‘Ireland is well placed to grow financial services jobs by one third’
Dr Cal Muckley says the ambitious IFS2020 Strategy can promote growth in the IFS sector.
Ambitious, even audacious plans have been at the heart of the development of the Irish Financial Services sector since the initial phase of the IFSC was first mooted in the late 1980s. Fast-forward 30 years, and the scale of ambition has not diminished with the IFSC Strategy 2020, which plans to grow employment by one third from its current 35,000 by 2020. Attaining this level of expansion will be challenging, in particular given the fiercely competitive international environment, but by playing to our competitive strengths and leadership position in financial and regulatory technologies, it is achievable.
The inaugural European Financial Forum – Building the Future of European Financial Services, which is taking place in Dublin this week, is an important forum to identify Ireland’s opportunities and challenges alike in financial services. It will have as a focus financial (FinTech) and regulatory (RegTech) technologies to manage and mitigate operational risks. Areas of FinTech and RegTech have considerable potential in respect to the key IFS2020 jobs objective. The majority of FinTech and RegTech investment in Europe occurs in Ireland and the UK. And the start-up rate for Irish-owned technology firms is accelerating rapidly. To enable such technology firms in Ireland, the right supply of skills and supports, in research and innovation, are vitally important.
One specific international event of concern for the sector is a much-debated geopolitical risk: a British referendum on whether to exit the European Union. It would likely have far-reaching negative and positive implications for the financial services sector here. But the primary day-to-day focus of the Irish Financial Services (IFS) sector is to curtail operational risk failures and related losses. Risks of an operational nature (inadequate processes, people and systems) constitute the major challenge to the financial services sector internationally, and the IFS is no exception. And this is where the IFS2020 must focus its attentions. Should a British referendum compel that country’s exit from the EU, the one certainty is that new regulatory compliance challenges and operational risk will ensue, due to the new regulation requisite to inter-relate the financial sectors of Britain and Ireland.
The principal concern for the future of the IFS sector is, hence, not a specific national or international event. Rather, it is the capacity of the Irish Government together with industry partners to provide an environment in which IFS sector members can best evaluate and respond to risk itself. If such a financial services eco-system can be further developed in Ireland, the potential for the IFS sector, and by extension the Irish economy, is very exciting indeed.
The Dublin Docklands IFSC had inauspicious beginnings, providing a mere several hundred job opportunities in the late 1980s. As of 2015, the number of employees in the sector, including specialised indirect service areas of accounting, taxation law and consulting, has risen to more than 45,000. It is the largest centre for hedge fund administration in the world, with some 3.8 trillion euro in fund assets being serviced across Ireland. The sector is, thus, of critical economic importance in Ireland. It contributes critically to the nation’s trade surplus and to the exchequer’s finances, and it has grown dramatically since its beginnings and it can continue to do so.
Regulatory compliance challenges are transforming the financial industry, as addressing these challenges impacts significantly on the bottom line by raising costs (eg fines and payments to customers) and increasing risk capital provisions. In IFS2020, Enterprise Ireland, IDA Ireland and Science Foundation Ireland provide financial and administrative support and guidance to IFS members, particularly those in the FinTech and RegTech sectors. Industry-orientated research, development and innovation is an important end product. It allows university educators, together with industry experts, to provide a stimulus to technological innovation in risk management and regulatory compliance across the industry.
Perhaps the most significant initiative in this regard is the Financial Services Governance Risk and Compliance Technology Centre (GR3C). This industry-led Technology Centre is hosted by UCC with NUI Galway and UCD as research partners. Industry members include major national and international financial institutions. The GR3C is conducting innovative R&D to help solve the governance, risk and compliance problems facing the financial industry. Its work in developing a knowledge base and an industry standard is crucial to allow Irish FinTech and RegTech companies to develop solutions that will retain Ireland’s competitive advantage and enable the ambitious growth plans to become a reality.
The IFS sector thrives or fails in a fiercely competitive international environment. Against this backdrop, the IFS2020 strategy is ambitious and it adeptly seeks to firmly establish a tailored financial eco-system. And it needs to do so. The IFS is an important constituent of our export-orientated, open economy, making a significant contribution to employment and taxation. This IFS2020 Strategy has clear potential to facilitate and promote growth in the IFS sector and to underpin the achievement of its key jobs objective in the years ahead.
Dr Cal Muckley is a member of faculty at UCD’s College of Business and a Principal Investigator at the Enterprise Ireland initiated GR3C.