-book is well below the average of other industries, and European banks appear to be the most disadvantaged. Existing actions and operating models are unlikely to deliver ROE demanded by investors.

This can only be addressed by deploying new business models driving revenue growth and radical cost reduction initiatives, and further improving capital efficiency and risk management. Industry consolidation through mergers and acquisitions will intensify, driven by opportunities around weak market valuations, the need for scale efficiency, and the need to safeguard distressed institutions.

Accelerated digital adaptation as customers and employees embrace digital interactions driven by government-mandated social distancing and closures of physical locations.

During the pandemic outbreak, clients quickly migrated to direct channels. Just as clients had to adapt, financial institutions also had to quickly enable a remote workforce and digital interactions with partners and vendors.

Increased digital experiences make clients&rsquo; demand more compelling for transparent, real-time, tailored services, which are seamlessly integrated into their lives and businesses. As a result, banks are further enabling virtual proximity and enacting instant payments.

New cloud-based business architectures fast-track application programming interface (API)-driven banking functionalities.

Existing architectures cannot deliver the cost and agility required to compete in a disrupted landscape. Industry leaders are migrating to new operating models based on an open hybrid multicloud architecture.

To achieve expected returns, financial institutions might target a range of 40-50% of workloads on a specific public cloud, around 20% on a traditional public cloud, and the remaining 30-40% on-premises based on a modern, mainframe infrastructure. Banks are intensifying their cloud migration of business-critical workloads. They are coupling application modernization with the sourcing of banking functionality from joint ventures or external providers in new consumption models.

Escalating competition inside and outside the financial services industry blurs the line between banking and non-banking to enable client-centric ecosystems.

Bigtech companies are moving &ldquo;outside-in,&rdquo; expanding their businesses with inside financial services. They are connecting to financial clients by enabling and leveraging ecosystems around people&rsquo;s lives and their businesses.

Leading financial institutions are also developing new value propositions that address this new model for the consumption of financial services. They are innovating &ldquo;inside-out&rdquo; to connect with clients and engage them on non-banking platforms through end-to-end analytics.

Operational resilience challenges are driven by increased regulatory scrutiny, as well as new compliance and business requirements.

Amid post-pandemic uncertainty, compliance officers and risk managers are learning the importance of being proactive and anticipating any impact on their businesses, while new guidance is enforced for clients to access stimulus packages. A barrage of new regulation is coming in 2021 to address operational resilience.

Increasing open and free data creates opportunities for cloud-native competition.

The industry has access to vast amounts of rich data about its clients&mdash;data that is becoming cheaper and increasingly open. Well-balanced data strategies underpin sustainable success in the digital platform economy.

Success will require the modernization of data environments, leveraging new analytical and artificial intelligence (AI) tools, while enacting a transparent balancing act between the ownership and the sharing of data across entire ecosystems.

Security and fraud risks continue to expand as financial institutions enable operating models deployed in response to the pandemic.

Combined with expanding channels, increasing interconnectivity, digital platforms, and pervasive access is driving increased security risks, threats, and fraud. Holistic strategies and combining data across functions allow banks to predict and respond proactively across the risk management spectrum, knowing that the risk for fraud and security breaches evolves with sophisticated adversaries.

New ways of working emerge as financial institutions are shifting from the traditional front-office/back-office segmentation.

Teams of employees, subcontractors, and automated systems are working together in new collaboration models on well-defined tasks across areas of expertise. This has been accelerated by remote working. A redefinition of the workforce, combined with intense competition for digital talent, will transform how resources are recruited and managed.

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<h3 class="ck-h3 ibv-ckeditor"><a href="https://www.ibm.com/downloads/cas/KWXA8D3O" target="_blank">Download</a><a href="https://www.ibm.com/downloads/cas/KWXA8D3O"> the Leaders in banking &amp; financial markets face 8 trends infographic.</a></h3>
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Keys to transformation

Facing these eight trends, industry leaders are encouraged to master a set of common enablers to transform their business and address all priorities in 2021.

<ul>
	<li>Open hybrid multicloud architecture. Migration of business-critical workloads to open hybrid multicloud enables business flexibility and resolves operational risks experienced when workloads are concentrated among a small number of data storage providers.</li>
	<li>Data and AI. Enterprise data strategies underpin the digital transformation in the platform economy, enabling a transparent balancing act between ownership and sharing of data and insights across entire ecosystems.</li>
	<li>Security and compliance. Holistic approaches combining data across risk management systems and security functions allow businesses to predict and respond proactively to cyber risk (such as data breaches, operational resilience, and identity theft).</li>
	<li>Ecosystems. Easier-to-use, self-served digital options and embedded hyper-personalization offers higher value for clients in an accelerated digital world.</li>
	<li>Talent. New enterprise working models that mobilize expertise globally will help the industry meet accelerated client demand for digital services.</li>
</ul>

For more insights about Banking and Financial Markets, you can download the latest IBV paper, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/banking-hybrid-multicloud" target="_blank">Banking on open hybrid multicloud</a>.&rdquo;

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2021 Global outlook for banking and financial markets

We are about a year into the COVID-19 pandemic, and we can just now begin to see the light at the end of the tunnel. We now know much more about the virus, and the science of medicine has made great strides both in treating infection and creating preventative vaccines. However, developing and manufacturing a vaccine does not mean that we are yet out of the woods.

The biggest challenge lies ahead&mdash;specifically, distributing the vaccine across the globe both safely and efficiently, and ensuring that the citizenry feels comfortable accepting the shot. At the end of the day, this comes down to trust: Do I, as an individual, trust that the shot I am putting in my arm is both authentic, and safe?

Vaccine distribution is logistically challenging and must be executed with care and precision. If not done right, it is vulnerable to bad actors and financial waste. Distribution requires stable and effective government, as well as extensive planning and coordination.

According to the <a href="https://www.who.int/immunization/programmes_systems/supply_chain/resources/tools/en/" target="_blank">World Health Organization</a>, a well-managed program &ldquo;can help save on program costs in ensuring program implementation efficiently without sacrificing the quality of service delivery. Poorly managed logistics systems can lead to high and/or unnecessary vaccine wastage rates, stock outs, or improper management of waste, resulting in significant operational program costs, as well as a negative impact on public health.&rdquo;

Stable and effective government rose to the challenge at the height of the pandemic. Stable and effective government built new hospitals in record time, and provisioned and delivered hundreds of thousands of iPads to students who did not have access to Wi-Fi.

Stable and effective government can&rsquo;t stop here. The biggest task lies ahead.

We have a vaccine. The fastest ever developed, using the latest mRNA technology, manufactured at high speed and scale. Millions of doses are already available. A near-impossible feat, achieved. A groundbreaking vaccine should be rolled out using the best technology the private sector has to offer.

Government leaders are currently grappling with many questions:

<ul>
	<li>Which groups should be prioritized?</li>
	<li>How will the vaccine be administered?</li>
	<li>How will the second dose be tracked?</li>
	<li>How can we jumpstart the economy through safe &ldquo;return to work&rdquo; rules and practices?</li>
</ul>

We have been collaborating with many government clients, and here&rsquo;s what we have learned about what is required to manage a vaccine rollout, from inception to injection:

1. Planning

Each jurisdiction will need to plan not only on how to get the vaccine to their population&mdash;whether it&rsquo;s 200,000 or 8 million people&mdash;but also how to certify vaccination. Meticulous planning is key, and technology should be at the core of building trust.

Do not leave the CIO and CTO out of planning; they will be essential. Plans should consider supply chain management, security, mobility, and most importantly, the underlying data sharing architecture. Each dose has to be tracked and data needs to be securely shared and easily referenced (vaccine manufacturer, batch number, and date of vaccination). Government officials should leverage inventory management, enabling data insights and forecasting to make vaccine inventory decisions.&nbsp;Critical to all of this is an underlying data sharing platform (such as an existing blockchain network) that regulators, governments, manufacturers, distributors, and consumers can use to view and trace the vaccine management lifecycle.

2. Secure distribution

IBM recently uncovered <a href="https://www.nytimes.com/2020/12/03/us/politics/vaccine-cyberattacks.html" target="_blank">a sophisticated spear-phishing campaign targeted at the COVID-19 vaccine supply chain</a>. Clearly, cybersecurity must be at the heart of planning and execution.

How can governments do this?

<ul>
	<li>Understand risk: Vulnerabilities can occur at any point in the supply chain. Knowing you are protected at each point of the process is key to managing risk. 
	&nbsp;</li>
	<li>Test: Every step of the cold supply chain should be tested for security vulnerabilities. Hire threat hunters and &ldquo;ethical hackers&rdquo; to find weaknesses, and then secure them before a malicious actor can exploit it. 
	&nbsp;</li>
	<li>Plan: Establish shared security policies, standards and processes for a potential breach. Be prepared for an incident and ensure you have access to 24x7 incident response. This type of partnership provides access to top security experts in a dire time of need.</li>
</ul>

Do not skimp on investing in cybersecurity. It can be the difference between a smooth rollout and a very disruptive, expensive crisis. Given the massive complexity of the vaccine distribution network, however, there can no guarantee that all cyberattacks will be detected and mitigated. This is why an underlying blockchain-based data sharing platform is so critical&mdash;it can assure both the citizen and the government that the shot at the point of injection both is authentic and has been safely handled throughout distribution.

3. Certification

As schools, sporting arenas, and workplaces start to reopen, they may require health records verifying test or inoculation status. Having a digital health pass becomes essential. This digital pass cannot be one-size-fits-all as organizations, universities, and public entities may have different criteria for returning to work or school.

According to <a href="https://www-nytimes-com.cdn.ampproject.org/c/s/www.nytimes.com/2020/12/13/technology/coronavirus-vaccine-apps.amp.html" target="_blank">a recent New York Times article</a>, &ldquo;The advent of electronic vaccination credentials could have a profound effect on efforts to control the coronavirus and restore the economy.&rdquo;

Providing digital vaccination information to consumers and allowing them to leverage this for their workplaces, schools, and other locations will propel a safe and swift workforce re-entry, and help revive the global economy. Consider partnering with a technology company that has experience with HIPAA, data protection, privacy, and identity management.

4. Population analytics

Finally, it will be crucial to provide visibility to citizens on how the vaccine rollout is progressing. Similar to how state and local governments have provided data and visualizations on virus cases and deaths, governments should be closely tracking vaccinations. In order to do this, governments need a robust data management platform with clean, real-time data. The collection of public health data and visibility to the public is part of planning and execution.

In order to safely re-open our economy and rebuild from the pandemic, citizens must develop a level of trust that when they venture outside their homes to go to work, attend a sporting event, or eat out, they are safe from infection. Reaching critical mass in vaccination is critical, and it all comes down to trust in the vaccine. This is why building a distribution capability that is founded on information-sharing, with security at the core, is so important. People must feel confident that the vaccine going into their arm is authentic and safe.

IBM has proudly stepped up globally for the public sector for many decades, and we won&rsquo;t stop now. Let us help you with vaccine management. For more information on IBM&rsquo;s offerings, please visit:<a href="https://www.ibm.com/impact/covid-19/vaccine-management" target="_blank"> https://www.ibm.com/impact/covid-19/vaccine-management</a>

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The essential role of government in vaccine management

Back in September, I wrote that the Hispanic community faces a giant disconnect. Hispanics make up <a href="https://www.census.gov/quickfacts/fact/table/US/PST045219" target="_blank">18.5% of the US population</a>, contribute <a href="https://assets-global.website-files.com/5f2883288707a1d898871825/5f90bba8f6c30a3fe0dfabce_LDC%20FACTBOOK%2010_14.pdf" target="_blank">$2.6 trillion</a> annually to the US economy, and generate a significant share of all new jobs.

But there is one place where Hispanics are not well represented, and that is at the top echelons of business. Across the US, Hispanics make up just <a href="https://www.fastcompany.com/90456329/this-is-where-there-are-the-most-hispanic-executives-and-its-not-where-you-think" target="_blank">4% of senior leadership positions</a>, a tiny fraction of our contribution to the workforce as a whole.

That figure is not acceptable. We know that. Organizations know that. And most wish to do better. But knowing something takes one level of commitment. Doing something requires another.

But what measures should we take? To find out, we sought to engage with Hispanics directly.

Over the past few months, the <a href="https://www.ibm.com/thought-leadership/institute-business-value/" target="_blank">IBM Institute for Business Value</a> surveyed 1,223 Hispanics across the US. We also partnered with <a href="https://www.weareallhuman.org/" target="_blank">We Are All Human</a> to host a <a href="https://www.collaborationjam.com/j5/2484262/#/threads/3375833" target="_blank">Jam</a> session with Hispanics. In fact, it was the largest one ever: a 33-hour event attended by more than 1,000 people, the majority of whom spent more than 4 hours with us.

Our new report, <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/hispanic-talent-advantage" target="_blank">Untapped potential: The Hispanic talent advantage</a>, details what we&rsquo;ve learned. (Read the <a href="https://www.ibm.com/downloads/cas/2KX38VME" target="_blank">Spanish translation</a>.) However, three key gaps deserve our singular attention.

<ul>
	<li>The first has to do with mentoring. We&rsquo;ve all heard the mentoring message loud and clear. Most of us are mentoring others right now. That&rsquo;s good and it&rsquo;s effective. But it&rsquo;s not enough. A member of our Jam event told us, &ldquo;Hispanics are over mentored and under sponsored.&rdquo; The difference? &ldquo;Mentors talk to you,&rdquo; said one Jammer. &ldquo;But sponsors talk about you.&rdquo; Active advocacy&mdash;done repeatedly and at scale&mdash;is a critical and often missing element to advancement. We need sponsors who will step up and engage others on behalf of Hispanic professionals, especially younger professionals. Only with this level of persistent action can we move the needle on performance. 
	&nbsp;</li>
	<li>The second thing has to do with over simplification. Anyone with a close understanding of Hispanics and Latinos in the US recognizes the vast differences in cultural values, backgrounds, and places of origin, just as there are in life experience. Yet most programs and outreach treat the Hispanic community as though it were a single block. We also frequently fail to reflect that individual Hispanics may feel very differently about their heritage. To be relevant and relatable, we need to appreciate the nuances. My friend, Dr. Robert Rodriguez, helped get at some of these nuances in the Jam with what he calls the four Latino archetypes:</li>
</ul>

Invisible Latino: These are individuals who choose to downplay their Hispanic heritage at work because they don&#39;t feel it is relevant, they prefer not to be labeled, or they simply choose to connect more closely with another aspect of their identity. &nbsp; 
 
Equivocal Latino:&nbsp;For these individuals, expressing their Hispanic identity is situational. They lean into it at certain times, especially when interacting with other Hispanics. But they minimize or conceal their heritage in other contexts.&nbsp; 
 
Retro Latino:&nbsp;These individuals have a strong desire to reconnect with their Hispanic roots. They may not have leaned into their Latino identity in the past, but they want to do so now.&nbsp;Sometimes becoming a parent pushes someone to become a retro-Latino because they want their children to have a stronger connection to their Latino identity than they did.&nbsp; 
 
Unapologetic Latino:&nbsp;These individuals wholeheartedly see their Hispanic identity as an asset and source of strength. They fully acknowledge their Latino roots and celebrate them. They also want others to learn about their culture and celebrate it with them.&nbsp;They tend to be strong advocates for Latino issues.&nbsp;

These archetypes can help us recognize that Hispanics bring both a cultural and personal context to their identities. Knowing this can help organizations tailor their outreach more effectively. After all, if we can&rsquo;t reach people where they are, then we may miss them altogether.

<ul>
	<li>The third and most troubling issue is that we are failing Latinas. Latinas face a double gap&mdash;they are penalized because of their race and penalized again because of their gender. I call it the &ldquo;gap within a gap.&rdquo; And it has widespread financial ramifications. Latinas in the US are paid <a href="https://leanin.org/data-about-the-gender-pay-gap-for-latinas#the-pay-gap" target="_blank">45% less than white men</a> on average. To put this in context, <a href="https://iwpr.org/wp-content/uploads/2020/09/Gender-Wage-Gap-Fact-Sheet-2.pdf" target="_blank">the average Latina has to work 23 months</a> to earn what a white man earns in 12. But it&rsquo;s not just men. Latinas also <a href="https://leanin.org/data-about-the-gender-pay-gap-for-latinas#the-pay-gap" target="_blank">earn 30% less than white women</a>. In fact, they are the lowest-paid group of women across racial and ethnic categories. What makes these findings especially jarring is that Latinas are an entrepreneurial powerhouse. Not only do they run <a href="https://www.gsb.stanford.edu/insights/whats-fueling-latino-entrepreneurship-whats-holding-it-back" target="_blank">44% of all Latino businesses</a>, Latinas <a href="https://www.gsb.stanford.edu/insights/whats-fueling-latino-entrepreneurship-whats-holding-it-back" target="_blank">created nearly half of all new Latino businesses</a> between 2007 and 2015. By failing to recognize, advance, and pay this talent in our workforce, we are doing ourselves a collective disservice.</li>
</ul>

It&rsquo;s time to step up our commitment level. 

A Jam poll asked whether business executives are doing enough to pave the way for the success of the next generation of Hispanic leaders: 83% said they are not. That is a sobering percentage.

You can help change this. I&rsquo;d like you to do something right now. Take out a piece of paper or pull out your phone and write down how many people you are mentoring today. Then, write the names of people you actively sponsor. Now, look at the numbers. If you&rsquo;re like me, you may find that the two lists are uneven. Most of us mentor more people than we sponsor. I&rsquo;d like to ask that we make it our New Year&rsquo;s resolution to balance these lists and sponsor and advocate for the same number of people you are mentoring.

Second, go to your company&rsquo;s website and intranet and take a look at the diversity and inclusion programs your organization offers. Are they one-size-fits-all? Think about one or two ways you can connect with those whose backgrounds and archetypes are similar to yours. Think about what helped you most in your career. Can you use that experience to help raise the effectiveness of your organization&rsquo;s outreach so it reflects the diversity of the Hispanic community?

