Risk in Service Sector

Quality and timeliness with an optimum efficiency level are the key factors affecting the delivery in service sectors. While this holds true even now, with the insertion of frequent market turmoil affecting the various line of services, many of which are linked to each other have turned the focus lights towards risk related considerations taken by the companies who strive to guard the interests of their existing customers, shareholders and employees on one end and to enhance their brand and goodwill to develop new clients.

The fashion in which Operations Management and Quality Management systems addresses the areas of improvement in the service delivery performance and customer delight, the processes and systems used to control and manage the various forms of risks like operational risks, credit risk, liquidity risk, market risk, IT risk etc., too have gained better momentum. Standards in the areas like information security, business continuity are changing the structure of operations models in the service sector.

Of all the service sectors, one industry which has been in the limelight for quite some time now and in fact, the industry which happens to respond most to this volatility in the market is the financial services industry. Based on the past experiences and future assumptions, it is expected that the financial markets will continue to experience some amount of volatility in the next few years. Even though various regulations like Basel II, Solvency II for insurers, UCITS 3 for Asset Managers and Sarbanes Oxley (SOX) for everything else are being prescribed, events wiping out major financial services giant like Lehman Brothers are promoting new sets of stringent regulations.

While it is very crucial from the risk management perspective to understand the appetite of the company to digest these new regulations and churn out positive outcomes for energising the overall financial system, it is more important to understand the gaps in the existing systems and regulations which resulted in such a large scale financial crises. Thus, finding realistic solutions which precisely lies in the basics of risk management needs to be looked afresh.

Risk Management Policies In Financial Services: Hedge Funds

Many financial services make use of a well-structured risk management policy to manage their day-to-day exposure to risk, including exclusive investment entities such as hedge funds. For many years hedge funds were considered the high-stakes bad boys of the investing world; an image that the industry despised and rejected in the public eye, yet celebrated behind the closed doors of their high-rise offices and their swanky exclusive nightclubs. Over the past 36 months the hedge fund community has stepped up their efforts to shed the negativity and weariness that is often associated with them. Of course in some ways this “risky market gambler” perception was always unfounded, especially considering hedge funds use complex strategies and investment vehicles to hedge away systemic and market risk.

Due to their size and unique capital structure, hedge funds were previously allowed to operate outside the stringent oversight of investment regulators, but this has changed over the past decade. While hedge funds continue to abstain from using the comprehensive risk management ‘best-practices’ of other financial services such as banks and large fund managers, they have certainly increased their use of risk management policies. These processes have evolved to monitor not only how their range of investments mitigate inherent market risk for their investors, but also how they conduct their business in general.

The organizational risk philosophy at any particular hedge fund typically reflects the interest-level and commitment of that fund’s top traders and officials. The greater these managers believe in not chasing greater return at the expense of risk compliance, the stronger the fund’s risk policy is embedded throughout the entire fund’s other personnel. Many hedge funds now employ a Chief Risk Officer and have doubled their expenditures on risk management processes and risk compliance. They are increasingly seeking individuals who have obtained at least one risk management certification, focusing on credit and financial risk. These changes are the result of not only clearer minds within the hedge fund management community, but also from changing investor expectations. While hedge fund have always used complex quantitative risk management models to quell investor fears, most managers will tell you that in the past few investors know, or cared to know, how they worked. While this sentiment has not dramatically changed during these past few months, there are changing expectations from investors, especially large institutional money managers, in regards to transparency, risk analysis processes, and how business is conducted. Fund managers typically benefit from long investment time-horizons and leeway from their investors, but even traditionally ‘sticky’ investors are demonstrating a willingness to pull assets out of hedge funds if managers do not comply with the changing risk expectations.

As a consequence of the 2008 financial upheaval the fund community has witnesses the creation of a series of private oversight groups, such as the ‘Hedge Fund Standards Board’. These self-regulatory bodies are creating industry benchmarks and best-practices in risk management, and from which the community can develop their own risk policies.

Hedge funds of all sizes have developed and incorporated risk management policies into their operational and trading strategies. These processes include limits on acceptable losses per trader, controls and limits on the types of investments made, and formal communication and internal policing procedures. These funds offer limited transparency on how they conduct business to anyone outside their inner circle of investors, and thus individual firms are expected to internally police themselves. An predominant precursor of risk in this business is the overuse of leverage, and risk management in this area has become a hot-button issue within the fund community. Many fund managers use borrowed money (funds borrowed against the assets provided by their investors) to maximize the return on their positions, and achieve the above-market gains the industry is famous for. However, this practice leaves the firm and its investors assets exposed to unforeseen market risks. The majority of funds now have risk assessment policies in place that monitor their liabilities-to-assets ratios and prevent individual traders from exceeding leverage limits.

