The investments necessary are long-term and the fixes, in many cases, will take multiple years to execute. A number of firms have sound programs in place to address these longstanding issues, but continued strong project management and tenacity are crucial. I see commitment to this basic “blocking and tackling” as essential to financial institutions continuing to be competitive – and relevant – in the digital world. And that’s the third dimension that concerns me: the competitive landscape for financial institutions in the digital world. As more and more non-financial entities are entering the financial arena, I worry that financial firms may lack the agility and ability to compete at the level that they need to – particularly with the added complexities (and likely constraints) of regulation. At the end of the day, will financial firms be able to compete in the same way – or will these largely unregulated players be the future of our financial system? 2. Culture  My final topic today is culture – a complex topic that we all know it is an important one. Before I get into this in detail, I want to stress that “culture” is very different from “risk culture.” You can have a strong risk culture within your firm, but still have cultural issues. The culture I am talking about today is broader and deeper. There seems to be a general acceptance that there needs to be changes to the overall culture in the financial services industry, as well as improvements to cultures within individual firms.
The road ahead Looking ahead, we see a number of challenges that firms are facing, and I thought I’d take a couple of minutes to share with you some broad themes that we see emerging. The list is not exhaustive or overly detailed – as I’m sure you will recognize – but I think it captures some of the issues that are – and should be – more “top-of-mind” for many of you. 1. Engagement of Boards and Senior Management: While management is clearly on the hook to develop and implement necessary changes, and despite the tremendous progress made in board engagement over the past few years, some firms are still struggling to set the appropriate level of engagement with their boards. The challenge for these firms is finding the right balance and having a clearer understanding of the roles and responsibilities of boards of directors. Based on our experiences with increased engagement with boards, a number of lessons can be applied to engagement between senior management and boards, including the importance of: •  Trust and credibility;  •  The qualifications and experience of board members;  •  Board leadership and in setting the right tone; and  •  The right composition of members. Firms should not underestimate the importance of the chairman or lead director, or the roles of the committee chairs. The board has the responsibilities to provide the appropriate level of oversight and to be prepared to hold senior management accountable for their running of the firm.