Finally, I&rsquo;d like you to commit to being an advocate for Latina advancement. Are Latina women represented in upper management in your organization? What can you do to create specific opportunities for up-and-coming Latinas to be mentored and sponsored by senior colleagues? If we are to create change, we need to make doing so a strategic priority, with special programs, defined metrics, and clear accountability.

As we head into 2021, I hope you will join me in moving from wishes to plans and from talk to accountability. Thank you for engaging with me on this.

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Closing the Hispanic leadership gap: What are we going to do about it?

Sixty percent of business leaders are accelerating their digital transformation efforts as a result of COVID-19. This, in itself, is not really news or surprising. We understand how a world in lockdown, where movements are limited, needs to rely heavily on technology to continue operating. Public and business models are fast evolving to become more digital and ubiquitous.

As I was working to define and ramp-up the IBM response to COVID-19, I wanted to understand which technologies are making a real difference among companies that are faring relatively well during this crisis and companies that are not. This would help us better guide our clients to technologies that may offer them the most significant benefits. I thought approaching this question by industry and comparing across industries might give us some new and interesting insights, as there are many complex factors at play within each given sector of the economy.

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&nbsp;

Obviously, it&rsquo;s not all about technology. Our research shows that for six of the 18 industries we analyzed, you can&rsquo;t really detect any strong correlation between technology footprint and financial performance. Indeed, industry performance has been influenced by many external factors, such stay-at-home orders, travel restrictions, and supply chain disruptions, among others.

But what our research reveals is that there is a massive increase in the direct correlation between technology adoption and financial performance during COVID-19 compared to the past three years. Prior to recent events, there were only a few industries in which these exponential technologies played a significant role in financial performance.

Results are striking. In 12 industries, leaders in technology adoption outperformed their less-advanced peers by an average of 6 percentage points and as much as 16 percentage points in revenue performance. Industries are seeing the effects of their technology choices in their financial performance.

For example, differentiation has been high in retail this year. Those in the top 10 percent of technology adoption have outperformed the remaining 90 percent on revenue growth by 16 percentage points. For a typical $10 billion revenue company, this is equivalent to a revenue premium for high-technology adopters of $1.6 billion annually.

Our research also reveals that the relative weight and influence of certain technologies on performance has changed dramatically. We are talking about a shift of the technology mix that underpins performance by providing greater resiliency, agility, and speed. In particular, adoption of cloud and AI have become significantly larger contributors to improved financial performance since the onset of COVID-19. &nbsp;

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The mix has changed overall, but we could also determine that each industry has a unique &ldquo;fingerprint&rdquo; for key technologies. The technologies that benefit one industry are not always differentiating for another. Companies that have invested in the right mix of industry-specific key technologies have gained a significant revenue premium during the current crisis.

Of course, we&rsquo;re highly focused on the pandemic right now. However, it is by no means the only economic risk facing businesses today. There are significant global political and environmental risks and challenges that may need to be addressed at any time. And other pandemics remain an ongoing possibility. Organizations that adapt to COVID-19 with speed, agility, and resilience are likely to be well positioned to meet other sudden challenges.

Until now, leaders were likely unaware of the fingerprint of technologies that lend advantage to each industry. So, while digital transformation efforts have continued, they may not have been aimed at the best targets. This initial research starts addressing this issue and provide a macro-compass to business leaders in their respective fields of activity.

The next normal is being shaped right now. It calls for leaders to step back and make some critical shifts and decisions to redefine or significantly adjust their enterprises to this new reality. Some leaders are responding faster to challenges and opportunities by accelerating their business transformation. They seize the potential of digital technologies to shape business and operating models for the future, applying these new technologies in conjunction with their historic strengths to reshape their competitive positions.

We call this journey the path to a revolutionary, next-generation business model &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/build-cognitive-enterprise" target="_blank">The Cognitive Enterprise.&rdquo;</a>

Our new report, <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/digital-acceleration" target="_blank">&ldquo;Digital acceleration: Top technologies driving growth in a time of crisis,&rdquo;</a> provides specifics on our detailed research. It explains how particular technologies can be applied to six core capabilities that are helping industries navigate the pandemic and emerge stronger in a post-pandemic world

As we say in the report: &ldquo;Realizing the vision requires immediate action.&rdquo; The report can help you identify the differentiating technologies being used by leaders in your industry, and where to apply your digital transformation to optimize them.

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How technology choices affect business performance during  COVID-19

The COVID-19 pandemic continues to have a significant impact on the world&rsquo;s population, industries and entire economies. Our lives have changed, in every country, in every way, and amidst ongoing uncertainty.

The action and reaction of our European Banks will be the beating heart of ensuring stability and driving economic recovery in Europe. Successful post-pandemic banks will be those that understand the essentials to providing certainty in an uncertain world.

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Impact on the European economy

The overall impact on the economy in Europe has been profound. Eurostat reported <a href="https://ec.europa.eu/eurostat/documents/2995521/10545332/2-14082020-AP-EN.pdf/7f30c3cf-b2c9-98ad-3451-17fed0230b57" target="_blank">a decrease of GDP</a> in the euro area of 12.1 percent in the second quarter of 2020, versus the previous quarter. This is the biggest fall in GDP since 1995. In the first quarter, GDP fell by 3.6 percent in the euro area. Compared with the second quarter of 2019, the drop is even greater&mdash;15.0 percent.

The dramatic second quarter GDP drop is observable across the world, which comes as no surprise. The impact in the United States is dramatic as well, although slightly less so than in Europe. US GDP decreased in second quarter by 9.5 percent versus the previous quarter.

<img alt="GDP growth rates over the previous quarter" height="417" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/f8d621d9bab644798658b46603c27dd7.png" width="708" />

The consequences for European banks

As outlined in the IBV Expert Insights report <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/post-pandemic-bank" target="_blank">&quot;Essentials for the post-pandemic bank&quot;</a>, credit defaults have escalated on a global scale.&nbsp; Higher levels of non-performing-loans (NPL) are triggered in retail banking by high unemployment rates, high delinquencies in credit card operations and unsecured loans. In wholesale banking, small and medium enterprises default rates have risen and will expected to continue to rise. For large corporations, heavy restructuring is already seen in hard-hit industries, such as travel and transportation.

With 2020 second-quarter results recently reported by all European large banks, the overall picture is clear. Non trading-related profits have dramatically fallen, compared to second quarter of last year.

<img alt="2019 Q2 vs 2020 Q2 net results " height="469" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/73b76ec59043495dbdfe3aad0aec618e.png" width="708" />

The dominant trigger clearly is the significant increase in the provision for bad loans in Q2 2020.

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<h3 class="ck-h3 ibv-ckeditor">Four imperatives for the financial services industry in Europe</h3>

Lower cost structure radically

Given the financial impact on European banks, banks must operate at radically lower costs. Financial institutions will have to act quickly to cut more cost and uncover new savings and efficiencies.

The cost savings areas for financial services will need to be:

<ul>
	<li style="list-style-type:none">Substantial: Cut greater than 40 percent to reflect new economic and competitive realities</li>
	<li>Structural: Be structural in nature, going beyond being capacity-reducing</li>
	<li>Sustainable: Deliver a sustainable cost structure without impacting customer, resiliency, compliance, and security requirements.</li>
</ul>

Adopt extreme digitization on cloud

Extreme digitization starts with evolving the customer experience to create more cohesive and personal digital journeys. This requires combining and integrating every aspect of customer experience into a single platform and tooling. Moving beyond the customer interface, digitization includes middle- and back-office operations. It also supports functions that can be transformed and automated into intelligent workflows.

One of the key approaches for banks to apply is intelligent automation. The ongoing digitization and automation of work, by infusing Robotics, AI and Machine Learning into business processes, will enable banks to operate at lower cost. The areas in which to apply intelligent automation range from loan processing, customer onboarding, risk and compliance, to learning and development. Extreme digitization is developed on an open hybrid cloud platform that enables financial institutions to securely build, run and manage apps and workloads in a consistent way, across any cloud. IBM is a recognized leader in this space and has helped financial institutions create efficiencies, improve customers outcomes and reduce risk.

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<a href="https://www.ibm.com/case-studies/barclays-bank-plc" target="_blank">A leading European/UK bank</a> increased its customer satisfaction around automated, multichannel services to a Net Promoter Score (NPS) of 70 and rolled out new automated multichannel customer processes 88 percent faster by using an efficient process management capability that taps IBM Business Automation Workflow.
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A leading European/Dutch bank bank embarked on a learning transformation journey, aiming to close the skills gap of employees in critical areas such as digital customer engagement and KYC/AML, by providing personalized, 24/7 available e-learning. The platform had to meet very strict data regulations and requirements (C3). The closing of employee skills gaps led to better customer engagement and cost savings in learning for the bank, which were used to fund the ongoing HR transformation.
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Reinvent customer engagements

Remote working and changes in digital consumption models are altering the routines and expectations of customers, especially in terms of their digital adoption and adaptation. In the post-COVID World the data-driven bank will be driven by the data-enabled client. Customer proximity will be fostered less by using data to personalize offers, and more by infusing every interaction with artificial intelligence (AI). This new business model brings new value by preserving client proximity and enabling compelling user experiences, particularly during crises such as the pandemic lockdown.

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<a href="https://www.ibm.com/consulting/client-stories/rbs" target="_blank">A leading UK bank takes on digital transformation to make home buying easier.</a><a href="https://www.ibm.com/consulting/client-stories/rbs" target="_blank">&nbsp; </a>While on the phone, with a customer, the bank employee gets fast digital mortgage support from Marge, an AI-powered, cloud-based platform with an evolving personality. With Cognitive enterprise technology at their fingertips, employees support new and existing home buying customers seeing 20 percent improvement in customer NPS, and a 10 percent decrease in call duration.
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In times of crisis, a flight-to-quality or a flight-to-safety occurs when customers migrate to environments that are perceived to be less risky, even if they later prove to be otherwise. This can manifest itself as sudden and unexpected migration of clients due to a negative perception or single bad experience being amplified.

To ensure no client relationship relies on demand-outdated models, or that clients become &ldquo;digitally left behind,&rdquo; banks should preserve both the perception and reality of quality and safety for their customer experiences&mdash;and provide easy accessibility. Ensuring that distanced does not mean disadvantaged will be an essential part of economic recovery. Financial institutions that employ a human-centric model will help their customers navigate and thrive in an uncertain world.

Make everything secure and compliant to the core

Prior to the 2020 pandemic, the industry was already under pressure to ensure compliance to regulations, particularly in the space of AML and Data Protection.

<a href="https://www.fenergo.com/industry-research/global-report-financial-institutions-fines" target="_blank">Fenergo Global Research Report on Financial Institution Fines and Enforcement Actions</a>:

<img alt="Financial institutions fines and enforcement actions" height="246" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/1e2ca0b6c6c24fb29174e1331c0153d7.png" width="709" />

COVID-19 has dramatically amplified both the speed and the need to ensure compliance, accelerating reliance on digital platforms, increasing interconnectivity, expanding channels and 24/7 access. Each of these enhancements brings innovation to the client experience but also drives an increase in novel and unanticipated security risks, threats, and potential for data breaches, fraud and money laundering.

Bad actors use uncertainty and chaos to conceal their activities. Risk mitigation depends on removing any obscuring layers by quickly exposing suspicious transactions, connections and patterns in data. It is essential to know your customer and how they behave so you can rapidly identify anomalies. Advanced analytics, Machine Learning and AI that, in turn, drive intelligent automation will be enable banks to move faster than the speed of the threat and while complying with increasingly complex regulations.

Consider this recent example undertaken by notable banking partners, including BNP Paribas, to deliver a public cloud platform that is Financial Services ready. It is designed to enable a rich public cloud ecosystem that supports customer proximity, with specific features for security, compliance and resiliency that financial institutions require.

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<a href="https://www.forbes.com/sites/moorinsights/2020/07/22/ibm-cloud-for-financial-services-momentum-builds-with-bnp-paribas-and-30-isvs/#4b05a3d78e11" target="_blank">A leading European bank</a><a href="https://www.forbes.com/sites/moorinsights/2020/07/22/ibm-cloud-for-financial-services-momentum-builds-with-bnp-paribas-and-30-isvs/#4b05a3d78e11" target="_blank"> works with IBM to develop a public cloud secure enough for Banking.</a><a href="https://www.forbes.com/sites/moorinsights/2020/07/22/ibm-cloud-for-financial-services-momentum-builds-with-bnp-paribas-and-30-isvs/#4b05a3d78e11" target="_blank">&nbsp; </a>Faced with changing consumer behaviors and expectations in areas such as real-time banking, mobile services and access to a more complete view of their financial situation, the project aims to accelerate the bank&rsquo;s digital transformation and improve its operational efficiency whilst meeting the industry&rsquo;s extreme regulatory requirements. For its French operation, the bank had to satisfy European Banking regulations, French disaster recovery rules and EU privacy laws.
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Financial Services clients, particularly in Europe, require a policy framework that enables a collaborative model for implementing security control and compliance. This policy framework needs to support industry-informed cloud controls required to operate securely with bank-sensitive data in the public cloud. Common operational criteria and a streamlined compliance controls framework built specifically for the financial services industry allows the ecosystem to function with confidence.

The journey to a secure and successful next normal requires the courage to truly modernize the application portfolio. This includes migrating to resilient and secure clouds; driving the digitization of processes into intelligent workflows; building self-serve capabilities; embedding security and compliance across operations; and designing a new relationship with customers. The IBV has gathered a set of best practices and recommendations in&nbsp;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19" target="_blank">our COVID-19 Action Guide</a>, along with related resources to support you as you make the journey.

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A European perspective on post-pandemic banking

Most people think that resilience is a good word. So did I. Then I participated in a panel discussion with an injured war veteran last year. After hearing his story, I told him that I admired his resilience. He politely replied, &ldquo;I&rsquo;ve come to hate that word. Resilience implies that all your energy goes into recreating the world before your trauma. It doesn&rsquo;t offer the possibility that life after trauma can be fuller or richer.&rdquo;

That was a humbling lesson. It was also one that helped me put a recent health trauma that I&rsquo;m experiencing into perspective. And while I would not wish trauma on anyone, I&rsquo;ve always known that crises present an opportunity for faster transformation.

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Jesus Mantas shared this presentation with delegates at TWIN Tech 2020.&nbsp;<a href="http://www.twinglobal.org/" target="_blank">The World Innovation Network (TWIN)</a>&nbsp;is a highly curated, global connective of innovation leaders from across sectors and geographies who build trusted relationships to address the most salient challenges across business, technology and sustainability. The IBM Institute for Business Value is a partner and sponsor of TWIN. 
&nbsp;

Imagination is the essential skill to engender growth mindsets

I&rsquo;ve also learned that imagination is the single most important element in adopting a &ldquo;growth mindset.&rdquo;

Our brains are encoded to respond to uncertainty as we do any other threat&mdash;to fight, freeze, or flee. Adopting a growth mindset asks us to do something different&mdash;something against our natural evolution and survival instincts. It requires us to look beyond the immediate threat, see the opportunities that surround it, and act as if achieving those opportunities is more important than mitigating the threat.

Let me give you a recent example from a friend. His global company was nearly wiped out by the COVID-19 crisis. It was an events company&mdash;so you can imagine that the pandemic was a nightmare scenario. As the lockdowns gathered pace, every event the company had planned for the rest of the year was cancelled.

It would have been totally understandable for my friend to close his business, find something else to do, and move on. Instead, he imagined something different and transformed his company into a premier digital events business, with a sleek platform that now hosts rich, virtual programs. Over a million people have signed on to use the platform&mdash;far more than the 15,000 people that used to represent a sell-out crowd.

If, like my friend, we can rationally and emotionally accept that there could be a massive opportunity in the middle of a crisis, then we can embrace the set of actions needed to realize that opportunity. But how do we do that?

Growth mindsets thrive with authentic leadership 

There are many styles of leadership, but the ones I want to focus on here stand on two opposing ends. One is based on authority, command, and control and on managing scarcity. The other on persuasion, community, and empowerment and in unlocking abundance. With the first mindset, leaders focus their energy on optimizing scarce resources for the achievement of their declared goals. Whereas with the second mindset, leaders focus their personal energy on helping those who can drive the most impact. Some people call this &ldquo;servant leadership.&rdquo; I prefer to call it &ldquo;authentic leadership.&rdquo;

Most great leaders use a mix of these two styles, depending on the needs of the organization. I would argue, however, that the needs of the present moment require leaders to lean more heavily toward the latter model, reinforcing empathy and authenticity. When we lead without authority, we can tap into a surprising new leadership superpower.

Let me illustrate this. Several years ago, I had the opportunity to spend eight days in Bhutan. In the US, we measure prosperity based on gross national product. Bhutan uses a different measure, called gross national happiness.

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As a general cultural trait, when the Bhutanese get up in the morning, they ask, &ldquo;What does the world need from me the most today?&rdquo;

Can you imagine waking up and asking the same?

Dorji Wangchuck was one of the guides I met on my trip. He is currently focused on helping the king of Bhutan manage the dire consequences of the pandemic. I had not seen him in a while, but when he learned recently of my health issue, he immediately sent me a text that said, &ldquo;Jesus, as you seek the best doctors to help you medically, we are seeking the best spiritual masters to support you mentally. I am confident everything will be OK with you hereafter. Take care, my friend.&rdquo; In a matter of days, he had personally contacted one of the most sought-after Buddhist masters of our time and arranged for three temples across India and Bhutan (each with hundreds of monks and nuns) to send up thousands of prayers, all specifically in service of my healing. &nbsp;

This is what it feels like when someone is an authentic leader to us. It has power beyond command and control, even 7,782 miles away.

Translating authentic leadership to the new business reality

&ldquo;Growth mindset versus fixed mindset,&rdquo; &ldquo;scarcity versus abundance,&rdquo; and &ldquo;empathic and authentic leadership versus command and control&rdquo; are familiar concepts to anyone who has sat in on a leadership Zoom meeting over the past four months. But how do these ideas translate to the day-to-day business?

In IBM&rsquo;s case, when the pandemic struck, we had an opportunity to put these ideas to work at scale in a large, complex corporation.

