Today we conducted our Euro Crisis Webinar. 416 participants were surveyed about:

• Whether their enterprise had plans in place to deal with a worsened euro crisis
• Whether the euro crisis has impacted their IT budget
• Whether the euro crisis would influence investments in innovation

Results of the polling revealed that 50% of respondents covering all industries have no contingency plans in place to manage a worsened euro crisis. We urge clients to better prepare themselves via accessing existing research available on http://www.gartner.com/ and setting alerts for upcoming research using the search term “euro crisis”.

Existing published research includes:

Peter Redshaw Jan 18^th: Euro Crisis and the Threat to Outsourcing

Andrea DiMaio Jan 18^th:Examine Six Risk Dimensions of IT Preparedness for the Euro Crisis

Alistair Newton Jan 16^th: Expect the Euro Crisis to Adversely Affect Payment Systems and Industry Supply Chains

Keith Harrison Jan 13^th: Euro Crisis: Issues and Recommendations for Electric Utility IT Functions

Mim Burt Jan 11^th: How Retail CIOs Should Respond to the Unfolding Euro Crisis

Mark Raskino Dec 29^th: Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

Stessa Cohen Dec 27^th: Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

Dave Aron Dec 23^rd: Ensure Your IT Strategy Is Ready for a Euro Crisis

Andrea Di Maio Dec 22^nd: What the Euro Crisis Means for Government IT

David Furlonger Dec 20^th: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

David Schehr Dec 20^th: The Euro Crisis Will Mean More and Different Customers for Wealth Managers

David Furlonger Dec 6^th: CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

David Furlonger Oct 1^st 2010: The European Crisis and Market Impact: Situation Remains Dire

David Furlonger Apr 17^th 2009: The Financial Market Crisis: Storm Clouds Over the Euro

We also asked webinar participants about their IT investment plans:

• 52% of respondents believe IT budgets will remain unchanged
• 15% expect an increase
• 9% expect a decrease of <5%
• 25% expect a decrease of >5% in their IT budgets

Clients should watch for forthcoming research from analyst Kurt Potter: Actions to Fight Cost Optimization Fatigue during the Euro Crisis, for additional guidance on how to work through reduced IT budget scenarios

Lastly, we also asked webinar participants about their views on how the euro crisis will impact investments in research and development and discretionary spending on innovation:

• 17% revealed that discretionary spending would increase
• 69% suggested there would be no change
• 14% voted that discretionary spending investments would be cut to zero

Those clients who expect no change in their innovation spending patterns or who anticipate a cut can gain further insight into the importance of maintain an innovation focus during crisis by reviewing an upcoming note from David Furlonger: Euro Crisis Innovation Remains Critical to Survival and Growth

We thank everyone for their participation today and welcome client enquiry and continued interaction on this important subject. An archive of today’s material can be found on the Gartner Webinar website.

An interesting article appeared on Reuters yesterday: Financial repression is here and may be helpful.

It discusses and supports the potential for greater control over the financial markets by governments, including a continuation of the current schemes that print more money for central banks to lend to banks who then buy more “risk free” government debt. Throw in a little inflation and the long-term debt load depreciates. Merkel is calling for more money for Greece and I note that the US debt ceiling has been nearly reached – again. (Where did that last U$1tn get spent anyway..?) The suggested alternative to financial repression via regulation is considered far worse. But is it?

Admittedly austerity packages don’t help either and are creating popular unrest at levels considered worrying enough for several commentators to point to previous historical conditions that led to bloodshed.  Nevertheless, structural reform doesn’t even seem to be on the agenda, and certainly lacks political will.

In fact, the most recent Economist leader hinted rather as political posturing and included the repressive/protectionist impact of:

• The imposition of the Tobin tax on financial transactions (suppressing proprietary trading),
• Forcing houses that do clearing & settlement of derivatives that are denominated in euros to be located in eurozone,
• Forcing OTC derivatives to move to exchange-traded instruments

While maintaining market order, curbing greed and improving terrible risk management is important, protectionism and unnecessry regulation will only introduce artificial subsidies. Financial institutions will surely be wise to this as the costs of managing red tape increase eating further into profit margins. The euro crisis and political/regulatory meddling will therefore likely encourage Asian markets to be more aggressive with strategies to evolve their own platforms and tempt firms to move east.

Regardless of Europe 2020, a 2010 European Commission report highlighted more than 330 trade restrictions that included cross border challenges such as tariff increases, licensing requirements etc, as well as internal restrictions such as certification schemes, buy-national policies etc. A worsening euro situation leading to a meltdown or default scenario will only make matters worse: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them, and likely bring about yet more “repression.”

