Nearshoring has been a part of the location strategy of established entities for a while, but the size of nearshore hubs is usually dwarfed by the scale of the global hubs in the traditional low-cost locations built over the last decade.
With the sudden lockdown amid the pandemic, many global banks facilitated remote working for their employees to ensure safety at work. The offshore model was challenged in terms of infrastructure and connectivity. This predicament caused a negative impact on the overall performance and productivity and led to a distrust in the sound working of offshore hubs in the post-coronavirus economy. Remote working has also raised concerns about data privacy and client confidentiality for financial services firms. Some firms have temporarily moved the work classified as sensitive data back to an onshore environment.
We see leading banks estimating a 50:50 physical to virtual working ratio as the end state norm in a post-COVID-19 world. As such, the location and real estate configuration is being re-configured.
This new model will have its own challenges in terms of securing the required capabilities in nearshore sites. The cost equation will have to be recalculated to ensure that the effect of the shift remains cost neutral to the Finance cost base. However, the key driver this time around for location strategy decisions will not be one of arbitrage but of agility and sustainability.
This will also serve as an opportunity to rebrand from production-heavy shared services to digitally enabled centres of excellence.