As COVID-19 hit, we had to reconfigure several IBM offerings in real time. How do you complete in seven days what normally takes many months with no direct authority over the required resources? How do you persuade people to deliver at record pace without a command-and-control relationship? How do you get a diverse collective to adopt a shared goal and pull in the same direction quickly?

In our case, authentic leadership translated to empowering a self-directed &ldquo;team of teams.&rdquo; We gathered communities of scientists and other experts, volunteers, business leaders, developers, and partners, and we made sure everyone was clear on the common priorities. The most critical job as leaders in such moments is to look beyond the immediate crisis and help teams imagine the new offerings and better environments that could be created, and then enable them to deliver that vision.

We&rsquo;re still learning, but we helped connect client-facing, marketing, and offering leaders in a closed-loop mechanism that increased our ability to deliver by orders of magnitude and, most importantly, accelerated our capacity to pivot toward new client needs. I am confident some of these behaviors will serve us well going forward and create a better way to work than we had before the pandemic.

As a traditional leader, you only have the resources of your team at your disposal. As an authentic leader, everyone can be on your team&mdash;so long as you articulate a common goal and the team perceives you as helping them achieve it. When that happens, people begin to pull with you and for you. That is why it is such a superpower.

<img alt="5 strategies for authentic leadership" height="1899" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/85ad3a19f0764b3f9b3aca24fdc9cb0a.jpg" width="2951" />

Culture is not created; it is a consequence of leadership

Culture is another one of those words that everyone talks about. How do you create a more digital, more agile culture? My answer is: You don&rsquo;t. Culture is an outcome. It&rsquo;s a consequence of behaviors, habits, and reinforcement mechanisms.

Environment shapes culture. Ways of working shape culture. Leaders shape culture by developing and reinforcing the skills and habits that matter the most. It is those leadership actions that eventually generate the culture.

In normal times, changing culture is hard because changing habits is hard and because reinforcement mechanisms have a lag time between their implementation and widespread buy-in. But we are not in normal times now, and therein lies the opportunity in the middle of the trauma.

The pandemic has given us a &ldquo;species moment,&rdquo; a burning platform to adopt new habits, new leadership, and new ways to achieve things at a pace and scale we wouldn&rsquo;t have believed possible five months ago. We have a window to select which habits will stick and emerge from the trauma of the pandemic as better individuals, communities, and companies in ways that shape our planet for good.

Great leaders will seize this moment.

In the meantime, smile

A 30-year study by UC Berkeley revealed that smiling is correlated with a host of positive&mdash;and surprising&mdash;outcomes. People who smile widely often live longer. They have better standardized test scores. Even their marriages are happier.

Ron Gutman, an inventor, investor, and technology and healthcare entrepreneur, describes in a Ted Talk how smiling reduces stress-enhancing hormones like cortisol, adrenaline, and dopamine and increases mood-enhancing hormones like endorphins.

It&rsquo;s also contagious. When we smile, so do others. When we see people smiling, our brain mirrors that reaction, triggering a subconscious state of joy. In other words, smiling creates joy for us and others.

At a time that calls for empathic leadership, our smile is one tool that we always have with us. If you remember just one concept from this article, make it this one: When in doubt&mdash;smile.

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A new mindset is required to seize the leadership opportunity of a generation

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Why resilience is sometimes the wrong word

Across the world, electricity systems are decarbonizing. The reasons are varied, but certainly there&rsquo;s a deep understanding by society and governments that transforming the electricity infrastructure is critical. Our industry is responsible for about one-third of global manmade carbon emissions, yet, it&rsquo;s one of the easier sectors to rapidly decarbonize. This is due to the relative density of carbon sources in this sector, such as coal- and natural gas-fueled power plants, along with the historical social contract and attendant regulatory oversight of this industry.

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&nbsp;

It&rsquo;s already happening:

<ul>
	<li>US&nbsp;coal power-generation plummeted 30&nbsp;percent&nbsp;during the first six months of&nbsp;2020, driven by COVID-19 and depressed prices.</li>
	<li><a href="https://www.utilitydive.com/news/target-aims-for-100-renewables-by-2030-walmart-announces-minnesota-solar/556897/" target="_blank">Retailer Target</a> announced their intent to be 100 percent powered by renewables by 2030; Apple&rsquo;s&nbsp;operations are already there, and they&rsquo;ve announced every Apple device will have zero climate-impact by 2030.</li>
	<li><a href="https://www.wsj.com/articles/amazon-to-launch-2-billion-venture-capital-fund-to-invest-in-clean-energy-11592910001" target="_blank">Amazon has doubled-down</a>, indicating they&rsquo;ll invest USD 2 billion in clean energy venture capital.</li>
	<li><a href="http://cbre.vo.llnwd.net/grgservices/secure/GBAI%20Office%202019.pdf?e=1600806382&amp;h=a813b57f51c3d6b097868aaae113fbf9" target="_blank">Commercial real estate markets</a> including Chicago, San Francisco, and Atlanta are increasing their rentable square footage in green energy buildings, and have crossed the 50 percent threshold.</li>
	<li>A 12 megawatt energy storage project in the Netherlands has <a href="https://www.energy-storage.news/news/nec-to-build-12mw-crowdfunded-energy-storage-system-in-netherlands" target="_blank">successfully raised &nbsp;EUR 3.6 million</a> (USD 4.03 million) through crowdfunding, offering a 5 percent interest to investors, who chipped in a minimum of EUR 500 each.</li>
</ul>

Consumers are demanding change, and they&rsquo;re holding governments and companies accountable.

Government policies such as renewable energy portfolio standards (RPSs) and tax credits kickstarted the move to renewables. This has enabled non-carbon emitting power generation sources (particularly wind and solar) to reach price parity with traditional generation technologies, and their price curves continue to drop.

Battery storage is on a price/performance curve similar to solar generation and remains the missing piece that will allow renewables to provide services equivalent to those available from controllable fossil-fueled generation.

<blockquote>
These facts underpin our vision, Electrifying Energy (EE): Sustainably fueling the future.
</blockquote>

EE is the global movement that supports decarbonization of large portions of the economy through clean electrification, while maintaining and increasing the reliability and resilience of the electric grid by (1) assuring that the electric grid is reliable and resilient; (2) providing an ever cleaner electric grid; and (3) extending clean reliable electricity to the broader economy.

EE addresses the urgent market and societal need for decarbonization 

Societies expect electric utilities to provide uninterrupted power to connected customers in a safe, affordable manner. Electricity is essential; it&rsquo;s the &ldquo;infrastructure of infrastructures&rdquo; (meaning without electricity there&rsquo;s no water, gas, or communications).&nbsp; Electricity is so important that it&rsquo;s often government-owned or at least heavily regulated.

The fundamental change is around the energy transition: substantial substitution of clean electricity for fossil fuels in other sectors of the economy. This replacement must be done while delivering a safe, reliable, affordable, and continuous service.

Our work with the IBM Institute for Business Value (IBV) on the recent report, &ldquo;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/digitize-electric-utilities" target="_blank">Digitizing Electric Utilities: Core Performers power up reliability and resiliency</a>,&rdquo; speaks directly to the importance of improving and automating infrastructure to prepare for today, as well as tomorrow. Making changes that drive reliable and efficient systems improves the odds of successful outcomes.

The factors and market dynamics propelling enhanced electric infrastructures include:

Decarbonizing the energy system:&nbsp;Electric utilities&rsquo; decarbonization is primarily driven by three factors&mdash;societal, political, regulatory, in addition to&nbsp;economic factors:

<ol>
	<li>renewable energy generation has reached price-parity with fossil fuel generation and continues to decrease</li>
	<li>renewables remove commodity (fuel) risk from energy company&rsquo;s portfolios</li>
	<li>as a result, financiers of new power generation are investing the majority of their funds in renewable energy projects, instead of traditional fossil-fueled projects</li>
</ol>

The four market dynamics of Electrifying Energy

<img alt="The four market dynamics of Electrifying Energy" height="431" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/58393c46646443108cf60479e5baaafe.png" width="750" />

Network resilience and operational excellence: Utilities must do what they&rsquo;ve always done: maintain the social contract of providing uninterrupted power to connected customers in a safe and affordable manner. Utilities must adapt to current climate-related risks while mitigating for future ones. The sophistication required to maintain this contract increases as the economy becomes more dependent on electricity for core energy needs. This results in an electricity system that becomes more complex, diversified, and resilient.

Renewables integration: Utilities must integrate intermittent, uncontrollable wind and solar power into the existing grid infrastructure, which depends on large, central power plants feeding energy one-way to customers, through the electricity grid. Most of this new renewable energy comes from large-scale wind farms or solar farms, connected to the grid&rsquo;s high voltage system (the transmission system).

Industry electrification: Business and government leaders are replacing fossil fuel with electricity as their primary energy source, due to a lower cost of energy, primarily from renewables and increased cost certainty, compared to volatile commodities like natural gas, and lower carbon content.

Some industries are becoming &ldquo;fuel switch&rdquo; early adopters, <a href="https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/demand-by-sector/transport.html" target="_blank">particularly transportation and the residential and commercial building sectors</a>. In 2018, buildings consumed about 29 percent of global energy, while transport consumed 21 percent. Manufacturing and industrial processes are also electrifying to some degree, and electrification in these areas can make sizable differences.

Utilities must provide exceptional resilience, reliability, and access that offsets fossil fuel&rsquo;s advantages in those areas. Simultaneously, utilities must accelerate the clean electrification of their grids to continuously widen their environmental advantage over the competing energy sources. As more organizations embrace this approach, the greener, more affordable, and resilient the grid becomes. This creates a virtuous cycle, where more electrification, increased resilience, and newly electrifying industries can meet their environmental goals more quickly.

Energy integrators: As the number of non-utility owned and operated resources connected to the grid increases exponentially, a fundamental rethinking of the electrical system&#39;s operation is required, as well as the utility&#39;s role within it. We term this new role the Energy Integrator, and we&rsquo;ve anticipated this need for several years.

As the grid transitions to an even more complex network, with energy and grid services going both to and from customers, improved technologies and solutions are needed. This is where IBM is investing to help clients move toward a sustainable, greener energy future. Over the next few months, we&rsquo;ll be sharing more research and perspective on how to leverage a balanced, risk-mitigated portfolio of existing and emerging solutions. Our vision is: Electrifying Energy: Sustainably fueling the future.

The utility industry is moving toward a fundamental shift in its operations in support of the global Energy Transition. The speed at which this transition occurs depends on many factors, some in the utility industry&rsquo;s control, and many external.

Certainly, new and maturing information technologies such as AI, blockchain, 5G/edge and cloud will be important enablers for this more collaborative, fast-paced, and networked electricity system. At the same time, continued and growing delivery of clean, reliable, and resilient electricity to extended sectors of the global economy will require a &ldquo;fast evolution,&rdquo; &mdash;not &ldquo;revolution&rdquo; of the industry&mdash;leveraging and extending existing solutions to reliably accelerate the energy transition.

<a href="https://www.ibm.com/account/reg/us-en/signup?formid=urx-43376" target="_blank">Subscribe now</a> for access to data-driven research and expert analysis for utilities leaders about emerging trends and navigating dynamic environments. You can find our perspectives on new and maturing information technologies such as AI, blockchain, 5G/edge, and cloud. These digital technologies will be important enablers in a collaborative, efficient, and networked electricity system. At the same time, we&rsquo;ll be supporting the growth of clean, reliable, and resilient electricity to extended sectors of the global economy.

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Why we need to electrify energy to sustainably fuel the future 

Last Monday, I visited a hospital. Victor, the Uber driver, got me there safely. My nurses, Maria and Cristina, spoke Spanish to me. After I left the hospital, I met with Zaira, a prominent PhD in the field of quantum computing. Then, when I got back home, Rodrigo got me the mail.

I am Hispanic, so perhaps I am more likely to take note of other Hispanics and the work they do. But then again, with Hispanics representing one out of every five workers in this country, it would be hard not to take note.

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&nbsp;

This is especially true during the pandemic when, <a href="https://www.nytimes.com/2020/05/07/us/coronavirus-latinos-disparity.html" target="_blank">as The New York Times reports</a>, Hispanics and people of color disproportionately work on the frontlines, serving as EMTs and healthcare professionals, delivering food and packages, and filling other roles essential to our well-being and sanity.

Step back from the frontlines to the C-suites and corner offices of US businesses, however, and it&rsquo;s a different story. Hispanics represent <a href="https://www.census.gov/quickfacts/fact/table/US/PST045219" target="_blank">18.5 percent of the population</a> in this country, but just <a href="https://www.umass.edu/employmentequity/race-states-and-mixed-fate-white-men#overlay-context=diversity-reports" target="_blank">4 percent of the executive ranks</a>.

<img alt="Hispanics represent 18.5 percent of the US population, but only 4 percent of executive ranks." height="1575" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/e46d7a105662466e8c0aa4d33092ffa0.jpg" width="2951" />

The incongruity is stranger when one considers our economic power. Annually, Latinos and Hispanics contribute USD 2.3 trillion to US GDP. To put it another way, if Hispanic GDP contribution were its own country, it would <a href="http://latinodonorcollaborative.org/latino-gdp-report" target="_blank">be the eighth-largest economy in the world</a>, just behind that of France.

A vibrant economy has many layers vital to effective functioning. Victor and Rodrigo perform essential roles that make our society better, and Maria, Cristina and Zaira show the professional depth of Hispanics in our society.

But if our economy is to thrive and innovation to grow, we need increased representation on the top floor, in upper management. For that to happen, we have to determine the conditions that enable such inclusion&mdash;the patterns and characteristics that make success not only possible, but probable. How did the 4 percent of Hispanics who advanced to positions of leadership get there? What can we learn from their experience, and will any of that be relevant to the next generation of leaders?

As part of its research into people and development, the <a href="https://www.ibm.com/thought-leadership/institute-business-value/" target="_blank">IBM Institute for Business Value</a> recently surveyed Hispanics in the US to find out. The full report will be available in December 2020, but you can see some early data in <a href="https://www.ibm.com/downloads/cas/W5BAABZO" target="_blank">this infographic</a>. One key finding is that professional advancement opportunities have played a crucial role in helping senior Hispanic executives achieve their success.

But the survey also shows that younger leaders are not getting those advancement opportunities.

<ul>
	<li>Only 30 percent of junior managers say they have access to mentorship programs or on-the-job training.&nbsp;</li>
	<li>Only 20 percent say they are empowered to overcome their professional challenges.&nbsp;</li>
	<li>Most worrying, 67 percent say that they have to work harder to succeed because of their Hispanic identity.</li>
</ul>

These findings show us what success looks like. Our next step is to turn these learnings into action. When I think of my own journey, three factors helped me succeed: education, mentorship, and advocacy. At IBM, we&rsquo;re taking steps to advance all three.

<ul>
	<li>The IBM <a href="https://www.ibm.org/initiatives/p-tech" target="_blank">P-TECH program</a> is already active in 75 school districts located in predominantly Hispanic communities. Over the next two years, we plan to double this number. By 2023, we will have 150 active programs in schools that serve Hispanic students.</li>
	<li>In addition, IBM is kicking off the IBM Mentorship Marathon to empower Hispanics and advance their career opportunities. The Marathon will begin with P-TECH schools in the U.S. by matching 1,000 IBM mentors with the students, and encouraging other Fortune 500 companies to join the effort. This initiative will also benefit all our P-TECH students in the U.S.</li>
	<li>I, personally, am increasing my commitment to mentoring Hispanics, advocating for their advancement to leadership positions and creating economic opportunity for Hispanic entrepreneurs.</li>
</ul>

But success will take all of us&mdash;corporate leaders, NGOs, innovators, and average citizens&mdash;working together.

A society in which the Hispanic community thrives is the kind of society I would like to live in over the next decade. And it&rsquo;s not just because I&rsquo;m Hispanic. It&#39;s because investing to help the growing, youngest minority group in the US will help everyone in the country as we shape a more inclusive, more diverse, and better-performing society.

To see the numbers, please <a href="https://www.ibm.com/downloads/cas/W5BAABZO" target="_blank">download our infographic</a>.

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Closing the Hispanic leadership gap: Why it's in everyone's best interest

A new business normal seems to be emerging in the post-pandemic world, affecting consumer perspectives and multiple industries at once.

The <a href="https://www.ibm.com/thought-leadership/institute-business-value" target="_blank">IBM Institute for Business Value (IBV)</a> has been conducting continuous research to understand all the changes ahead. I would like to share some insights taken from three of our research papers, and shed some light into:

<ul>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-trilemma" target="_blank">New consumer perspectives</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-action-guide" target="_blank">Key actions for business executives</a></li>
	<li><a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-recovery" target="_blank">How we break through the business decision-making impasse</a></li>
</ul>

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Consumers are dealing with a trilemma of tradeoffs

<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-consumer-survey" target="_blank">IBV has conducted regular surveys</a> of more than 54,000 respondents in the United States during the great lockdown. In August, we extended the exercise to cover a global population representing more than 60 percent of the world&rsquo;s reported cases and deaths.

We have realized that much of the pandemic has turned into a shared experience involving <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-trilemma" target="_blank">a trilemma of concerns.</a> People around the world are worried about their: (1) personal health and safety; (2) economic future and job security; and (3) individual privacy and liberty. To gain deeper insight into the tradeoffs&mdash;preventing sickness, growing the economy, and protecting privacy&mdash; IBV gave respondents three pair-wise comparisons and asked them to indicate which of the factors was relatively more important for leaders to consider.

<img alt="The COVID-19 trilemma" height="549" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/b03f4f33424244579531b7e95c9a35ab.png" width="700" />

Looking at how people responded in the US when asked to make a direct tradeoff about the relative importance between low infection and death rates and a strong economy in the near-term, more than 40 percent selected health, while more than 20 percent selected the economy or privacy and personal liberty. These choices have so far remained consistent

Ongoing concerns about the impact of the coronavirus also remain very real. When it comes to return-to-work strategies, our survey reveals a disconnect between employers and employees across most industries.