Perhaps the most immediate form of any financial repression will involve protectionist initiatives designed to “protect” local jobs. This has two implications for CIOs:

• General enterprise HR sourcing and labour/talent mobility
• Ability to outsource

This will require CIOs to perform a risk analysis/containment and draw up contingency plans for all outsourcing contracts. Such planning will enable CIOs to adapt outsourcing strategies as needed. In the current crisis, these plans need regular review. The key question here is to ask: what contractual contingency has been taken in the event of a significant change to the business model of the firm due to meltdown or euro break-up?

CIOs should carefully consider their longer-term HR plans in terms of location of critical talent, training mechanisms, long-lining business support and the specific contractual requirements for IT staff and their jobs. Flexibility is key, as is increasing the institutional knowledge of non-eu locations, working practices and culture.

In terms of the ability to outsource, corporations and government departments have been under pressure in the press and from unions to reconsider outsourcing while simultaneously looking to make local redundancies in an effort to cut costs: Backlash leads Birmingham City Council to reconsider offshoring IT-jobs and Department for Work and Pensions staff begin industrial action. CIOs need to have in place communication and media management plans to address any public backlash from operational changes.

CIOs should also note that repression may not be overt. They need to prepare for additional administrative requirements, the impact of subsidies on ROI and potentially more foreign exchange rate manipulation that will impact the costs of products and services.  Note the last quarter’s Swiss moves in this regard: Swiss Franc Protectionism. Such protectionism will likely not occur as “one-off’s” at the moment annual budgets are set. This means CIOs will require financial flexibility from CFOs as part of ongoing project commitments.

Loading companies with more red tape will in the end just be counterproductive for all of Europe, especially at this moment of econommic malaise. However, CIOs must prepare for more protectionism, whether overt or hidden under the banner of market stabilization.

Remember to read our latest research:

CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

Ensure Your IT Strategy Is Ready for a Euro Crisis

Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

What the Euro Crisis Means for Government IT

Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

The Euro Crisis Will Mean More and Different Customers for Wealth Managers

And remember to diarise our January 19^th webinar on this topic: Euro Crisis Webinar

Commentators suggest over half of the companies on the 2009 Fortune 500 list began during a recession or bear market. Does this offer hope to a European market saddled with an on-going crisis and likely poor economic growth, if not recession, for several years to come?

The new European Programme for Research and Innovation Horizon 2020  European Programme for Research and Innovation Horizon 2020, which will come into effect from 2014 and will run until 2020 affirms this hope. Indeed, one can also argue that the level of entrepreneurship in many European countries is also quite strong as evidenced by THE GLOBAL ENTREPRENEURSHIP AND DEVELOPMENT INDEX. However, there is more to these two positive indications than meets the eye.

 First, Horizon 2020 is not a new initiative; an earlier attempt to launch Europe on a path to innovative growth came in 2000 at the Lisbon Summit. In addition, one has to question whether the goals set then have been achieved, or are close to achievement.

The Eu has expanded and the recent euro crisis has highlighted stark divisions of interest and capability between member nations. There remains a large difference in economic and entrepreneurial performance in many countries which is manifest in both scientific and technological development.

 Second, innovation and entrepreneurial activity requires sustainable funding and individual creativity. However, in: Is the Economic Crisis Impairing Convergence in Innovation Performance across Europe? , data suggests the level of investment in innovation during 2006-2009 has fallen substantially.

 What does this mean for our clients?

• Centralized political structure doesn’t necessarily translate into individual invention, creativity and growth oriented development, that is sustainable and drives meaningful change – witness the different approach taken in Silicon Valley regardless of Federal US economic policy 
• Companies seeking innovation should not wait for government bureaucracy to deliver performance
• Even if new investment may be hard to come by and discretionary spend is cut back, CIOs should still take an inventory of their initiatives and seek to reallocate money from poorly performing ones to alternates that have proven success records. Ie seek to scale innovation success

Remember to read our latest research:CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now, as well as attend the January 19^th webinar on this topic: Euro Crisis Webinar and contribute to our survey:Euro Crisis Survey.