Due diligence in many aspects of the hedge fund business has increased since the 2008 financial crisis. Fund managers are now acutely mindful of their brokerage trading connections, as well as the structure of asset-custody with transaction partners. Since the 2008 financial crisis hedge funds have learned the hard way that counter-party risks certainly do exist in the financial services sector, and the domino effect resulting from the collapse of Lehman Brothers demonstrated that even the best and brightest can be left exposed.

5 Ways to Promote Your Financial Services Blog

Wouldn’t it be nice if all you had to do was post great content and then let the internet do the rest? Yes. But it wouldn’t it be convenient for your competitors, too?

Because successful promotion takes time, effort, and skill, developing superior promotion skills is another way to get ahead of the competition.

If you’ve worked hard on your content strategy and content creation, it makes sense to shout it loud and proud. How you do this depends on a number of factors, including how much time you can dedicate to promoting your blog and what industry you are in. As a general rule of thumb, you should spend at least as long promoting your blog posts as you spend creating them.

How do you do this? Here are some of our favorite and best ways to promote your financial services blog.

1. Find the Players in Your Niche

If you can associate yourself with the top people in your field, this improves your perceived authority and how likely people are to trust you. It also makes a good impression on Google and other search engines. Ideally, you want to get a link to your site from a top site on the web.

Ask an influencer for a quote – this is a good way to make contact with the top players in your field. They become aware of you and, if they agree, their followers become aware of you too because they are very likely to link to you whether on their site or via social media.

Mention your expert sources – When you create content, make sure to mention any experts whose work was influential. Tell them that you mentioned them and they are likely to re-share the content to their network.

Direct message influencers – the bigger they are, the more email they will get. To make you and your business stand out, offer something that they will find helpful. You don’t need to feel awkward about contacting someone when you are helping them or their business.

2. Post Content on Social Media

Social media promotion is a cost-effective way to increase leads. According to a LinkedIn study, 63% of mass affluent customers said they acted on a financial product or service after learning about it on a social media platform. And according to HubSpot, lead conversion rates are 13% above average through social media.

By being active on social media, you can increase brand awareness. Engaging with your chosen platforms also gives you the opportunity to manage negative comments promptly. With skill, businesses turn negative comments into opportunities to demonstrate their integrity and professionalism.

It’s worth regularly crafting content specifically for social media, rather than only ever posting links back to the content that’s on your blog. Provide compelling, tailored content, and show your social media followers that you care. The result will be increased shares and better brand awareness.

3. Use Social Media Targeting

Via platforms like Facebook and Twitter, your business can use algorithms to target your ideal customers.

This means that you don’t need to go wide with your promotional material, which risks irritating people for whom this material is irrelevant. By using social media’s advanced targeting capabilities, your content will not only reach the people who need it, but they will also be grateful to you for providing it.

While advertising via platforms like this amounts to paying for traffic, this is not to be confused with buying an email list or buying leads. These latter activities are likely to end in loss of money with very little return because the overwhelming majority of people who would receive these mailings won’t want them. Paying for targeted ads on social media platforms, however, allows you to take relevant, targeted traffic from the big players and diverts it to you.

4. Remember that Social Media Works Two Ways

To get ahead, it’s critical to remember that social media is social. It’s not just a place to post promotions and advertisements. Engage with your customers. By being personable, you differentiate your product from your competitors and build trust, which is so important in the financial services sector.

Monitoring and engaging with social media also gives businesses an invaluable opportunity to learn about their customers and how to serve them better.

If you’re not yet getting comments on your blog, don’t worry. This is not so unusual. Wherever you do get customer engagement, however, make sure you are there.

And remember that you can start conversations. Ask questions and be interested in your customers. A lot of what you will be doing to promote your website is learning about your customers to satisfy them better.

5. Become a Thought Leader

Becoming a thought leader doesn’t happen overnight. Success will be one step closer, however, if you start now.

How to do it?

Share information that your online community needs to know. This includes industry updates and advice, demonstrating that you are informed, but also authoritative and helpful. It’s best if you generate most of this content yourself, but you can also curate content from other sources and create useful resources too.

Thought leaders use their experience and expertise to make insightful predictions about the future of their industry. When something new happens, make sure that your business expresses an opinion or explains and analyzes what is going on.

Follow the blogs of other thought leaders and make valuable comments on their posts. Over time, they will be checking out your blog to see what you have to say on important matters.

If you can be controversial or say something that everybody else has either overlooked or is afraid to say, this will help your business get noticed. By being bold and pushing conversations into new territories, you can earn a reputation as a player with something to say.

Find an influential community and join it. Answer group questions to establish yourself as an authority and to make waves with other influencers and followers. Quora is also a good place to establish yourself as an authority and build your reputation and trust.

Promoting your financial services blog is much more than just promotion. Done right, it will help you to learn more about your customers, develop your brand’s authority and trust, and differentiate your offering from everybody else in the market.

If you’re blogging, make sure that you are also promoting and make the most of your opportunities to connect with customers.