<img alt="Finding the disconnect" height="493" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/f487579f312d4f208b283c00bcee878d.png" width="700" />

Interestingly, 79 percent of employers say they are adequately supporting the physical and emotional health of the workforce, while only 44 percent of employees say the same.

While employers received mixed reviews on how they&rsquo;re handling the pandemic, there is one thing they could do that would appeal to most employees: continue to offer the option to work from home.

Prior to the lockdown, only 10 percent of individuals indicated they were working from home. By July 2020, that percentage had quadrupled to nearly 45 percent.

<img alt="Virtual reality" height="460" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/7207698b307c4f138c3fff55e390847c.png" width="700" />

Of those currently working remotely, 83 percent indicate they would like to continue to work away from the office at least occasionally, while 58 percent would like this to be their primary way of working.

In fact, of those individuals who are now working remotely full-time, only one in ten say they want to return to their workplace.

Emerging stronger to a different normal

Even though each day brings more uncertainty, there are definitive actions that can improve business resilience and strength in the post-pandemic environment.

IBV research has revealed <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-action-guide" target="_blank">a framework that outlines a path forward</a>, organized around seven key imperatives that will be useful for any organization&rsquo;s executive team. Consider this guide as a checklist.

The first imperative is for <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/return-to-work" target="_blank">talent leaders and Chief Human Resources Officers (CHROs)</a> to empower a remote workforce. Executives should consider a full revision of their strategy and policies to support remote and distributed work, with specific guidance and rules in place. Communication is key. Be aware that what leaders think they&rsquo;re communicating isn&rsquo;t always being perceived the way it&rsquo;s intended. Our research shows that 74 percent of executives say they are currently helping their employees learn to work in new ways, yet only a third of surveyed employees said the same: that&rsquo;s a 36-point gap. Clearly, feedback loops need to be built into all interactions.

The second imperative is for <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/cmo-action-guide" target="_blank">Chief Marketing Officers (CMOs)</a> to engage customers virtually. In this pandemic, service centers have been swamped with massive call volumes. Exponential demand can be met by the exponential power of digital tools. Virtual engagement with clients and partners will remain a core part of doing business, even as we reestablish face-to-face interactions.

The third imperative is for <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/cio-guide-challenges" target="_blank">Chief Technology Officers (CTOs) and Chief Information Officers (CIOs)</a> to provide remote access to everything. When shelter-in-place orders were issued, uncomfortable questions arose for many businesses, such as how to transition overnight from existing models to virtual ones. Fortunately, as a tech-at-its-core business, IBM was already configured to operate in this way. But for many organizations, the question has been, &ldquo;can-we-do-this?&rdquo; CTOs and CIOs need detailed business continuity plans that make the most of digital technologies to create operational resilience and flexibility.

The fourth imperative is for Chief Operations Officers (COOs) to accelerate agility and efficiency. The solution lies in the immense benefits of cloud-native capabilities. Organizations embracing public and hybrid cloud are already using this crisis as an opportunity to emerge stronger, better, and more resilient.

The fifth imperative is for Chief Information Security Officers (CISOs) to protect against new cybersecurity risks. As more workloads and users move to cloud operations, accelerated by the current work-from-home requirements, cybersecurity resilience will evolve from a baseline performance requirement into a driver of a competitive advantage. What began as extraordinary will become systemic.

The sixth imperative is for Chief Financial Officers (CFOs) and <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-supply-chains" target="_blank">Chief Supply Chain Officers (CSCOs)</a> to reduce operational costs and enhance supply chain continuity. The ability to generate granular, real-time data about supply chains has gone from nice-to-have to necessity. Volatility has become hyperlocal, with excess inventory in one city and dire need in another.

The seventh imperative is for Chief Medical Officers and public sector leaders support health providers and government services. It&rsquo;s become critical to expand the use of human-centered technology interfaces, to help those racing to find the right treatments, vaccines, and cures, as well as to help manage physical, mental, and economic health. Developing a sophisticated strategy that combines the strengths of humans and machines will also be central in preparing for the effective re-integration of newly remote teams across these areas and industries&mdash;and across the economy and society, as well.

Organizations can invest now to expedite COVID-19 recovery

So then, how should companies <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-recovery" target="_blank">finance these actions now to expedite post-pandemic recovery</a>?

The pandemic has thrown organizations into crisis mode, with respondents reporting all business capabilities growing in importance. Asked about the most pressing of those priorities, C-suite executives ranked &ldquo;workforce safety and security&rdquo; number one, closely followed by crisis management. But right after that came familiar concerns: cost management and cash flow management.

<img alt="Executives' top business priorities" height="510" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/efb992e56ba04a13ab8ee1e7d8a80df3.png" width="700" />

A central theme in the search for cost efficiency is the question of investment and ownership, or capital expenditure (CapEx) versus operating expenditure (OpEx). A valuable business approach would be to Invest the right way: CapEx with a technology twist.

<img alt="A shifting paradigm" height="422" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/8a11ef6e6090405aab5f9a081e5520f3.png" width="700" />In the course of the crisis, executives have come to realize an aspect of ownership that has been under-appreciated for a long time: it increases independence and buffers against outside shocks. Consequently, in a reversal of the OpEx shift paradigm, executives state they plan to increase CapEx and decrease OpEx, with Cloud and AI at the top of their priority list.

The principle of the Honorable Merchant

To conclude, as the world faces a new normal, we&rsquo;re seeing a fundamental shift that corresponds to the principle of the <a href="http://www.ihk-nuernberg.de/de/media/PDF/Publikationen/Hauptgeschaeftsfuehrung/broschuere-the-honorable-merchant-.pdf" target="_blank">Honorable Merchant</a>. What is it? It&rsquo;s a historically rooted model of operating a business in Europe. The principle prizes prudent accounting and operating, and responsibility toward the enterprise and all of its stakeholders, including society and the environment. <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-recovery" target="_blank">IBV survey data</a> shows that the ideals of the Honorable Merchant are returning to executive thinking: an unexpected positive outcome of this crisis.

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Leading businesses out of the COVID-19 pandemic

August 31, 2020 marked the official six-month mark since we went into COVID-19 lockdown in my home state of Connecticut. Around that time, I published the first in a series of<a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government-rebuild-recover" target="_blank"> blogs</a> that sought to break down government response efforts into logical and digestible phases to help leaders organize their approach. The Phase I immediate response was all about emergency management and business continuity. This phase started with providing advanced analytics to track the virus and predict where it was going next. In collaboration with our government partners, IBM helped launch the <a href="https://covid19-hpc-consortium.org/" target="_blank">COVID-19 High Performance Computing Consortium</a> to help researchers everywhere better understand COVID-19 treatments and potential cures. This initial research has produced new insights into how the virus <a href="https://elemental.medium.com/a-supercomputer-analyzed-covid-19-and-an-interesting-new-theory-has-emerged-31cb8eba9d63" target="_blank">works</a>.

Working alongside government leaders, we helped them move to models enabling case workers to provide critical services from home. We armed governments with tools to engage citizens directly, and virtual assistants to reduce the burden on contact centers. We supported remote learning. We helped keep the lights on, and even improve services in this uncertain and challenging environment.

Increased demand for protective measures

As spring turned to summer, many regions moved to Phase II with loosened restrictions, resulting in an increased demand for and focus on deploying protective measures (for example, contact tracing, return-to-workplace and exposure notification efforts) aimed at mitigating the spread of the virus while also enabling economies ravaged by the pandemic to reopen and begin to recover. IBM has been in the middle of these initiatives with tools and local resources to support our government partners.

Looking back at <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government-rebuild-recover" target="_blank">what I wrote earlier this year</a>, however, I&rsquo;m struck by how hopelessly na&iuml;ve I was. Like many, I thought the path from response through recovery would be linear&mdash;one phase would lead to the next, and we would soon return to some semblance of normalcy. But we soon learned the path to recovery would be neither linear nor consistent across countries and regions.

While many regions have been largely successful in containing the virus and reopening their economies, others (including the <a href="https://coronavirus.jhu.edu/map.html" target="_blank">US, Brazil, India, Mexico</a>) remain in a reactive position as the virus continues to spread. Today, countries across the world vary in their phases of recovery. Some are responding to a resurgence of the virus by moving back toward an emergency response and tightening restrictions, while others are moving toward a new &ldquo;normal.&rdquo;

Importance of trust

A central theme has emerged in many of our conversations with government leaders from around the world during these unprecedented times. Namely, restoring and rebuilding the trust and confidence of citizens as an increasingly critical driver for government effectiveness. According to <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-consumer-survey" target="_blank">IBV consumer research</a>, globally, less than 60 percent of citizens we surveyed believe the response actions taken by governments in response to the pandemic have been appropriate. And people are scared.

Two-thirds fear that lifting restrictions will result in another outbreak in their community, and nearly three out of four people are concerned about another wave of the virus hitting during the upcoming winter. Trust is an increasingly important issue that governments must face head on.

According to unpublished research from the IBV, in the US (which by many measures has seen the most widespread impact from the global pandemic) less than 40 percent of respondents trust public health officials and only 17 percent trust elected national leaders. And only slightly more than one in five people trust local and regional and elected leaders.

Leaders struggle to answer the question: What can we do to restore citizens&rsquo; confidence in our societal institutions broadly, whether that be in our retail supply chains, our healthcare systems, or our scientists? Perhaps more significantly, what must we do to restore trust and faith in our government systems and institutions&mdash;to protect and serve the public, to maintain the very stability of our society?

Continual reinvention and transformation in government

What has become clear is that we need to work together to transform how government operates. The pandemic and its health and economic impacts, have challenged and exposed rigid governance processes, and the seams and limitations in core government services. While industry has been working with governments on transformation and reinvention initiatives for decades, the simple truth is that transformation is no longer optional, or an extracurricular focus. It&rsquo;s quickly becoming THE focus. And it&rsquo;s not just governments. Leaders across industries say digital transformation is even more of a priority today (see Figure 1). We must re-imagine the business of government, and we must adapt fast.

Figure 1: Executives who assign high or very high priority to digital transformation (Source: <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-recovery" target="_blank">IBM Institute for Business Value</a>.)

<img alt="Executive who assign high or very high priority to digital transformation" height="265" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/527f9922f76c499f804535e1d77a32bd.png" width="710" />

Leaders across the public sector must make the most of what they have, rethink the way they work, and find opportunities for efficiencies. And leaders must achieve this within an environment where processes can be difficult to change. What&rsquo;s more, technology solutions are often not designed to work together, and security and privacy have been thought of after the fact, rather than as core elements to government solutions.

At the same time, many citizen services are supported by antiquated applications and infrastructure with increasing cost of maintenance, weakening security, and decreasing reliability. No agency will &ldquo;serve citizens better&rdquo; by maintaining the status quo. Effective agency and ministry leaders understand that engaging their constituents successfully is a function of resiliency, agility, data protection, and scale. This means adapting technologies that consumers experience elsewhere to work for government to deliver the secure transformation many know has been delayed for too long.

Technology solutions are key

In an environment of growing demands and limited resources, technology solutions can play a significant role in addressing today&rsquo;s challenges while embracing opportunities for the future to enable&mdash;and realize&mdash;a new normal for governmental agencies and healthcare organizations. All this will allow them to be more agile, resilient, secure, and responsive to future threats.

Government leaders should focus on increasing engagement and improving access to services. Citizens today are more connected and empowered, with expectations of efficiency and transparency in their interactions with government agencies&mdash;just as they expect from their banks or retailers.

Access to new and unprecedented amounts of data is creating opportunity for deeper insights, more personalized service and ultimately more proactive care. Artificial intelligence (AI), data and cognitive systems can support a transition to personal-centered care across the continuum, empowering care providers, social services agencies, and families and citizens.

The State of California and <a href="https://www.ibm.com/industries/government/case-studies/sonoma-county-and-ibm-working-together-to-change-lives" target="_blank">Sonoma County</a>, for example, are moving to help at-risk families, children in need, and the homeless. By pulling data from multiple departmental sources, breaking down department silos, using AI to identify patterns of risk, and then prioritizing collective efforts, they can support individuals with greater levels of personalization and care. Similar efforts are being deployed in <a href="https://www.ibm.com/events/think/watch/replay/126556293/" target="_blank">Orange County</a>, California and for the State of <a href="https://www.ibm.com/blogs/industries/louisiana-hepatitis-c/" target="_blank">Louisiana&rsquo;s Department of Health</a>.

Unlock the value of data

Government leaders should unlock the value of their data and put it to work. The mission for recovery and resiliency&mdash;and to save people&rsquo;s lives and livelihoods&mdash;begins with a modern and swift approach to deliver benefits, care, and cures. Organizational data that&rsquo;s been secured, aggregated and analyzed generates meaningful insights that can lead to actionable results to improve care and services.

In a world where data is exponentially expanding, governments need the tools that will help securely store, collect and organize data, facilitate interoperability, and help you break down data silos across the enterprise.

Government leaders need to reimagine the business of government, digitally transform operations and modernize core systems. Government leaders live in a world where legacy systems, inefficient processes and siloed systems make it hard to pivot and respond in a crisis. Leaders need to react more quickly, deliver at lower costs, and improve the quality of services. They need capable, nimble systems and processes with sound structural resiliency and a modern approach to workflows, data, and security. Examples of how governments are successfully transforming include:

<ul>
	<li><a href="https://www.ibm.com/case-studies/nhs-digital-security-services" target="_blank">The National Health Services</a> in the UK moved to enhance security services and support. This enabled them to predictably and precisely block would-be threats, and boost cybersecurity preparedness and resilience for the sake of patient care.</li>
	<li>The <a href="https://www.ibm.com/case-studies/b025674t19569b75" target="_blank">New York Department of Social Services</a> launched an online portal that allows clients to access services more readily and conveniently, improving the process of applying for supplemental food assistance.</li>
	<li><a href="https://www.ibm.com/blogs/think/2019/08/bringing-blockchain-to-healthcare-for-a-new-view-on-data/" target="_blank">Canada&rsquo;s University Health Network (UHN)</a> leveraged blockchain to create a new model for managing consent.</li>
</ul>

Governments, including the US Federal Government, are working to protect sensitive citizen and operational data, prevent advanced threats, combat fraud, and safeguard cloud and mobile access across the multiple devices that citizens and businesses use for services. In fact, the <a href="https://au.newsroom.ibm.com/2018-07-05-Australian-Federal-Government-signs-a-1B-five-year-agreement-with-IBM" target="_blank">Australian Federal</a> Government is doing that, and more.

It&rsquo;s been a tough six months, but we at IBM have been proud and honored to work with government leaders around the world, not only in the initial emergency response and recovery phases of the pandemic, but also what lies beyond. Many leaders are now moving to reimagine government, and are emerging smarter, more flexible, and more resilient.

Emerging stronger, more resilient

We, as nations and citizens, have a long way to go, and there&rsquo;s a lot of hard work ahead of us. But I remain optimistic. We&rsquo;ve been here before. We have survived great turmoil. In just two decades, we have endured a global pandemic, a collapse of our global financial system, and too many global conflicts and tragedies to keep count. And each time we have emerged stronger and more resilient.

Today we&rsquo;re armed with new and powerful technological capabilities that allow us to innovate in ways previously unimaginable. We have AI to support new intelligent workflows, flexible hybrid cloud architectures that will enable agility and business process orchestration, and tools to more securely engage the citizenry while protecting privacy. Each of these new capabilities are transformational in their own right. When we bring them together, an entirely new way of protecting and serving the citizenry is possible. The only failures are those of vision and courage. We are limited only by our imagination.

Let&rsquo;s get to it.

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Phase III: The essential role of government in response to COVID-19

As the impact of COVID-19 reverberated throughout the world, transformation journeys were disrupted, and organizations reacted by moving their employees to shelter-at-home while continuing critical business operations. They also updated workplace policies, deployed virtual employee engagement processes and quickly embraced collaboration platforms to effectively execute work virtually. In this evolving world, the physical barriers of an office have been removed with the shift to distributed, self-empowered teams in a virtually equidistant world.

However, as organizations adjust to the new normal, the need for accelerating Digital Reinvention&reg; and cloud adoption has become a crucial lever for growth.&nbsp;

Our perspective on Digital Reinvention envisions a <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/build-cognitive-enterprise">Cognitive Enterprise&trade;</a> powered by intelligent workflows, underpinned by hybrid multicloud. However, navigating the journey in the uncharted waters of remote, contactless work requires a resilient delivery model designed for both virtual and physical work patterns.

We have evolved and strengthened our services delivery model to help our clients address the new requirements and continue to drive sustained value. We call this holistic model <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/service-delivery">&ldquo;Dynamic Delivery.&rdquo;</a> It integrates technical foundations and humans in the network with virtualized methods, enhanced with AI and automation, to support rapid adaptation to changing business conditions. As the report says, it goes beyond just virtual collaboration or automating select processes. It represents the next generation of service delivery necessary to help businesses realize value in the new normal.&nbsp;

According to <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/service-delivery">our recently released report</a> on the new delivery model: &ldquo;Fundamental to Dynamic Delivery is the focus on motivating and empowering employees, inspirational virtual leadership, flexible and available expertise, and interconnected digital knowledge platforms and processes.&rdquo; Companies that deploy Dynamic Delivery can improve timeline confidence, orchestrate and optimize talent, reduce costs, and continue to accelerate their digital transformation journey to become Cognitive Enterprises.

Dynamic Delivery comprises three key components, each with three key groups of capabilities (see figure below):

<ol>
	<li>Delivery foundation: Fulfils the technical requirements necessary for a flexible service delivery model.</li>
	<li>Humans in the network: Provides the roadmap for building and managing virtual teams, developing and deploying new engagement methods, enhancing leadership models and enabling cloud-based knowledge management.</li>
	<li>Contactless delivery: Uses the necessary methods and tools framework enabled by extreme automation and seamless virtual collaboration.</li>
</ol>

These components and capabilities are based on insights we gained from virtualizing our own operations across the globe and successfully delivering multiple client engagements since the onset of the pandemic.

<img alt="Reimagining service delivery" height="300" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/7557434b819443879056ea6e29c845eb.jpg" width="740" />

While we continue to support our clients during the pandemic, the phrase &ldquo;we won&rsquo;t be unprepared again&rdquo; echoes repeatedly. Whether you try to do it on your own, or engage with experienced service providers, there are some actions you can take to be better prepared for the future.

