As the world is bracing itself for the impact of COVID-19 on our nations, economies, companies as well as individuals and societies, professional services firms (PSFs) are both positively and negatively impacted at once: Navigating the regulatory, ethical and legal responsibilities of this pandemic drives business for many law firms, accounting, assurance and consulting service providers as well as technology advisors and providers alike. However, this additional work does not compensate for more extensive losses. PSFs are also the first to take some hits as many clients’ priorities are shifting, projects are being canceled or delayed and first cost avoidance and reductions measures need to be put into place.
While it is clearly necessary to deal with the serious short-term implications of this situation, it may also be strategically important to think through the mid- to long-term implications for professional services in general and your firm in particular. Our standing dialogue with leaders in our and other knowledge-driven firms has echoed this in these past days and weeks. Based on these and our long-term observations, we would like to suggest the discussion of three hypotheses regarding the aftermath of COVID-19 for professional services:
Hypothesis #1: Firms are realizing that virtual collaboration and digital client engagement models are possible
As partially reflected in the recent news about the benefits and usage of video conferencing and other virtual collaboration tools amidst the current COVID-19 pandemic, people all over the world are finally starting to consequently communicate and collaborate virtually in their professional environments. While these “virtual ways of working” may still have some downsides compared to physical human interactions, professional services firms, their clients and workforce can be expected to develop a much deeper and practical understanding for these tools – and may even start to question the importance of “face time”, which has traditionally been at the heart of the hourly and daily rates for many professional services until today.
The quickly increasing adoption and usage of technology is likely to set the pace for both the digital optimization of existing business and the digital transformation towards new business going forward. For both old and new offerings, we can expect a quickly rising share of work being delivered via digital engagement models – which will be based on collaboration tools and platforms, but also more fully digitized delivery components (aka “software“). Consequently, firm leaders will need to evolve their traditional view of technology as a necessary cost position towards technology as a driver of business growth and profitability.
Hypothesis #2: Risk and compliance challenges are omnipresent questions – in the long run and within all other challenges.
A global crisis like COVID-19 quickly exposes structural weaknesses across supply and value chains, decision-relevant data and information, management decision-making, and crisis response plans etc.
Fixing these weaknesses is obviously creating business opportunities for several firms in the short term – but it is also improving clients’ mid to long-term awareness and relevance for their individual agenda. The market opportunity arising from globally increasing and more complex regulation, growing uncertainty as well as a general risk management needs has been transcending many clients’ management questions over the past few years – and is now, in the light of COVID-19, likely to increase even more.
In contrast to the 2008 financial crisis, many experts also see the corona virus responses by both governments and companies as an opportunity to demonstrate that collective global actions are possible. This sheds a new light on the global climate change challenge, which is here to stay – and which will largely be addressed through quickly expanding regulation in many countries over the coming decades.
Overall, we believe that the markets for risk and compliance related advice, services and solutions (which have traditionally always stretched across legal, accounting and consulting firms alike) can be expected to have a bright future. This will be strongly reflected in the portfolios of key players in the field today, but also attract new players, such as traditional strategy consultants or new technology providers.
Hypothesis #3: Digital business models are in reach – and in demand.
Effectively responding to many of the above-mentioned challenges, means that data and information need to be gathered and processed across thousands of clients, employees and/or suppliers. The same goes for many of the resulting actions and changes, which companies may need to take in response to a crisis or far reaching regulatory change. Furthermore, the responses are not one-off projects, but often about the enablement of sustainable capabilities, processes and solutions to the above mentioned challenges (Hypotheses #2).
Professional services firms have widely begun to invest in their data & analytics and digital solutioning capabilities over the past years – and may now finally be able to cash-in those capabilities or reach more significant scale with their increasingly digital offerings. This is driven not only by innovative firms on the supply side, but mostly by clients themselves, in search of much more permanent, tangible and measurable solutions these days. Managed services, automation and subscription business models and offerings by PSFs provide solution reliability and scalability around critical client issues, e.g. as the following client statistics on business model demands for risk services clearly show:
These three hypotheses are by no means an exhaustive list of the potential implications of COVID-19 – nor can they be exclusively attributed to this terrifying pandemic. We have tried to work through the current discussions about effective responses, the first learnings and have connected them with the overarching trends, which we have been observing for several years. With this article, we try to look beyond the current flood of tragic news and developments – and we hope to offer some food for thought and different perspective to leaders of legal, consulting and accounting services.
This article was originally published on LinkedIn.