As announced on the BBC (and other media outlets) today: Euro crisis: Eurozone deal reached without UK it appears on the surface as if consensus has been reached between many Eurozone countries on addressing the crisis. All but the UK whose current leader believes such a deal is not in the UKs best interest.  Tweets on #euro (from presumably UK “supporters”) seem to back this view. Indeed the Chairman of Tullett Prebon was quoted with no little irony as saying “UK as isolated as someone left on the dock in Southampton as the Titanic sailed away.“ Yet, it should not be forgotten that the UK banks are still exposed to euro debt: Revealed: UK banks’ exposure to eurozone debt

Even if Mrs Merkel believes that the “Eu has learned from its [past] mistakes”, I think it is a very long shot to believe that all is now rosy in the euro garden.

Whether the goal of fiscal union (one of the scenarios in upcoming Gartner research) can be achieved or evenly partially manifest in a tax and budget pact remains to be seen. Mr Sarkozy and Mrs Merkel have certainly bought time – at least politically. However, the markets do not usually play by politically oriented rules or indeed politicians’ time lines (memories of the ECU/EMU come to mind). Indeed, it won’t have escaped the market’s attention that yet more money (lending) is promised as part of this deal.

 Perhaps more importantly, and from a long-term perspective, the tragedy of the commons has not been addressed – rather this announcement from Brussels seems to reinforce it. There is a great article yesterday in the Hoover Institution Journal: The Euro & The Tragedy of the Commons that neatly explains the challenge before Europe, and indeed the US and its own debt crisis.

So, should CIOs and senior corporate executives (and the public) breathe easier? No! This situation is not resolved – at least not until amended treaty ratification occurs (and that is extremely uncertain), which is unlikely before March. Scenario planning remains an essential tool to uncover the implications and outcomes facing organizations and governments.

It is critical therefore that clients refer to Gartner research over the coming weeks to gain a better understanding on how to manage through this crisis: CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now, as well as attend the January 19^th webinar on this topic: Euro Crisis Webinar.

We will also be releasing the results of our survey: Euro Crisis Survey over the next few weeks as clients reveal their contingency plans.

Gartner has published a number of research notes on this aspect including one which deals with variable annuity products and another one that analyzes the aftermath of the economic crisis. Although the life insurance industry has weathered the economic turmoil quite well in the last few months (compared to their banking peers) there are no reasons to believe that the situation will become better in 2010. Unemployment rates are high, many markets are saturated and customer loyalty is eroding.

IT will play an increasingly important role in this environment to help life insurers to deal with these challenges. Being able to reduce operational costs, to improve straight-through-processing and to increase the number of interactions with clients will for example be key to remain competitive. And all of these goals will have to be achieved in an environment of flat IT budgets. According to Gartner’s latest IT Key Metrics data IT spending in the insurance industry will even slightly shrink in 2010 compared to the previous year.

But without better IT support including the modernization of outdated legacy applications the business model of life insurers will be at an even greater risk as it is already because of the economic environment.

I would love to hear your thoughts on this topic, as well as invite you to the upcoming event.

In further posts I’ll be able to include links to both a podcast and a video that give more of the flavour for our keynote FS presentation and the workshops we’ll be running. In the meantime, here is a quick summary for eleven of the presentations, workshops, roundtables and networking events that will be delivered by the Banking and Investments Services analysts, dedicated to Financial Services professionals. Note that many of these are designed for end-users financial services companies only so that they can exchange views freely – I’m afraid that vendors might cramp their style!

1.    Six Things That Could Kill Your Financial Services Firm in 24 Months

09:30-10:30, Monday, 02 November 2009 (Location: Palais des Festivals – Ambassadeurs 2)

“Despite the current gloom, as the dawn of a recovery gets a little closer, some financial services firms will see an opportunity to rebuild their brand and their business. But for others, this brave new world will be a harsh and possibly fatal environment. Make sure your IT plans put you in the former category.”

2. Financial Services Workshop: Cost Optimization Best Practices and Banking on Recovery (REGISTER!)

11:00-13:30, Monday, 02 November 2009 (Location: Palais des Festivals – Ambassadeurs 1)

This extended workshop forum, including a working lunch, will allow attendees from FSI to work together to explore key issues, share best practices and create practical action plans. The session agenda is as follows:

• 11:00-12:00 —“Cost Optimization — what works and what doesn’t work,” sharing participants’ actual experience from FSI organizations and their practical advice
• 12:00 — Lunch will be served
• 12:15-13:15 “Banking on Recovery” — examining the participants’ views on investments they must make grow, where new budgets should be prioritized, and making the transition to the post-recession banking world
• 13:15-13:30 — “Wrap up” — with a focus on actionable advice and practical solutions.

