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Key Points • Profound changes in Global Economy and Financial Structure from financial innovation, deregulation, globalization and technology forces us to re-think how to handle FAILURE - such as crisis management and restructuring of financial institutions. • GFC showed inter-locking, inter-dependency between banks, shadow banks, stock and real estate markets, driven by debt, derivatives, political and “capture” linkages. • Huge complexities and uncertainties from geo-politics, climate change, demographics, technology, and feedback from Big Data, social media. These challenge formulation of monetary policy, regulatory reforms and market structures • Need changes in mindsets, governance, new measures of inter-connected behaviour (social media) and new data-sets • But the process of how to diagnose, control damage from failing banks, allocating losses and changing incentives remain true. We just need to adapt these processes and tools to our national conditions. Section 1 Digital Disruption Megatrends in Technology and Business Models – KNOW YOUR CONTEXT Digital Component has Growing Share of Global Flows Share of selected cross-border flows that are digital, % Note: 1 Based on China data; 2 Excludes other VOIP minutes; 3 Based on US data. Data sources: iResearch; Telegeography; OECD; US Bureau of Economic Analysis; McKinsey Global Institute analysis Source: McKinsey Global Institute. 2014. “Global Flows in a Digital Age.” Four Impacts of Technology on Business Models 1. Competition intensified. Technology disintermediates conventional business – cheaper, faster, global 2. Demographics shifted. Customer older, more women and millennials to control large share of buying power 3. Clients have new expectations: Want more trustworthy, better transparency, lower fees. Social Media spread can improve or damage Brand reputation (e.g United Airlines Dr. Dao reputation issue) 4. Regulation. Complex regulations – cyber-security, anti-money laundering, tax evasion, corruption laws, cyber-security all impose huge burden on corporate compliance and reputation Digital Dividend: Consumer Surplus – Labour Deficit = Job Disruption/Inequality + Populism Digitization causes losses in economy (NPLs from NPAs) that makes even banks also suffer loss of business and credit losses! Source: Accenture. 2016. "Future of Wealth Management." Global Risks Interconnections Map 2017 Risks are dynamically connected and unpredictable Source: WEF. 2017. "The Global Risks Report 2017, 12th Edition."
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