To get started, we recommend initiating the following actions on each of the nine components shown in the figure above:

<ul>
	<li>Perform a gap assessment. Examine your work practices to determine which are best suited to virtual delivery and which require co-location. This gap assessment should serve as a starting point in your delivery transformation.</li>
	<li>Develop standards. Review your infrastructure&mdash;including your network, tools, IT support, and virtual office configurations&mdash;to enable virtual working.</li>
	<li>Redesign, build a roadmap and deploy. Establish polices, processes, tools, enablement, and governance across the nine components.</li>
	<li>Create strong governance and measurement systems. Install digital dashboards, enabled by a platform to foster transparency and collaboration. This is critical to pervasive adoption and buy-in of the Dynamic Delivery model in your organization.</li>
</ul>

As you consider transforming delivery in your organization, we encourage you to address the following questions:

<ul>
	<li>Are you establishing new capabilities for remote interaction and engagement with your customers and vendors?</li>
	<li>Are your infrastructure, policies, and IT support processes enabled for scalable and compliant delivery from offices and non-traditional locations?</li>
	<li>Do you have a delivery platform for seamless operations across locations, and is your platform scalable and interoperable for deployment across partners?</li>
	<li>Are your security practices adequate and embedded in the new ways of working?</li>
	<li>Are your processes for employee acquisition, onboarding, development, assessment and engagement reimagined with a mix of virtual and in-person?</li>
	<li>How are you executing capacity management and deployment processes for virtual delivery?</li>
	<li>Have you institutionalized your knowledge management tools and processes to enable seamless virtual delivery?</li>
	<li>Are your work practices and methods automated and enabled for virtual delivery in case of disruption?</li>
	<li>To what extent is your process for contracting with partners and vendors digitized and are your vendor management processes virtualized?</li>
	<li>How have you enabled your governance for virtual execution, for example, a digital dashboard?</li>
</ul>

To learn more, read <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/service-delivery">our new report on Dynamic Delivery</a>.

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COVID-19 disruption has provided a unique opportunity for many companies to accelerate their journey to Cognitive Enterprise and hybrid multicloud.

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Accelerate your Digital Reinvention with a resilient, Dynamic Delivery model for a rapidly changing world

COVID-19 is making people rethink where to live, how to commute, how to work, how to design, how to construct, how to source, how to operate, and how to maintain. Companies in the Engineering, Construction, and Operations (EC&amp;O) industry are facing this rapidly changing reality, and those who can execute fast, innovative, and flexible responses, supported by digital technologies, will be better positioned to weather the changes and thrive.&nbsp;

Prior to COVID-19, big cities were already seeing their populations dip, and the pandemic could accelerate this trend as people consider relocating to less densely populated areas. Innovation will be key and will create a new wave of smart city upgrades. According to the <a href="https://www.arcadis.com/en/global/our-perspectives/international-construction-costs-2020/">Arcadis 2020 ICC Index</a> report for 100 of the world&rsquo;s cities, &ldquo;The impact of COVID-19 on public health is bringing a new understanding and awareness of the need to make our assets, cities, and communities more resilient.&rdquo;

Cities are reimagining their transportation concept and considering smart infrastructure upgrades. As we&rsquo;ve seen already happening in Europe, some cities are making less room for cars post COVID-19. For example, the city of <a href="https://www.weforum.org/agenda/2020/04/milan-covid-19-coronavirus-lockdown-reducing-car-use/">Milan</a> has been a leader with the intent to transform streets by adding biking lanes, introducing new speed limits, and creating wider pavements. 

Real estate and other asset owners are asking themselves if their assets are still fit for purpose post-COVID-19. New developments will need to be &ldquo;circular by design&rdquo; to re-purpose and re-use assets consistently in the future. A good example is an office space or hotel that easily can be transformed into a hospital, like <a href="https://investors.aecom.com/news-releases/news-release-details/aecom-completes-phase-one-transformation-mccormick-place">AECOM</a>&rsquo;s recent work transforming McCormick Place Convention Center in Chicago into an alternate care facility for patients with COVID-19 symptoms.

We expect a subset of people who are working remotely today to continue to do so after the pandemic, and that trend should grow even faster with Millennials and Generation Z. To support this, they will look for smart home upgrades including better connectivity, infrastructure, and work space.

In the area of managing employee health and worker safety post-COVID-19, more immediate insights will become very important. One example is the <a href="https://www.portofantwerp.com/en/news/port-antwerp-tests-smart-bracelet-prevent-corona-infection-workfloor">Port of Antwerp</a>, where workers are testing smart watches that buzz if workers are too close, supporting the required social distancing of 1.5 meters.

We also expect that post-COVID-19, there&rsquo;ll be more automation and robotics in intelligent EC&amp;O workflows, with less human-to-human interaction to prevent disease transmission. 

The current situation means supply chain ecosystems are disrupted, logistics are restricted, and mid-market suppliers and sub-contractors are vulnerable. Key workflows and ways of working need to be re-examined with tighter collaboration and better visibility across the supply chain ecosystem. The need for common language to collaborate is high, and the value of speeding up new regulations and standards like <a href="https://www.iso.org/news/ref2364.html">ISO 19650</a> is clear.

COVID-19 response

EC&amp;O companies are working on a three-step approach to fight the battle and manage the journey back to operational stability, while preparing for the next normal: respond, recover and reinvent.

<img alt="" height="337" src="https://s3.us-south.cloud-object-storage.appdomain.cloud/ibv/052bbcfb565346728fc16f5df938c2b5.png" width="690" />

We believe the future of EC&amp;O will be much more digital, with faster adoption of Industry 4.0, circularity, and the use of differentiating business platforms.

Respond

As we write this blog, enterprises have already taken actions to respond to the COVID-19 challenge. Companies in the EC&amp;O industry have prioritized community and workforce health and safety. New partnerships have been initiated, such as <a href="https://www.vinci.com/vinci.nsf/en/news-update/pages/vinci_autoroutes_partners_with_the_covid_19_barometer_on_behaviour_in_france_france_042020.htm">VINCI</a> teaming up with market research institute Ipsos on the Datacovid initiative. Its purpose &ldquo;is to supply new, anonymous open data to scientists and public and private organizations, in order to track behavior in France, and its impact on the epidemic&rsquo;s dynamics over time.&rdquo;

What can E&amp;CO companies do right now to address the immediate impacts of COVID-19?

<ol>
	<li>Protect and support employees and stakeholders while moving to new ways of working and ecosystem collaboration</li>
	<li>Stabilize IT, manage project risks, and secure operations and supply of critical equipment, material, components and labor.</li>
	<li>Identify and reconfigure key elements of the enterprise operating model&mdash;and project delivery, resource-mix, and workflows&mdash;to conform to the new ways of working</li>
	<li>Analyze risk (worst case/best case scenarios) across demand, supply, projects, and other financial metrics. Enable scenario modeling to manage risk in a volatile environment.</li>
</ol>

Recover 

Having survived through the initial shock and assessed the magnitude of the pandemic&rsquo;s impact, enterprises should prepare for a fast restart.

<ol>
	<li>Drive cost optimization through sourcing, SG&amp;A, improving productivity, reductions in cost of failure, workforce, and IT. This also includes optimizing CapEx/OpEx plans to release cash. &nbsp;</li>
	<li>Build a new and updated digital asset lifecycle services model conforming to the new normal. An example of this would be to enable tighter collaboration among strategic suppliers, customers, &nbsp;and partners to get through the current reality.</li>
	<li>Enable operational excellence within the reconfigured processes and resource mix. Conforming to the new ways of working. An example of this is the adoption of the connected built environment platform linking key project stakeholders through the lifecycle of the asset to reduce cost of failure resulting in savings of up to 10 percent of contract value. The <a href="https://www.digiplaceproject.eu/">DigiPlace</a> initiative in Europe, for example, is moving toward a European digital platform for construction.</li>
	<li>Identify and build foundational capabilities required for the new revenue and operating model. An example of this includes the need to set a future talent model with secure knowledge, skills, and other differentiating capabilities.</li>
	<li>Enable data standardization and &ldquo;platformization&rdquo; that can be used internally and externally. For example, IBM worked with <a href="https://newsroom.fluor.com/press-release/corporate/fluor-uses-ibm-watson-deliver-predictive-analytics-capability-megaprojects">Fluor</a> to build a data platform which integrates its current and historical project data for benchmarking, and better project reporting and control. This capability is now helping Fluor&mdash;with better project health and risk assessments, and scenario actions&mdash; 
	to respond to the current challenges, leveraging cognitive intelligence for process efficiency and real-time analysis.</li>
</ol>

Reinvent

In the long term, to thrive post-pandemic, EC&amp;O enterprises will have to align with next generation business models by leveraging new technologies and exploiting their core strengths.

<ol>
	<li>Implement structural solutions to address new ways of working in the different normal across the enterprise, supply chain partners, and customers.</li>
	<li>Build and leverage cognitive intelligence, on top of the data and other business service platforms, for process efficiency and real-time analysis.</li>
	<li>Win in the marketplace with differentiated capability and lowest cost to serve</li>
</ol>

COVID-19 will be controlled. The economy will reopen. But life and business must evolve to meet the demands of a changed world. EC&amp;O companies that take prudent short- and long-term actions now will be positioned to emerge from the current crisis stronger and more resilient.

IBM&rsquo;s global team of experts is delivering new business insights to help our clients navigate disruption and prepare for the future.&nbsp;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">Click here</a>&nbsp;to access our COVID-19 Action Guide and related resources.

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COVID-19 accelerates new ways of working in the Engineering, Construction, and Operations industry

The Oil &amp; Gas (O&amp;G) industry is facing incredible challenges amidst the COVID-19 pandemic. The industry&rsquo;s demand destruction at the same time as its production contention has resulted in both the oversupply of resources and the subsequent oil price collapse. While challenging external forces are not new to O&amp;G companies, they are finding themselves having to adapt with greater speed and agility to address the current landscape and prepare for a new market reality.

The current oversupply scenario has filled almost 7 billion barrels of global storage and cargo vessels are being used as crude storage rather than transport. The subcontractor services ecosystems have been the first casualties of the crisis, with contracts terminated, projects postponed, operations minimized, and rate-cuts demanded. The magnitude and implications of this challenge have motivated political alliances, agreements, and decisions previously considered impossible, such as widespread production cuts.

Supply/demand imbalance will impose a new economic reality that challenges organizations&rsquo; ability to maintain production in individual fields, sanction new development, or even explore new areas. Likewise, downstream runs have been curtailed and await an increase from the nominal 30-40 percent decrease in fuels purchases.

Even in the midst of all this, O&amp;G companies are planning for their larger transformation that will address society&rsquo;s expectation to transition energy beyond hydrocarbons.

Against this market backdrop, organizations need to think about the path forward on three timelines:

<ol>
	<li>Respond &ndash; Focus on short-term priorities of safety and operations</li>
	<li>Recover &ndash; Empower and enable organizations to adapt to the new situation</li>
	<li>Reinvent &ndash; Develop new operating models and capabilities for growth.</li>
</ol>

Respond &ndash; Focus on short-term priorities of safety and operations

O&amp;G companies must prioritize the safety and health of mission-critical employees and partners. At the same time, they have to enable new ways of working, internally as well as with ecosystem partners. The industry approach of integrated operations is a best practice that other industries are now embracing to keep the lights on. Upstream organizations will leverage their remote and virtual ways of working to rapidly adapt to COVID-19 realities.

Companies are focusing on preserving free cash flow through cost-cutting, postponing projects, cutting dividends, and suspending share buybacks. National oil companies are balancing their social programs with these economic headwinds.

At the same time, companies are looking to stabilize IT and address cybersecurity to protect operations, technical integrity of facilities, availability of materials, and scheduling and deployment of labor. They are also revisiting risk analysis, technical and operational integrity and critical resources, and assessing individual assets&rsquo; financial sensitivity, and creating options based on technical considerations, interdependencies, and contractual obligations.

Recover &ndash; Empower and enable organizations to adapt to the new situation 

Adapting for the longer term, companies must focus on:

<ul>
	<li>Performing cost takeout initiatives in procurement, inventory optimization and workforce demand alignment, and cross-discipline work planning/execution</li>
	<li>Examining financing options for ongoing projects to preserve cash</li>
	<li>Enabling tighter collaboration with strategic suppliers and partners to develop mitigation and crisis plans that protect capabilities and skills required for normalization</li>
	<li>Acting on asset analysis, inclusive of M&amp;A and divestiture options</li>
	<li>Leveraging exponential technology for better process visibility and workflow efficiency.</li>
</ul>

Reinvent &ndash; Develop new operating models and capabilities for growth

As the new normal reaches a steady state, O&amp;G companies have to focus on reinvention:

<ul>
	<li>Co-innovating across disciplines, including new ways of working that take into account lessons learned from the pandemic, operational boundaries of assets, and exponential technology</li>
	<li>Building on internal and strategic partners&rsquo; strengths to restore operation of highest yielding and economically sustainable fields</li>
	<li>Exploring new technical options for extended economic life of assets</li>
	<li>Embedding sustainability requirements and costs in all green/brown field analysis.</li>
</ul>

COVID-19 will be controlled. Critical infrastructure and O&amp;G production will be a prerequisite to normalize all economies as the world recovers. As we emerge from the pandemic, society, shareholders and employees will have higher expectations for operational integrity to embed sustainability goals, as well as resilience to the cyclic economic challenges the industry still will face. Likewise, the forced transition to digital connectivity will afford new approaches and ideas to drive business performance, and also challenge some historically held ideas about what actions must be conducted where, and by whom.

O&amp;G companies embracing the new normal will gain a competitive advantage in a more sustainable hydrocarbon industry. While new regulations may emerge, digitally enabled companies will be more equipped to respond with agility to marketplace volatility.

To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic.&nbsp;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19" target="_blank">Click here</a>&nbsp;to access our COVID-19 Action Guide and related resources.

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COVID-19 accelerates new ways of working in the energy frontier

&ldquo;It is not the strongest species that survive, nor the most intelligent, but the ones most adaptable to change.&rdquo; &ndash;attributed to Charles Darwin

The experience of governmental lockdowns, self-isolation, quarantines, social distancing and other important measures to protect us from COVID-19 weighs heavily on us and continues to impact each of us personally and professionally. We have all seen the devastating and ravaging effects of the COVID-19 pandemic on an unprecedented global scale&mdash;especially in our travel and transportation (T&amp;T) industries.

In the Airline, Travel and Tourism sector, with severe travel restrictions and extensive border closures, demand has plummeted to almost non-existent levels. In the most recent <a href="https://wttc.org/News-Article/WTTC-now-estimates-over-100-million-jobs-losses-in-the-Travel-&amp;-Tourism-sector-and-alerts-G20-countries-to-the-scale-of-the-crisis">World Travel and Tourism Council Analysis</a>, revised forecast models are showing global sector impact of over 100 million job losses and nearly USD 2.7 trillion GDP losses to the world economy in 2020. Never have we seen such a grim near-term outlook.

In the Transportation, Freight and Logistics sector, even with the classification as critical infrastructure throughout the world, we have seen steep declines in demand and capacity&mdash;as much as 20-30 percent in some forecasts. And with uncertainty looming in consumer and business spending, manufacturing confidence, and trade-lane bottlenecks, on top of global job losses and economic contraction, the risk of categorical deglobalization is real. Forecasting future demand and capacity requirements is nearly impossible.

However, as our T&amp;T industries are tightly coupled with all aspects of critical infrastructure, global peace and prosperity, there is no doubt we will recover. And as leaders, it is our responsibility to adapt quickly, accelerate the recovery and emerge even stronger in the next normal.

Trust is the new currency

Trust is valuable in all aspects of life, but it cannot be purchased, it must be earned. Leaders in our industries must consider how to reimagine trust models, and elevate ideas and innovation learned from the current crisis. Earning trust with all stakeholders, including customers, employees, business partners, governments, shareholders, and others is critical in the face of extreme uncertainty and can be the only currency worth accepting.

Trust in the next normal is about confidence in actions taken by key stakeholders, particularly customers and employees. Proactive operating models&mdash;with open and transparent approaches and activities that bring surprise, delight and deepening engagement&mdash;must be sustained and become a dependency for long-lasting credence. For example, in our T&amp;T industries, we are seeing the rapid introduction of public health measures and touchless solutions as a key part of safety and security for building trust. Anti-microbial facemasks, gloves and other protective equipment, along with transparent sanitation techniques and food safety tracing, prep and certifications along with effective physical distancing can bring confidence to customers/passengers and employees. In addition, reimagining the customer journey with touchless (or contactless) solutions, such as AI-based computer vision and imaging, voice and face-based processing, biometric authentication and digital IDs/wallets, automated and robotic self-service, and other innovative approaches will provide significant trust and confidence benefits. Collaboration among industry organizations, associations, governments, and regulatory bodies will also be critical to accelerate trust on a broader industry basis, including developing global standards, common industry platforms and reconciling social and ethics concerns with data sharing, security and privacy.

We also cannot overlook the power of reimagining and/or repositioning existing markets, products, services and internal processes leveraging trust as a key (re)design principle. A clear example of this reimagining is how airlines are leveraging unused aircraft cargo capacity to send medical supplies to critical personnel during this pandemic. In hotels, we see rooms being quickly repositioned for medical workers and recovering patients. Employers are also filling the trust bank with their employees by shifting to virtual work environments, providing honest and open communications; finding tools and solutions in sincere fashion to ensure their long-term health, safety and security. A wonderful example is how some T&amp;T organizations are forming partnerships with critical businesses and organizations to take on furloughed employees for temporary employment.

