The events of 2016 raise the serious possibility that populism and nationalism will play a much larger role in advanced economies in the next several decades than in the last several. This is far from certain, given the deep divisions within the public in the US and Europe, but the potential must be taken seriously.
This report highlights some key assumptions of recent decades that may be reversed if we have entered a populist era and identifies over 30 specific implications for financial institutions.
Financial institutions need to think today about whether they could adapt as necessary if this turns out to be the era we are now in. Actions should be taken now to re-evaluate strategic planning and stress testing processes to ensure that potential outcomes are not implicitly or explicitly dismissed as impossible. Beyond that, the potential for changes in the environment this large should be a further spur to redesigning firms to be more agile and to clear away the obstacles to good governance, sound data management, optimal financial resource management, and other key tools that will be even more clearly necessary for success.
Douglas J. Elliott, Partner