3.  Gartner Analyst/User Roundtable: BPO for Banking/Investment Services       REGISTER

15:45-16:45, Monday, 02 November 2009              Speaker: Peter Redshaw

4.  Gartner Analyst/User Roundtable: Collaborating With Regulators in the ‘New’ Financial Services Industry         REGISTER

17:00-18:00, Monday, 02 November 2009              Speaker: Alistair Newton

5. Workshop: How Will You Survive the Six Killers of the Retail Banking Sector?   REGISTER

08:00-09:30, Tuesday, 03 November 2009            Speakers: Alistair Newton and Peter Redshaw

The retail banking sector has been drastically shacked by the subprime crisis. New opportunities are emerging but also new major risks for the sector. This workshop will give you the opportunity to discuss those new risks with Gartner’s financial sector analysts and other retail banking CIOs.

6. Gartner Analyst/User Roundtable: Offshoring for Banking/Investment Services         REGISTER

15:45-16:45, Tuesday, 03 November 2009            Speaker: Peter Redshaw

7. Gartner Analyst/User Roundtable: Development of End-Customer-Oriented IT in Financial Services             REGISTER

14:30-15:30, Tuesday, 03 November 2009            Speaker: Alistair Newton

8. Executive Roundtable: The Future of European Insurance            REGISTER

14:30-15:30, Wednesday, 04 November 2009       Speaker: Juergen Weiss

9. Gartner Analyst/User Roundtable: To Cloud or Not to Cloud — How Applicable is Cloud Computing and SaaS for the Insurance Industry?     REGISTER

16:00-17:00, Wednesday, 04 November 2009       Speaker: Juergen Weiss

10. Gartner Analyst/User Roundtable: Pan-European Insurance Platforms – Dream or Reality?             REGISTER

09:45-10:45, Thursday, 05 November 2009           Speaker: Juergen Weiss

11. Insurance Networking Lunch (please note that this lunch requires pre-registration and is limited to 80 attendees) REGISTER

13:15-14:30, Tuesday, 03 November 2009            Speaker: Juergen Weiss

Join us for a networking and best practices lunch session for professionals from the Insurance Industry. Sponsored by Fadata, the lunch will include an introduction from Gartner analyst, Juergen Weiss, followed by a discussion by Fadata on the state of the insurance industry in Europe.

Social networking sites provide businesses a new way to extend their brand identity, establish a community experience for their customers and provide personalized interactions.  At the same time, such sites usher in novel forms of risk that can’t always be mitigated through traditional risk management strategies. Facebook, MySpace and LinkedIn and Twitter, along with countless blogs and chats are Web environments where anonymously supplied information about a company’s products and services are shared and compared, in some cases inaccurately.

Social media exposes firms to significant risks including serious damage to a company’s reputation.  With a proactive approach you can influence and counteract how your organization is portrayed on these social media.  That requires companies to create an Internet reputation risk management plan that addresses what visitors to your site express, what your employees share on other sites and most significantly what things are said about your firm on sites over which you have no direct control.

Here’s how to begin to get a grip on protecting your reputation on the Web;

• Actively engage on social network venues to understand how reputation can be impacted by the interactions
• Gather information on the social media activities your company is considering.  Then assess the areas of vulnerability, create counteraction plans and communicate them to employees.
• Dedicate at least one employee to the monitoring of your online reputation
• Build a process to identify new reputation risk elements as social media evolves

The risks enterprises face as a result of participating in social media are real.  But so too are the benefits.  Therefore don’t let risk blind you from taking advantage of the transformational communication opportunities arise from social media. 

I’ll let my colleague French Caldwell have the last word. Here is his pithy take on risk management, Risk Management and Business Performance Are Compatible):

“Risk management is perceived as the opposite of business agility. In reality, risk management is about building a more agile enterprise – that is enabling an organization to take the greatest amount of risk in the safest way possible. It’s not about saying “no” to taking a risk; it’s about how to say “yes”.

Private insurers should expect that they will have to comply with regulations that formerly affected only public companies. Insurers will need to expend more time and money to provide transparency and comply with potentially new, stringent regulations. Regulatory agencies in specific jurisdictions will likely establish additional compliance rules (such as the optional federal charter in the U.S. or new rating agency requirements) that will require additional risk management and compliance investments.

In addition, it is very likely that national regulators will continue to collaborate even more closely with each other and that regional regulations such as Solvency II in Europe will impact other geographies as well or even serve as role models. In a recent note on Solvency II, Gartner discussed the growing impact of risk management on core business processes.

Bottom line:  CIOs should prepare for compliance and risk management to play an even greater role in the business strategy of many insurers in the very near future.