In addition, our T&amp;T industries must develop reimagined strategies and bold actions in cleaner energy and sustainability. As we just celebrated the 50th Anniversary of Earth Day, it reminded me of the collective challenges we all face and how important innovation and human ingenuity are to us accelerating our triumph over this existential threat. Comprehensive strategies and plans that are proactive, aggressive and possibly unconventional can demonstrate leadership for each stakeholder and must be considered. Innovative trends, such as open and transparent CO2 emissions footprints being embedded into &ldquo;sustainable&rdquo; loyalty currencies. Promotions and product offerings that drive customer behavior being pursued are bio-fuels, clean-energy vehicles and heavy equipment, sustainable plastic distribution and consumption, renewable and clean-energy sources with geospatial weather forecasting for heating and cooling, and aggressive elimination plans of emissions for computing systems. The bottom line is our T&amp;T industries must ensure all our efforts and energy are demonstrated in real and trusted commitment to responsible stewardship of our planet (see <a href="https://www.ibm.com/blogs/corporate-social-responsibility/">IBM&rsquo;s &ldquo;Good Tech&rdquo; initiatives</a>).

Beyond resiliency&hellip;to business elasticity

The focus in recent years has been about stabilizing and hardening our environments to ensure we can operate effectively in a relatively stable economic and political environment. However, as we have learned through the COVID-19 pandemic, we must go beyond resiliency and reinvent our organizations to drive elasticity in our business models as a fundamental design principle.

Elasticity implies that organizations, cost structures, systems, and business processes must be considered as interoperable capabilities and be able to scale both up and down, in near-real-time, to meet the dynamic changes and demands on the organization. Elastic business models will have a lasting effect in future discontinuity or crises. They&rsquo;ll help critically address our T&amp;T industries&rsquo; high fixed-costs and rigid structures which, during COVID-19, have resulted in unprecedented financial loss and operational impact.

With IBM&rsquo;s distinct and &ldquo;maniacal focus&rdquo; (<a href="https://www.linkedin.com/pulse/my-first-day-ceo-our-journey-together-arvind-krishna">see Arvind Krishna&rsquo;s first-day CEO blog</a>) on hybrid cloud and AI, coupled with our IBM services, we are uniquely positioned to help our T&amp;T clients reinvent and build elastic business models and technology capabilities, and &ldquo;architectures&rdquo; that can adapt to volatile business environments and demands...up and down.

For example, to reduce operational costs while accommodating volatility of demand and call volumes, and empowering a flexible segment of employees to work remotely, one T&amp;T client set up quickly to utilize our AI and cloud-based <a href="https://www.ibm.com/cloud/watson-assistant-2/?p1=Search&amp;p4=p50290480262&amp;p5=b&amp;cm_mmc=Search_Google-_-1S_1S-_-WW_NA-_-%2Bwatson%20%2Bassistant_b&amp;cm_mmca7=71700000060917569&amp;cm_mmca8=aud-311016886972:kwd-451214968547&amp;cm_mmca9=EAIaIQobChMIy6axzYSM6QIVUvDACh0BdwlbEAAYASAAEgKpj_D_BwE&amp;cm_mmca10=405891754057&amp;cm_mmca11=b&amp;gclid=EAIaIQobChMIy6axzYSM6QIVUvDACh0BdwlbEAAYASAAEgKpj_D_BwE&amp;gclsrc=aw.ds">Watson Assistant</a> for engaging customers virtually. Leveraging cloud and AI enables organizations to shift and flex up and down as demand, costs and capabilities need to adjust in real-time.

Another example is where <a href="https://www.ibm.com/financing">IBM Global Financing</a> provided financial support to accelerate modernization and migration of key applications into a hybrid cloud approach, eliminating the dependency on high fixed-cost data centers and extending elasticity into IT operating and cost structures. Other examples even beyond T&amp;T industries can be found on <a href="https://www.ibm.com/impact/covid-19/">IBM&rsquo;s response to COVID-19 page</a>.

My personal SARS experience

During the global SARS epidemic in the first half of 2003, I was, like many industry leaders, caught in a particularly difficult situation as a leader and employee of a major US airline. In addition to the SARS outbreak, the industry was also reeling from a number of other challenges, including post-9/11 recovery, bankruptcy (December 2002), Iraq War (March 2003), and a spate of global terror attacks (for example, in Rihadh, Jakarta and Istanbul). Many of the gut-wrenching messages from CEOs to employees and customers&mdash;messages about new procedures, liquidity concerns, and the deep uncertainty in demand forecasts&mdash;are echoing in our current crisis. But when handled with genuine grace, compassion, and integrity, these messages&mdash;even the ones with the most difficult implications&mdash;build trust.

The impacts of decisions made in these previous industry crises, however, were devastating. But they were, in almost every way, less severe than what the industry faces today. The extreme uncertainty that airlines and travel companies are grappling with today will leave deep scars and lasting memories. The SARS crisis introduced the industry to travel alerts, but now we have widespread World Health Organization travel restrictions and country border closings.

But even though the previous crisis was less intense, it made a lasting impression on me personally. I remember distinctly which vendor/partners I could rely on because they were in the crisis with me. The people and companies that earned my trust were authentically willing to engage and support with big and bold ideas and innovations in context with the situation. I remember one essential vendor/partner who took on additional risk and went to extraordinary lengths to support one critical customer initiative. As you can imagine, this cemented trust and a long-lasting impression of goodwill.

Here at IBM, we are obsessed with helping the world&rsquo;s industries and our clients&rsquo; response to this global pandemic. We strive in every interaction to be your trusted and essential partner by bringing bold ideas, innovation and assistance to accelerate recovery. It is our honor to be the backbone to many of the critical operational systems and processes in our T&amp;T industries and we will continue to be their most trusted partner in this strategic battle to emerge even stronger.

Please be safe and well with your families and loved ones.

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Accelerating COVID-19 recovery in the travel and transportation industries

Just over a month ago, I shared some <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government">thoughts</a> on the essential role that government will play in supporting our society and citizens through the COVID-19 pandemic. In that short period of time, the rate and pace of change has been astounding&mdash;in many ways, faster than anticipated. Like many of you, I have been humbled by the immensity of the challenges we are facing, but at the same, time enormously proud to see governments and citizens worldwide step up to slow and limit the spread of infection, protect the health of our communities, and care for those who have been affected by the crisis&mdash;whether physically, mentally or economically.

In my first <a href="https://www.ibm.com/thought-leadership/institute-business-value/blog/covid-19-government">blog</a>, I shared a framework for how government response would break down into three stages: immediate response, recover and rebuild, and optimize for the new normal.

We anticipated that the immediate response phase would be focused on gaining situational awareness and taking decisive action to enable remote working, remote learning, and cognitive assistance to overburdened call centers. We saw that play out in real time&mdash;government agencies worldwide have moved swiftly to deploy analytics tools to measure and predict the spread of the virus, marshal resources to support the healthcare system, provide economic assistance, and apply new models of work. Many of our government partners have been at the forefront of this:

<ul>
	<li>Government agencies in Europe and the US have deployed virtual assistants to support social services call centers</li>
	<li>One large US city distributed 300,000 tablets with educational and security software and free cellular data connections so that public school students could tap into their school&#39;s remote learning program</li>
	<li>One large U.S. state moved components of its unemployment agency&rsquo;s systems to the cloud in order to maintain performance</li>
	<li>Many health agencies are using the IBM Rapid Supply Connect offering to manage an ecosystem of new suppliers of medical equipment and personal protective equipment (PPE).</li>
</ul>

Faster than we initially anticipated, many governments have already begun to shift into the second phase, recover and rebuild. Although healthcare systems social services agencies continue to face enormous strain as they combat the outbreaks in their communities, governments moved quickly to provide financial and human resources, and for the most part these agencies have not been overwhelmed. While many countries established shelter in place and/or severe economic restrictions and citizen self-isolation, they are beginning to assess how to ease lockdowns, reinvigorate economic activity and get people back to work. At the same time, they are taking measures to quickly identify and mitigate areas of resurgence, and to rebuild the trust and confidence of the citizenry. As we move into this new phase, two main areas of focus have emerged:

Enhanced testing and contact tracing. Governments are moving to greatly accelerate both virus and antibody testing, and to develop industrial-scale contact tracing. They are building the ability to:

<ul>
	<li>Engage citizens at a community and personal level by standing up virtual call centers and cognitive assistants</li>
	<li>Hire and train contract tracers to support</li>
	<li>Manage and trace COVID-19-positive individuals through next-generation case management</li>
	<li>Serve the health-related and social needs of our most vulnerable during quarantine;</li>
	<li>Manage care and provide services for individuals and families affected by COVID-19</li>
	<li>Protect patient privacy and data as they track and trace to further limit the spread.</li>
</ul>

Unemployment assistance and return to the workplace support: As governments move to ease restrictions and restart the economy, they face the dual challenges of providing direct financial assistance to those who have found themselves unexpectedly unemployed, while at the same time standing up return to the workplace programs to help them get back to work.

While most government agencies are leveraging their existing processes and technology platforms to provide direct financial assistance, many systems have been quickly over-burdened. One US state, for instance, saw a 900 percent increase in unemployment claims in a 14-day period. Understanding that they cannot simply switch IT horses in the middle of the race, they are looking for ways to enable greater efficiency, flexibility, and agility in their systems and processes. And they are looking at how to break the workflows down into discrete building blocks, as well as assessing what can easily be moved to the cloud and what must remain in their current IT environment. We are consistently seeing an explosion in the move to hybrid cloud models that allow agencies to take advantage of cloud resources in concert with their existing infrastructure and move workloads seamlessly between the two.

One critical piece of the return to the workplace is understanding which parts of the economy are beginning to rehire, and helping unemployed people find roles that match their skills and experience in a dramatically changed environment. Entire industries and career paths have changed right before our eyes. Many people will find that the jobs they most recently filled will not come back, at least in the short term. Governments seek to develop the ability to help citizens assess their core competencies, and either match them to suitable roles, or provide guidance on the training they need to move back into the workforce.

Another critical aspect of the return to the workplace efforts, of course, is supporting worker and workplace safety. Government organizations around the world have had different experiences in responding to the pandemic. Some have employee populations that quickly adapted to work from home, while others were forced to shut down operations in whole or in part. As leaders consider re-opening office buildings and businesses, many are looking to do so in waves, enacting social distancing measures in the workplace, while at the same time keeping an eye on the potential for resurgence. Hyperlocal disease monitoring is critical at this stage to ease or tighten restrictions based on the latest information.

We have reached the end of the immediate response to COVID-19 and are now swiftly moving into the recover and rebuild phase. This is good news, though not without new challenges. IBM is deeply involved with government agencies around the world as they build capability to carry society through this phase. Addressing the challenge requires the flexibility of hybrid cloud, and the agility of new intelligent workflows&mdash;all supported with new cognitive intelligence and analytics&mdash;and I am proud that the work we are doing every day is bringing these capabilities to bear.

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Shifting government COVID-19 response into the next phase: Rebuild and recover

The current situation with COVID-19 and its impact on the global economy has dwarfed all previous disruptions. The International Monetary Fund (IMF) calls it <a href="https://blogs.imf.org/2020/04/20/a-global-crisis-like-no-other-needs-a-global-response-like-no-other/">&quot;a crisis like no other.&quot;</a>

The impact of COVID-19 on the Manufacturing and Resources industry varies from moderate to severe, depending on the downstream customer demand, workforce availability, supply-side shocks and regulatory environment. Industrial original equipment manufacturers (OEMs) are experiencing massive decline in new product demand and a slowdown in the services business, while the Metals and Mining industry is cautious. The Chemicals industry is re-prioritizing its product mix to support demand for alcohol (sanitizers) and plastics for packaging. In the near term, there was some tailwind for the Resources industries due to increased uptake by China, but this seems to be a short-term phenomenon.

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At IBM, we see the Manufacturing and Resources industry as an ecosystem of makers and operators whose value chains are intertwined, thus creating an opportunity for enterprises to support each other through these troubled times. For example, industrial OEMs can help their customers provide digital insights and augmented intelligence to maintain optimum operations while their own experts may not be available.

While the immediate need is to maintain continuity of operations and support the community, enterprises are utilizing this phase to prepare for a fast start and develop a long-term strategy to evolve into the next normal. Enterprises are working on a three-step approach to manage the journey: respond, recover and reinvent.

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Respond

As we write this blog, enterprises have already initiated actions to respond to the COVID-19 challenge. Most companies in the Resources industries have prioritized community and workforce health and safety. As an example, <a href="https://www.tatasteel.com/media/newsroom/press-releases/india/2020/tata-steel-amplifies-its-response-to-combat-covid-19/">Tata Steel</a>, through Tata Steel Foundation (TSF), recently launched a ten-point #CombatCovid19 program to empathize with, empower, and equip communities.

Many of our clients are working with us to maintain continuity of operations by:

<ol>
	<li>Enabling <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/business-resilience-pandemic">location-agnostic work platforms</a> to empower remote workforces</li>
	<li>Protecting against new cybersecurity risks &ndash; from early March to early May, <a href="https://www.ibm.com/security/services/ibm-x-force-incident-response-and-intelligence">IBM X-Force</a> observed a <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-cyberwar">more than 6,000 percent increase</a> in coronavirus-themed spam.</li>
	<li>Reducing operational cost and maintaining <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-supply-chains">supply chain continuity</a>.</li>
</ol>

For example, one client, a global manufacturer of eye contact lenses, remodeled its supply chain amid the pandemic. During normal operations, the supply chain ended at the distributor/clinic from which customers picked their orders. During lockdown, this was not sustainable and resulted in loss of revenue. The IBM team worked with the client to automate and integrate order management with the logistics provider to enable direct delivery, thus maintaining order fulfilment and delighting the client&rsquo;s customers.

Recover

Having managed through the initial shock and assessed the magnitude of impact, enterprises are preparing for a fast restart. They need to focus on critical areas, including:

<ol>
	<li>Responsive supply chains &ndash; Monitor the changing demand and supply picture and the capability to respond in real-time. Forecasting models will be recalibrated beyond statistical methods.</li>
	<li>Differentiated customer engagement &ndash; Understand customer needs and provide individualized engagement across all channels. Digital will become mainstream even in B2B engagements.</li>
	<li>Resilient systems and control &ndash; Assess risk, execute data-based decision making, and implement extreme automation built on a scalable and secure infrastructure. Enterprises may consider outsourcing non-core processes and collaborating with ecosystem partners to exploit economies of scale.</li>
	<li>Scalable production operations &ndash; Ready to restart operations with reliable assets, secure work environments, and availability of resources.</li>
	<li>Enabled workforce &ndash; Provide employees with the right skills, tools, and technologies to perform at the best of their ability. Enable lone worker safety to comply with social distancing regulations.</li>
</ol>

Reinvent

We believe the future of Manufacturing and Resources industries will be hybrid: Supply chains will be a hybrid between global and local. Manufacturing will be a hybrid between traditional and additive. Products and services will be a hybrid between physical and digital. Workforce will be a hybrid, with humans augmented by cognitive machines.

In the long term, enterprises will have to develop next-generation business models by leveraging new technologies and exploiting their core strengths. They will have to focus on:&nbsp;

<ol>
	<li>Service-enabled business models. Customer experience and service excellence at the core of all business models, commercials linked to outcome-based business models</li>
	<li>Extreme automation to support new ways of working. All workflows utilize data and automation to self-discover and respond to events, with human interaction for exception management</li>
	<li>Digital-first enterprise architecture. The next normal will accelerate the infusion of exponential technologies like artificial intelligence (AI), blockchain, automation, Internet of Things (IoT), 5G, and edge computing into the standard business architecture. Built on the hybrid cloud, this architecture will allow <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/build-cognitive-enterprise">enterprises to exploit the full potential of data</a> and enable new business models.</li>
	<li>New collar talent. A workforce skilled to work alongside cognitive machines and within intelligent workflows is essential.</li>
</ol>

This will drive acceleration of digital transformation and faster adoption of Industry 4.0.

We aim to come out of this pandemic stronger and ready for the next growth cycle. The ease of the journey will depend on collaboration with the ecosystem and willingness to change.

IBM&rsquo;s global team of experts is delivering new business insights to help our clients navigate disruption and prepare for the future.&nbsp;<a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">Click here</a>&nbsp;to access our COVID-19 Action Guide and related resources.

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How the Manufacturing and Resources industry can prepare for post-COVID-19

Before <a href="https://www.who.int/emergencies/diseases/novel-coronavirus-2019">COVID-19</a>, utilities did an excellent job fulfilling the expectations of users: providing safe, affordable, and reliable power, gas and water. Decarbonization was accelerating and renewables gaining traction. Businesses and consumers were demanding better services at a lower cost. 
 
Responding to this demand, the industry began exploring exponential technologies, creating more intelligent workflows, and starting to selectively leverage business and market platforms. For example, electrical utilities were looking ahead to meet new challenges, like:

<ul>
	<li>Reducing cost-to-serve by 10 to 20 percent</li>
	<li>Maintaining grid performance while new and more distributed energy resources are connected to the grid, prosumers (those who both consume and produce energy) emerge, and the penetration of more intermittent renewable energy increases everywhere</li>
	<li>Mitigating increasing cyber-risks.</li>
</ul>

The COVID-19 situation 
 
Then the pandemic struck. Today, we are isolated, yet connected. We videoconference with colleagues all day. We do the same with friends and family in the evening. We want to hear good news. We need to feel safe. We worry for those around us who put their lives at risk for the well-being of others. 
 
And all along, utilities have delivered. The industry was prepared. Electricity and water continue to flow. Gas heats myriad homes. But all is not well. Operationally, the industry might be in excellent shape, but moving forward, it will face unprecedented economic challenges. 
 
Electricity demand is declining between 10 and 30 percent, because the commercial and industrial sectors are at a standstill. Simultaneously, the residential segment&mdash;each of us&mdash;is consuming more. The decrease in demand is met by a drop in oil and gas prices, driving electricity market prices in some parts of Europe to USD 20 per megawatt hour (MWh).

