CFO Insights newsletter Q4 2022
Financial services sector deep dive
We have compiled you a targeted summary of Deloitte’s latest insights and 2023 outlooks for financial services sector that we believe are especially interesting for the Q4 2022.
2023 financial services industry outlooks
How can financial services leaders navigate the path ahead? They can apply the lessons they’ve learned since 2020 to address challenges and find opportunities: leaning in on smart strategy and execution and focusing on talent, technology, risk, regulation, and purpose. While some organizations may choose the cost-cutting route, others will point toward smarter execution, finding ways technology can be deployed to add value and create superior customer experiences. While some firms may respond to ESG requirements defensively, focusing on doing only what’s required, others will step up and lead, finding opportunities to invest in people and the planet.
2023 could be the year the “new normal” fully comes into view. There will be opportunities to help define the future, one in which profits and purpose are inextricably linked. Financial services leaders can be poised and ready to move the industry forward.
READ MORE: Financial services outlooks for 2023
The Digital Operational Resilience Act (DORA)
The Digital Operational Resilience Act is a “game changer” that will push Financial Services firms to understand fully how their ICT, operational resilience, cyber and third party risk management practices affect the resilience of their most critical functions as well as develop entirely new operational resilience capabilities such as advanced scenario testing methods. The DORA has an impact on the firms’ operating model in three areas: strategy and governance, people and organization as well as processes and operations.
- The EU’s Digital Operational Resilience Act has been agreed
- What can we expect from the Digital Operational Resilience Act
Tax responsibility as part of responsible investing and ESG reporting
Fiscal and tax responsibility has risen to the investors' agenda. Investors and various organizations have recently shown increasing interest in companies' tax practices, investors already expect companies to publish more information than before about the payment of taxes, tax strategies and tax-related practices and responsibilities. Tax responsibility reporting recommendations have also increasingly been included in various responsibility reporting standards.
- Five ways tax leaders can help achieve sustainability goals
- Corporate climate change commitments and trust
- Verovastuullisuus finanssialan toimijan näkökulmasta – onko omien verojen raportointi riittävää?
- Sijoittajien ja muiden sidosryhmien kiinnostus vastuullisia verokäytäntöjä kohtaan kasvaa – miten vastata odotuksiin?
Pillar2, i.e. the minimum tax directive
From 2023, Pillar Two’s ‘income inclusion rule’ will apply to large multinational businesses with consolidated group revenues of at least EUR 750 million per year. In-scope organizations will need to pay a minimum effective rate of tax of 15% in every country in which they operate. Groups with effective tax rates below the minimum in any particular jurisdiction will be required to pay top-up tax. From 2024, in cases where the income inclusion rule does not apply to a business, the ‘undertaxed payment rule’ will apply as a secondary (backstop).
The new rules will require a step-change for groups in scope in terms of global tax compliance - including understanding the rules, accessing data, performing and processing the calculations, understanding accounting treatments, and adjusting for changes in prior periods as well as filing additional Pillar Two calculation returns and notifications.
- Rahoitusalan yritysten näkökulmia EU:n minimiverodirektiiviin (deloitte.com)
- OECD Pillar Two - Global Minimum Tax
- OECD inclusive framework publishes Pillar Two global minimum tax model rules
Council Directive (EU) introducing certain requirements for payment service providers
In January 2024, EU-level regulation concerning new reporting obligations of Payment Service Providers (PSPs) as defined in the Payment Service Directive (PSD2) will come into force. PSPs are required to keep records and report certain cross-border payments to local tax authorities in EU Member States on a quarterly basis.
In Finland, the first reporting by the PSPs to the Finnish Tax Administration shall be done in April 2024. At this point, all PSPs should prepare for the changes by confirming whether this reporting obligation concerns them and by ensuring whether systems are capable of recording and reporting the necessary information.
- Link to the Council directive (EU) 2020/284
- CESOP – An EU-wide VAT transactional reporting obligation for payments
Over the past few years, the industry has been investing in digital technologies to improve core business capabilities and/or modernise legacy systems.
Investment banking groups have embraced digital transformation with the same gusto as other parts of the banking system. Modernizing technology infrastructure, when legacy systems and manual processes still persist, increases the risk of operational failure, and typically is a multiyear effort.
- Getting Ahead: How CFOs Can Align Minds and Machines to Reinvent Forecasting
- Data-driven reporting is the new trend
- Accelerating the last mile reporting
- Financial Planning & Analysis
- Enterprise Business Planning Transformation