Omar Mahmood, head of Financial Services for KPMG in the Middle East & South Asia, and partner at KPMG in Qatar
Doha: The KPMG in Qatar has identified five top critical challenges that could be so serious to Qatar’s banking sector in the light of COVID-19 pandemic. The COVID-19 impact on the country’s financial services sector includes liquidity pressures, revenue compression and credit quality deterioration, the KPMG said in its soon-to-be released COVID-19 case study on Qatar’s banking sector.
Sharing the KPMG’s key findings exclusively to The Peninsula, Omar Mahmood, head of Financial Services for KPMG in the Middle East & South Asia, and partner at KPMG in Qatar noted the pandemic is having an unprecedented impact on financial markets globally including in Qatar, with implications for banking businesses, employees, suppliers and customers. This has been coupled with the effects of the drop in oil price, which together create a unique situation we live in today.
“While the State of Qatar government has taken a number of proactive measures to ensure that the financial system and wider economy are protected as far as possible from the effects of the COVID-19 pandemic and drop in oil price, there are nevertheless implications that banks will inevitably face”, said Omar . “In view of this, there are top 5 ‘challenges’ and ‘focus areas’ for banking executives to consider, he said. The financial services sector will face liquidity pressures in the short, medium and long term, particularly in USD.
Given rate cuts, increasing competition, support for the private sector and a general market slowdown, the banking sector will face the challenge of serious revenue compression.
Credit quality deterioration is another challenge as businesses struggle with cashflow and profitability and while the real estate sector continues to be challenged.
The industry will face Operational Risks from the new norms in working practices, including cyber security threats and AML controls. Finally, Digital transformation and the pace of change in banking operating models will face greater scrutiny as shareholders look for growth
The KPMG in Qatar has also highlighted five focus areas –Liquidity & capital analysis: Banks need to thoroughly understand their available capital and liquidity resources and more frequently assess the resilience of these core pillars.
Employees: How you treat your employees now, given working practice changes, will have a massive effect on their wellbeing, and consequently on their loyalty and productivity
Customer interaction: Effective digital delivery of services, with minimal disruption to customer interaction, is essential while banks deal with staff shortages, office closures and other measures
Scenario planning: Using scenario modelling and contingency planning expertise, incorporating the impact of COVID-19 and the drop in oil prices, to help make sound decisions amidst the current volatility
Communication & transparency: As the economic impact of the crisis begins to bite, banks will need to ensure that they are communicating effectively with their various stakeholders to manage expectations.
While there are wide-ranging views on how this situation will actually end up affecting financial markets, one point over which there is unanimous agreement is that we will be dealing with the effects of the COVID-19 pandemic for the foreseeable future, and the banking sector as a whole will most certainly evolve as a result of this. “Those banks that are agile, flexible and willing to transform business models will be the ones that succeed, and secure the financial strength need for future growth, while those that rest on their laurels will be left behind in an increasingly more competitive sector,” Omar said.