The industry&rsquo;s COVID-19 response

Amid this crisis, utilities are working tirelessly to fulfill the world&rsquo;s expectations: to provide safe, affordable and reliable power, gas, and water to their customers, despite COVID-19-related challenges. In the next 30 to 60 days, they will be attending to the following critical activities:&nbsp; 
 
Addressing escalating cybersecurity threats: A skeleton staff of critical resources likely remains on-site, practicing social distancing, but much of the workforce and supply chain is now remote, putting traditional security controls to the test. This means utilities must work smarter to handle increasing cybersecurity demands, protect critical infrastructures and build out utilities&#39; security, resiliency and continuity plans (<a href="https://ibm.co/utilitiesiiot">see our industry study</a>). Adaptability and innovation of security and risk practices are imperative.

Maintaining resilient contact centers: COVID-19 is driving high call volumes to contact centers in all industries, including utilities. Customers may have questions about service requests, power outages and, most importantly, bill payment concerns.

Many utilities are also struggling with call center work-from-home options and have limited capabilities to serve customers through digital channels. Using a chatbot, such as <a href="https://www.ibm.com/watson/covid-response">Watson&trade; Assistant</a>, can drive automation of many customer inquiries. With a cloud-based, self-service customer engagement platform, utilities can manage call volume while enabling customer service agents to work from home. 
 
Assisting utility customers with financial hardship:&nbsp;Many customers must balance who and how much they can pay in the wake of COVID-19-induced financial hardship. Necessities like water, gas, and electricity services are going unpaid just when people need them most. Utilities are inundated with customer calls and requests for assistance.

AI and advanced analytics can identify customers at risk of missing payment, enabling utilities to proactively roll out programs to communicate with these customers about bills. Utilities can then quickly and efficiently deliver financial assistance to those most in need. 
 
Minimizing outage risks and optimizing workforce resources: We must keep our lights on and our hospitals running, so utilities must continue to perform the mission-critical work of responding to outages and emergencies&mdash;all while sizable portions of their field crew may be sick or under quarantine.&nbsp;

It is possible to delay maintenance and prioritize tasks that can be performed by a lone worker, but in large outage scenarios, deferred restoration is not an option. This can be mitigated by monitoring incoming weather, analyzing the risk of vegetation contact with conductors, estimating the health of an asset to withstand the upcoming storm type, and predicting the damage it will cause. Utilities can mobilize the right staffing levels at the right times and optimize the use of their limited resources.

The post-COVID-19 world

As we move out of the pandemic, energy suppliers will experience real tension on revenue cycles, cash management, and brand perception. Regulators are likely to increase network efficiency and performance targets, and pressure will continue to mount on non-competitive types of generation. 
 
Despite a difficult economic context, the global call to decarbonize will continue; deviations from decarbonization or NetZero emissions targets will be unacceptable. 
 
The way forward into this new world is for utilities to continue on the road to transformation they were traveling prior to COVID-19. That means:

<ul>
	<li>Integrating more renewable energy by using more distributed and granular sources of flexibility (such as batteries).</li>
	<li>Using artificial intelligence (AI) in the relationships with customers, improving service levels, and reducing cost-to-serve.</li>
	<li>Combining multiple technologies to optimize the performance of assets, from turbines to transformers.</li>
	<li>Re-architecting information technology to enable faster change, incorporate new combinations of information and actors, and increase asset observability.</li>
	<li>Evolving cybersecurity frameworks to be strong and impenetrable.</li>
</ul>

Nevertheless, they must be cognizant of the new economic, social and political context. If cost-to-serve has to be reduced by 40 percent, instead of 20 percent, if the network total expense has to be reduced further, while expanding the grid&#39;s capabilities, the industry must consider how to make it possible.

For the short run, utilities will have to quickly and thoroughly analyze their cash flow projections and ROIs, and in an even more open and collaborative model, find optimization models that are quick to implement.&nbsp; 
 
More companies will find themselves considering extended industry business platforms, outsourcing non-core activities, pursuing functional automation with embedded AI, and establishing long-term strategic partnerships to deal with a radically changed field of play. 
 
Longer term, the environmental impacts observed during the pandemic will likely lead regulators to support accelerated change. Some utilities will harness technology to introduce new business models and process platforms with greater speed. Simultaneously, utilities will have the opportunity to ask regulators to support the cloud, AI, blockchain, and other advanced technologies to sustain the favorable environmental changes we&rsquo;ve seen.

It&rsquo;s a lot. So, utilities should embrace innovation with partners outside their traditional value chain.&nbsp; 
 
For their part, governments and regulators need to set clear rules and stable frameworks that allow new innovative business models, and all players must find a common way forward: accelerated&shy;&mdash;and radical&mdash;innovation. That innovation will be powered by cloud-based platforms, new data, AI, and a more powerful partnership among consumers, businesses and governments.

To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic. Click <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">here</a> to access our COVID-19 Action Guide and related resources. 
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Technology can help utilities care for customers and combat COVID-19

Like many of you during this period of crisis and uncertainty, I have found that staying apart has, in many ways, brought us closer together. This is especially true for my family and friends, where evenings and weekends are spent checking in, catching up, and planning our next virtual social gathering. It has made me try harder to connect, to listen, and be patient as virtual conversations across an intergenerational family setting are just different.

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After several weeks of lockdown, it has also reinforced my belief in community and an increased awareness of the vulnerable in our midst, be that because of social isolation, frailty or an underlying health condition (both physical and mental). In this short time span of a lockdown, it is clear that people are concerned for themselves and others, listening to public health officials and changing their behaviors. These concerns surface in most conversations: &ldquo;How are you?&rdquo; &ldquo;Did you go out?&rdquo; &ldquo;Is everyone keeping well?&rdquo; and &ldquo;Stay safe.&rdquo; This was recently brought into sharp focus when a close family member had to attend an emergency department (ED) for a non-COVID-19 issue after a virtual referral by the General Practitioner (GP). Many family members were concerned: was it a safe environment? It was.

Speaking to my family member afterwards, it became clear that the ED was nearly empty, and the wards were quiet as they awaited &ldquo;the surge.&rdquo; &nbsp;Even Ireland&rsquo;s Chief Medical Officer, Dr. Tony Holohan, who also had to attend an ED for a non-COVID-19 issue, <a href="https://www.irishpost.com/news/chief-medical-officer-worried-empty-beds-waiting-rooms-irish-hospitals-182852">commented afterward on his brief treatment</a>, &ldquo;I would (also) like to highlight a worrying scene I witnessed during my visit to hospital on Tuesday evening; empty waiting rooms and empty beds. While protecting yourself from COVID-19 is a priority, no one should ignore signs that they may need medical attention for other ailments such as lumps, chest pain or other concerns. Please do not ignore any symptom outside of COVID-19. The hospitals are there for all ailments, not just COVID-19.&rdquo;

Prior to COVID-19, this would have been unheard of in Ireland, where a key issue in our most recent general election was the number of people waiting for admission from an ED and the capacity of our hospitals. In January, there were <a href="https://www.irishtimes.com/news/health/first-week-of-2020-worst-ever-for-hospital-overcrowding-1.4135852">760 patients a day</a> awaiting admission from ED. Fast forward to the empty waiting rooms that Dr. Holohan experienced in April. Similar profiles exist across Europe. For example, visits to ED from UK citizens with heart attack symptoms have <a href="https://www.thetimes.co.uk/article/coronavirus-fears-for-the-patients-shunning-a-e-djppc62tl">dropped by almost half</a>.

So, as we try and manage this crisis, IBM is supporting businesses to think about the model of care, re-examine how we do healthcare delivery, look for new ways of managing patients, enable care co-ordination and population health, and how technology can be an enabler.

If you examine <a href="http://pic.twitter.com/YF7bif5PeK">the graphic</a> below that illustrates the impact of COVID-19 on healthcare delivery, you can see a number of &ldquo;waves&rdquo; affecting the healthcare system and its capacity. To address the first wave, we have seen the reconfiguration of existing capacity, field hospitals and step-down facilities in hotels. But we also see normal hospital-centric care reduced, which will lead to waves two and three. We need to &ldquo;flatten&rdquo; these curves, too.

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An initial step should be using chatbot technology to engage with citizens, both to assess and reassure them around how health providers can meet their needs. IBM has been working with a number of health services across Europe to <a href="http://www.thehtn.co.uk/2020/04/02/nhs-wales-to-implement-ibm-watson-covid-19-virtual-assistant/">implement virtual assistants</a> which use natural language processing capabilities and AI to understand how to respond to common COVID-19-related questions.

A similar approach should be used to assess, direct and intervene appropriately for deferred elective treatments and effectively manage chronic diseases. Managing deferred elective treatments will be tied to the slow release of hospitals&rsquo; capacity, re-design or re-designation of patient flow across a network and prioritising clinical need. Payers and providers must now invest in cloud-based analytical capabilities that can help drive that action. For example, in Switzerland, <a href="https://www.ibm.com/watson-health/about/explorys">a triage tool</a> is being developed that individuals or clinicians can use to assess risk levels and recommend next steps for patients who are self-isolating. It differs from other self-diagnostic tools in that it is based on actual data from tens of thousands of patients, so it is not rules-based, and it can take into account co-morbidities when assessing risk.

Finally, to enhance appropriate community-based interventions, providers need to put in place a community care solution which can help coordinate the work of a range of care givers (community nurses, nursing home support staff and potentially GPs) outside of the acute system. As we all focus on minimising contact, this type of solution enables the sharing of data related to individuals in real-time without face-to-face contact between carers and helps appropriate action happen quickly.&nbsp;

The dramatic impact of COVID-19 on the healthcare system has been profound and the world is playing catch-up with the virus. However, we must not just take action to address the current health crisis, but also its ripple effect over the medium term. So, this is a call-to-action to payers, providers and health systems to look beyond the terrible reality of the day to day. We each must continue to do what we can, follow the guidelines and take time to connect each day. Personally, I connect with two additional individuals that I have not recently spoken to just to ask how they are. I also continue to volunteer and contribute to the global response, lending my assistance to a national support group looking at social capital, resiliency, and our inherent storytelling creativity in Ireland to support wellness. All stakeholders should continue to build long-term capacity to cope with the impact of COVID-19.

To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic. Click <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">here</a> to access our COVID-19 Action Guide and related resources.

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Using technology to help healthcare cope with crises

Amid COVID-19, insurers around the world are facing both direct and indirect impacts to their business that will reverberate through the industry for a long time to come.

Insurers are experiencing pressure on their workforce, with insurance workers and distributors in lockdown. They are also dealing with books of business with impact from higher mortality and contractual coverage disputes, and market environments where risk is top-of-mind, but buying insurance from an agent is not.

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At the same time, the insurance industry is feeling the effects of fundamental changes in the broader business and social environments in which they operate. Economic and political responses to COVID-19 have varied widely, with different lockdown and quarantine rules for different populations and businesses. Almost all populations, however, have rapidly seen significant changes in day-to-day life and in financial stability. Their customers&rsquo; major changes to work and life interactions, combined with significant global economic disruption, are not only affecting business today, but will likely result in permanent changes to the economic and cultural landscape even after COVID-19 is brought under control.

In the short term, our insurance clients need to:

<ul>
	<li>Support their workforce as they shift to work remotely, with new technology needs in applications, security, and networking, and cultural needs like workforce support and process changes</li>
	<li>Find ways to connect and serve their customers in a remote environment, handling the stress on voice customer engagement channels and on direct digital interaction and advice</li>
	<li>Address their financial pressures related to the potential for increased reserving and claims, uncertain investment returns, and low prospects for short-term sales to fill those gaps</li>
	<li>Account for increased volume of claims and benefits discussions, and likely increases in questions, disputes, and eventual litigation.</li>
</ul>

The bigger insurance picture

Many insurance companies are structured in a poor interaction model, considering today&#39;s environment. They sell a policy that is complex and intangible, often with significant back-and-forth around underwriting and contract terms. They charge increasing premiums over time for a product that most buyers do not interface with frequently. And when something bad happens to the buyer&mdash;like a worldwide pandemic and financial collapse&mdash;contractual disputes are initiated surrounding contract terms.

Clearly, neither those processes, nor traditional insurance products and their distribution channel mix, fit well in this new COVID-19 world. They are too reliant on a long sales process involving sales techniques that will have difficulty adapting to digital interaction. And the products themselves do not fit a world where apps can be downloaded for small sums and insurers can provide new products directly through other industries, such as travel insurance embedded within an airline website. Insurers will need a new toolkit.

Insurers, in fairness, know they need to change their model. However, they remain saddled with legacy systems&rsquo; inflexibility and high cost. Their sales and servicing model is labor-intensive in many cases as a result, and building new risk products and services is cumbersome and slow. Improving insurance products and services will require resolving this technical debt, in an environment where insurers themselves may be under financial pressure.

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These pressures will accelerate a separation of insurers, and insurtechs looking to disrupt them, into clearer divisions. Differences in insurer investment strategy now will become magnified post-COVID-19. This divergence will reward leading insurance innovators that can operate across the risk product and service spectrum. It will also penalize severely those that fall behind.

Re-engineering for the post-COVID-19 insurance future

To survive and thrive amid COVID-19 and beyond, insurers need to prepare and invest in the following areas:

<ol>
	<li>Stabilize. Change will be challenging until basic operations and financial position are brought under control. Building the systems for long-term remote operations and arms-length insurance interactions with customers will be essential. Insurers will also need to respond to financial pressures with low-hanging IT cost reduction, simple digital channel augmentation, and AI-powered automation and assistance tools to improve underwriting and claims throughput and quality. Clients are working with us today on workforce enablement, claims automation, and digital assistance tools.</li>
	<li>Build resilience. Movement of core operational systems to a more consolidated, cloud-based set of services can add flexibility to insurance product models while reducing costs. Cloud-based API frameworks can speed implementation of new risk partnerships and enable insurance as a service. Insurers will look to create this resilience while maintaining security, monitoring, compliance, and scalability, and avoiding needless lock-in. Clients are working with us to build and institute insurance-specific cloud offerings, including deployment of our input management solution in a COVID-19 context.</li>
	<li>Stride forward. In the post COVID-19 world, insurers will need digital tools that are adapted for this new age. Insurers must easily build and adapt digital interactions and integration with other industries via microproducts, AI-tailored advice, value-added service ecosystems, and holistic risk solutions. The firms that achieve this will be positioned not only to capture insurance market share, but to expand into entirely new markets and business models. Our forward-thinking clients are building new combined product/service risk offerings today to solve challenges ranging from eldercare and driving improvement to supplier resiliency.</li>
</ol>

Insurers, like all of us, are working incredibly hard to address the impact of a major world threat in COVID-19. Balancing short-term actions with plans for the longer-term COVID-19 future will better position insurers to offer relevant risk products, services, and advice. The insurance industry, if we can take advantage of these new risk offerings, can help prepare the world for risks that are like COVID-19, as well as risks that aren&#39;t&mdash;an essential function for our future.

To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic. Click <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">here</a> to access our COVID-19 Action Guide and related resources.

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Insurers address COVID-19 while transforming for a post-pandemic future

In Australia, there has been a slow increase in the number of COVID-19 cases&mdash;this is something we had been expecting with some trepidation. As a clinician, it is stressful for me to hear that COVID-19 appears to have had different impacts in different countries, &nbsp;although we all share the challenge of increased demand on limited healthcare resources. The Australian healthcare industry is bracing itself for this spike in demand, not knowing when or if the number of COVID-19 cases will escalate to a point that our health system is in crisis.

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Industry perspective 

In Australia and New Zealand, the impact of COVID-19 has been over an extended period. Being so close to China, we&rsquo;ve been aware of a major threat from the potential spread across the region since late January 2020.

The first changes came within medical research with a focus on efforts to understand the coronavirus, and look to treatments and, eventually, a vaccine. The Peter Doherty Institute for Infection and Immunity (Doherty Institute) in Melbourne successfully <a href="https://www.doherty.edu.au/news-events/news/coronavirus">grew the 2019 novel coronavirus (COVID-19)</a> for the first time outside China. This was provided to the World Health Organization, which made it available to expert laboratories around the world.

Health services and healthcare professionals are now looking at building capacity to cope with the increasing number of COVID-19 cases. In Australia, the available ICU beds and our ability to increase them is being assessed and it is considered that <a href="https://www.mja.com.au/journal/2020/surge-capacity-australian-intensive-care-units-associated-covid-19-admissions">the current baseline of 2,378 beds will need to be greater than 4,000</a>. To further extend the availability of ICU beds, there has been government support to manufacture ventilators onshore similar to other countries, such as the US.

Responding to COVID-19 

Several examples, in which the measures to improve our capacity during the COVID-19 crisis, are shaping our industry for the future:

<ul>
	<li>The introduction of telehealth as a standard approach to medical consults&mdash;with rebates for all medical practitioner services&mdash;has seen adoption by general practitioners (GPs) and medical specialists across the board. In this way, they can continue consulting whilst limiting their risk of exposure to COVID-19. Telehealth has been limited in use until now. This crisis has pushed an aspirational delivery model to the forefront as almost the only manner in which medical practitioners are delivering services today.</li>
	<li>The use of data and AI to help develop a clinical decision support dashboard, is allowing intensivists to more effectively assess patients on entry and whilst in ICU and help ensure they can give the most effective care. This project has required global engagement with data from other countries underpinning the algorithms development and supporting the data analysis. This approach will reshape our industry with clinicians both collaborating and re-evaluating the value of tools like AI, in order to deliver insights.</li>
	<li>Lack of trained health professionals, in particular nursing staff, has spurred the introduction of programs for upskilling. One program trains general nurses for working in intensive care to build up a sufficient workforce for ICUs. The acceptance that online training programs can adequately upskill nurses for more specialized roles will open up new opportunities for healthcare professionals.</li>
	<li>The impact to our supply chain for critical healthcare supplies has now reshaped our view of sourcing strategies. To fill the gaps, governments are supporting onshore manufacturers to restart manufacturing in Australia. Some of the examples are personalized protection equipment (PPE) and invasive mechanical ventilators. Much of these have been sourced offshore; however, COVID-19 has made it apparent we need to have reliability and continuity for supply for the end-to-end health system.</li>
	<li>IBM is supporting a health organization using a solution called Enhanced Contact Tracing (ECT) to support discovery of COVID-19 case contacts. An immense amount of time and resources is involved in the existing manual process of contact tracing analysis of exposed COVID-19 patients. Collecting, transcribing, and analyzing the data can&#39;t scale with the growth curve of a pandemic. ECT is able to significantly enhance the analysts&rsquo; capabilities of pandemic-related analysis through the use of a cognitive solution that has traditionally been used in an &ldquo;all-source&rdquo; intelligence capacity. The key challenge in this type of analysis is the ability to minimize the time requirement and increase the accuracy of identification to flatten the exposure curve.</li>
</ul>

The new normal for the healthcare industry will see more digital communications, better use of data, employing tools such as AI to derive insights, and more leverage of compute power to underpin our research efforts.

The consumer has been ready for digital communications with health professionals, but providers have been reluctant to change their delivery models. COVID-19 has forced the profession to adopt telehealth as routine consultation methodology to protect both them and their patients from COVID-19. This will prove to the GPs and specialists that this is an effective method and can improve their capability to serve.

COVID-19 has also pushed our health systems to their limits, and this experience will leave systems looking to have insights to better manage both services and clinical practice. Data as a resource and AI as a necessary tool to gain insights will inform both health service operations and clinical practices in the future. Operational management will be the first to look to adopting optimization and automation tools to underpin its services. Clinicians will follow in addressing the shortcomings of the current systems by harnessing data to gain insights for their practices.

Lastly, medical research has been at the front, looking at translating research into medical practice. The use of supercomputing in the quest to solve health challenges is being proven during the search for COVID-19 solutions. The underpinning capability of compute power to support and super-charge their research activities will be a core capability for success.

In Australia and New Zealand, we have yet to see the full impact of COVID-19. The question for the healthcare system is, &ldquo;Have we done enough?&rdquo; It is now clear how pivotal our healthcare systems are to the health of our population AND as a plank to a healthy economy&mdash;something many had seemingly forgotten.

To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic. Click <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">here</a> to access our COVID-19 Action Guide and related resources.

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The pandemic is pushing Australian healthcare to innovate beyond traditional barriers 

Like it has for many of us, the COVID-19 pandemic has had a profound impact on me and those around me. On a personal level, my family and I are fortunate that we have the luxury of working from home for the most part. We have made the best of &ldquo;social distancing&rdquo; by keeping physical distance from others and doubling down on remaining socially connected. Our children, who are now in their 20s and staying with us, are once again enjoying family game nights and movie nights&mdash;which is certainly a silver lining for all of us. My boys are making the best of virtual college classes, and my daughter is working remotely, and maintaining connections to co-workers and clients early in her career. Of course, learning how to live together again, share bandwidth and avoid becoming socially isolated is essential. Many families across the globe have been physically, financially and mentally ravaged by this pandemic, and my hope is that we will all be okay in time.

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Many of us will mark important milestones during this public health crisis. This year marks my 25th year since graduating medical school (we connected virtually), joining the Cleveland Clinic as an Internal Medicine specialist (part-time since focusing on health IT and informatics), and leaving Chicago to call the Cleveland area my home. As a physician, I can&rsquo;t help but think about COVID-19 from a biological, clinical, and epidemiological perspective: a microscopic novel virus that has challenged our global and national infrastructures, preparedness, and despite advances, overwhelmed our clinical and scientific communities. I worry about my colleagues at the Cleveland Clinic, friends and classmates across the country, and family members who are on the front-line, essential to fighting this epidemic. Many of us in clinical roles who are not currently on the front lines may wonder: Am I where I need to be?

Five years ago this month (in April 2015), IBM acquired Explorys, a health big-data analytics company that I co-founded. Overnight, I became an IBMer and embarked on a journey where I focused on the importance of data and insights, analytics and AI, as well as people and policy. The talent, technology and assets that IBM continues to bring together&mdash;combined with the raw talent and knowledge of IBM in the healthcare and life sciences space&mdash;have provided a very rewarding sandbox for many of us focused on research and innovation.

I have been honored to be part of a team where we have built solutions and services that have helped providers impact hundreds and thousands of patients through our population health solutions and decision support. Our technology has helped enable radiologists and oncologists in their practices, along with helping life science companies strive to meet their business objectives. Our solutions have been used by employers and health plans to help manage health benefits. We&rsquo;ve delivered technology to government agencies to help them manage social programs and engage citizens.

Our clients across the health ecosystem are essential to our health and welfare, and they play an important role in helping to address this pandemic. So when we asked ourselves how <a href="https://www.ibm.com/thought-leadership/covid19/">IBM can help address COVID-19</a>, it was no surprise that we were able to respond and identify ways that our technology, solutions and services can offer help to those entities working to combat the pandemic. IBM is a founding member of a <a href="https://covid19-hpc-consortium.org/">high-performance computing consortium</a> providing resources for various projects. We were able to rapidly assemble our data and knowledge assets, analytics, and AI experience, and make some of our tools and services available at no cost.

Qualified researchers can potentially accelerate their discovery process with AI. IBM can help support their efforts by making COVID-19 open research data sets (CORD-19) more usable, providing <a href="https://covid19-mol.mybluemix.net/">molecular explorer</a> tools to study potential drug targets, and offering <a href="https://s2s-omxware.us-south.containers.appdomain.cloud/landing">genomics</a> that are critical in understanding this novel virus.

While we await those discoveries, we have made available to front-line clinicians <a href="https://www.dynamedex.com/coming-soon/">DynaMed and Micromedex with Watson</a>, which is designed to help them spend more time caring for their patients and less time hunting for guidance on therapeutics and conditions related to COVID-19.

Finally, to help support a well-informed public, we have invested in tools that enable communities to deploy <a href="https://www.ibm.com/watson/covid-response">conversational AI</a> to address citizens&rsquo; most pressing concerns during this time. To help provide transparency into the local impact of the pandemic, we have aggregated and made COVID-19 specific data available in <a href="https://weather.com/coronavirus">The Weather Channel</a> app.

Of course, we have been working with our health ecosystem clients on their transformation journeys for many years and it is quite gratifying when <a href="https://www.ibm.com/blogs/watson-health/covid-19-screening-and-triage/">Desert Sage Health Centers</a> used those principles to create a drive-through clinic in days to support their community. So, whether for those fighting at the bench, boardroom, or at the bedside, or for those who depend on them, what we do at IBM is indeed essential.

Stay well, and if you&rsquo;d like to know more, please contact me or read our <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-action-guide">COVID-19 Action Guide</a>.

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Supporting healthcare’s response to COVID-19

The media and entertainment (M&amp;E) industry, which has provided us all with so much comfort during this time of sheltering in place, will never be the same again. Companies that can adjust quickly to the new realities of a post COVID-19 world will be the ones best positioned to thrive as the economy recovers.

The industry is experiencing <a href="https://www.newsweek.com/hollywood-takes-economic-beating-covid-19-1494920">a crisis like never before</a>. The pandemic has forced entertainment companies to &ldquo;pause&rdquo; their business. Theme parks, movie theaters and other venues are closed. As of right now, Broadway is dark until June. Many sporting events, such as the European Football League, NBA, MLB, Masters Golf, Wimbledon, and the Olympics, have been cancelled or postponed. And production (except for news and weather) is on hiatus, which means no new TV shows and movies are being made. Many companies are showing re-runs of classic sporting events and other programming.

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The financial and human impact is profound. In the US, <a href="https://www.statista.com/chart/21341/jobs-cut-us-monthy-report/">37 percent (approx. 83,000)</a> of the March job losses due to COVID-19 were in the entertainment industry. Disney is facing a potential <a href="https://www.ocregister.com/2020/03/27/disney-faces-3-4-billion-coronavirus-one-two-punch-at-u-s-theme-parks-analysts-warn/">USD 3.4 billion revenue loss</a> to its theme park business alone. According to ad firm MediaRadar, the pandemic could cause approximately <a href="https://www.cnbc.com/2020/04/03/coronavirus-could-cause-1-billion-loss-for-nba-nhl-and-mlb-broadcasters.html">USD 1 billion in lost advertising</a> for broadcasters of the top three US pro-sports leagues (NBA, NHL and MLB). And if the NFL season is delayed or cancelled later this year, data shows <a href="https://www.cnbc.com/2020/04/03/coronavirus-could-cause-1-billion-loss-for-nba-nhl-and-mlb-broadcasters.html">losses of up to USD 6 billion</a> from 3,000 advertisers.

However, there are some bright spots. Consumers are returning to trusted media brands in news. Local news and broadcasting are attracting new viewers and have become the medium of choice for information. Nielsen viewership data indicates <a href="https://www.nielsen.com/us/en/insights/article/2020/in-the-new-normal-of-covid-19-local-tv-news-proves-to-be-the-medium-of-choice-for-news-and-information/">a 10 percent spike</a> in year-to-year growth in the coveted 25- to 54-year-old market. A window of opportunity has been created for broadcasters and news organizations to capture a new group of loyal audiences.

As people stay home and are social distancing, in-home entertainment is becoming more important. Disney recently signed <a href="https://www.nytimes.com/2020/04/08/business/disney-plus-50-million-subscribers.html">over 50 million subscribers in only five months</a> for its streaming service Disney Plus&mdash;far ahead of analysts&rsquo; predictions that it would take until 2022 to reach those numbers. We are also seeing innovative virtual events, such as the iHeart Living Room Concert for America hosted by Elton John, which attracted 8.7 million viewers, according to Nielsen ratings.

In other examples of flexibility and ingenuity, studios are eliminating theater-to-digital release windows for some movies, like The Invisible Man. And eSports is quickly becoming mainstream. According to Zach Lavine, Chicago Bulls point guard, &ldquo;It&rsquo;s pretty much the only thing that people are allowed to be competitive with.&rdquo; NBA fans who are missing their favorite athletes can watch them compete in the <a href="https://nba.2k.com/en-US/">NBA 2k Players Tournament</a> live, complete with banter on ESPN. Other sports leagues like <a href="https://f1esports.com/">Formula 1</a> are also creating eSports experiences, such as virtual racing.

So, what is the path forward? Although it has been hit hard, this industry is familiar with disruption. Apple disrupted the music industry by changing the way we consume music. Netflix disrupted the motion picture industry in similar fashion. Companies must adopt a disruptive approach to the post-COVID-19 world, developing or expanding three important capabilities:

<ul>
	<li>Digital with agility: The entertainment venue of choice right now is in the home&mdash;a trend that was building prior to the pandemic. I expect that COVID-19 is a watershed event, and that the in-home entertainment trend will continue even stronger after the crisis passes. So, for some to survive, an accelerated shift to digital is essential as in-home entertainment becomes the main growth engine. That means creating new digital and mobile services and revenue streams&mdash;for example, by digging deep into studio archives and creating original digital content and services using existing material. Speed and agility are important here: the digital world is an environment of constant change, where new experiences are offered up all the time. Audiences expect it.</li>
</ul>

&nbsp;

<ul>
	<li>Smarter operations: To accomplish this, the industry must transform business processes into a data- and digitally driven operating model. At the same time, it must aggressively reduce operating expenses to compensate for expected losses in traditional entertainment and to invest in new in-home entertainment services. Both can be accomplished by smarter operations and intelligent workflows based on automation, AI and cloud. A modern back office will empower the professionals who are creating the new digital services to innovate and deploy quickly.</li>
</ul>

&nbsp;

<ul>
	<li>Deep consumer engagement: Finally, many must move beyond their traditional &ldquo;one-to-many &ldquo;comfort zone and start building personalized platforms and capabilities. As we come out of this crisis, society will continue to look for entertainment to relieve us of the daily grind and reconnect us to our families and friends. Now is the time to engage with consumers to re-capture their advocacy, time and wallet share.</li>
</ul>

&nbsp;

These actions will not only allow M&amp;E companies to survive this crisis, but also position them well for the next generation of exponential technologies, such as AR/VR, 5G and NextGen TV that will impact our industry in the longer-term.

Entertainment has been a fabric of our society from the beginning. It brings joy to our lives by diverting our attention from our demanding lives. It brings our families and friends together. COVID-19 will most definitely transform the industry landscape. However, if they move quickly to transform, entertainment companies will survive and will remain essential to our society.

IBM continues to innovate with our clients to deliver the new data-driven digital and cloud enabled business processes required&mdash;for example, <a href="https://www.ibm.com/case-studies/fox-sports-aspera">our work with Fox Sports</a> on remote sports production. To support our clients, IBM has developed best practices and recommendations for actions to take now and after the pandemic. Click <a href="https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19">here</a> to access our COVID-19 Action Guide and related resources.

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COVID-19 spurs media and entertainment companies to transform

The effects of <a href="https://www.who.int/emergencies/diseases/novel-coronavirus-2019">COVID-19</a> will be significant for the global postal industry, and indeed the entire world. The essence of the challenges the world&rsquo;s postal operators face is akin to that of other businesses affected by COVID-19: identify where the impacts will be felt; and determine how to respond.

COVID-19 has and will continue to have a devastating financial effect on the world&rsquo;s posts. At the same time, posts have significant roles to play in the response and recovery effort. However, these efforts will not be enough to offset the financial impacts of COVID-19.

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To respond to this global crisis, posts must do three things: 

<ol>
	<li>Take a lead role in helping to accelerate the economic recovery after the COVID-19 situation stabilizes;</li>
	<li>Expand collaboration with ecosystem partners to build redundancy in their supply chains; and</li>
	<li>Offer the use of their vast, ubiquitous physical networks to play a larger role in response efforts.</li>
</ol>

Posts with more diversified revenue models are better positioned than their peers to respond to the pandemic. Here in the US, the US Postal Service (USPS) still relies heavily upon traditional letter products, especially marketing mail. In FY2019, marketing mail accounted <a href="https://about.usps.com/what/financials/annual-reports/fy2019.pdf">for USD 16 billion in revenue</a> and over half the total volume delivered. Unfortunately, history has shown these volumes are at significant risk in times of economic shock. The global financial crisis of 2008 was devastating to the global postal industry. That year, USPS delivered <a href="http://content.time.com/time/business/article/0,8599,1870289,00.html">9.5 billion fewer letters and packages</a> than the year prior, the largest mail decline in history.

These effects will likely pale in comparison to COVID-19

On April 9, USPS announced that as a result of the COVID-19 shock, it expects <a href="https://www.nytimes.com/2020/04/09/us/politics/coronavirus-is-threatening-one-of-governments-steadiest-services-the-mail.html">a USD 13 billion drop in revenue</a> in FY2020 and an additional USD 54.3 billion in losses over the next 10 years. This is largely the result of changes in letter mail volumes for both large and small businesses. History shows that in times of economic decline, these volumes all but disappear. Posts cannot plan on them returning.

In France, La Poste has already reduced the number of delivery days per week to <a href="https://www.thelocal.fr/20200319/are-french-post-offices-and-banks-open-during-coronavirus-lockdown">three</a>. Royal Mail in the UK has reduced service levels as a result of nearly <a href="https://www.bbc.com/news/business-52243179">20 percent of its staff being off work</a>, either due to sickness or self-isolating.

There is reason for hope

Posts have been affected by and responded to these kinds of economic shocks before. In 2005, in the aftermath of Hurricane Katrina, the USPS was designated as the deliverer of antibiotics as part of the <a href="https://www.cdc.gov/cpr/readiness/mcm/cri.html">Cities Readiness Initiative</a> (CRI). This program, managed by the <a href="https://www.cdc.gov/">Centers for Disease Control and Prevention (CDC)</a>, increased bioterrorism preparedness across the US. USPS also delivered disaster relief checks and distributed absentee ballots during the 2006 election. These serve as examples of how posts can aid governments at different levels in these most difficult times.

COVID-19 has revealed how increased globalization and shifting manufacturing out of country can amplify the detrimental effects to global supply chains. Posts need to consider a world of less globalized supply chains to build in redundancy for the future. They must test contingency plans and be ready to make quick decisions to move mail and packages in the face of mass flight cancellations of both commercial airlines and air cargo. They must plan to balance the trade-offs that include shifting volumes to slower transit modes, paying higher per kilogram rates, and reducing network visibility.

This increased redundancy can also be utilized to offer innovative services to help individuals and businesses in difficult times. For example, USPS could expand small businesses access to its Electronic Verification System (EVS) mechanism to facilitate drop-off zones to better reach customers who are sheltering in place.

Posts should also use their physical networks of assets (such as trucks, buildings, and indeed, employees) to contribute to the recovery effort in innovative ways. In short, they need to work with traditional and non-traditional partners to identify the highest and best uses for their assets. In the US, the USPS has more than 200,000 delivery trucks and 31,000 retail locations. Letter carriers and truck drivers drove <a href="https://facts.usps.com/size-and-scope/">1.34 billion miles in 2019</a>. Excess capacity should be offered to help move needed supplies and deliveries in local economies.

Regarding core postal services, current global quarantine measures are driving increased demand for package deliveries. &nbsp;Companies like Amazon <a href="https://www.reuters.com/article/us-healthcare-coronavirus-amazon-com/amazon-to-hire-100000-workers-as-online-orders-surge-on-virus-worries-idUSKBN2133LB">are finding it difficult to support the surge</a>. After quarantine ends and global production resumes, posts must be prepared for the potential &ldquo;Bullwhip Effect,&rdquo; <a href="http://www.scdigest.com/ontarget/20-02-24_sheffi_on_supply_chain_coronavirus.php?cid=16380">as described by MIT Logistics and Supply Chain Expert Yossi Sheffi</a>, where sudden spikes in demand for cargo could exceed supply, causing bottlenecks throughout the global supply chain. Posts must be prepared for shortages in available air cargo and passenger underbelly capacity when manufacturing restarts. They must be prepared to scale up operations and delivery capacity in an environment that may already have insufficient capacity.

Posts must also consider what they can offer in non-core services to assist in the recovery. Broadening the network of partners is a start. The goal should be to identify roles that aid in the development of &ldquo;smart cities&rdquo; during quarantine, during the restart, and long after the COVID-19 crisis. Posts and governments must collaborate on how to best use and repurpose publicly owned assets to improve the quality of social services and develop entrepreneurial solutions. It is possible the world&rsquo;s posts discover that the innovative partnerships formed during the pandemic may turn into new revenue streams after the world settles on a &ldquo;new normal.&rdquo;

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