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Cyprus 4.0: Looking ahead to 2024

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In the tumultuous landscape of 2023, the global economic and sociopolitical spheres were rife with challenges that tested the mettle of governments, organisations, and businesses of all sizes across the world

As the year unfolded, unprecedented events prompted swift reactions and resilience from these institutions, navigating through uncharted territories to sustain stability and growth.

Now, as we step into 2024, new hurdles arise, presenting fresh challenges that demand astute responses.

Yet, amidst these trials, opportunities emerge, inviting a reimagining of strategies and a seizing of new prospects.

This article delves into the pivotal events of the past year, explores how institutions braved the storm, anticipates the challenges ahead in 2024, and illuminates the opportunities that accompany this evolving landscape.

During the mid-2021 period, a global surge in inflation emerged, marking the steepest inflation rates witnessed by many countries in decades. This widespread inflationary trend found its roots in a complex blend of factors, stemming from the economic aftermath of the pandemic, disrupted supply chains, extensive fiscal and monetary support issued by governments and central banks worldwide in response to the pandemic, and instances of price gouging.

As the demand surged through 2021, it spurred historical and extensive shortages, encompassing critical areas such as chip and energy supplies, significantly impacting global construction sectors.

The ramifications of the Russian invasion of Ukraine in early 2022 added fuel to the fire, amplifying global oil, natural gas, fertilizer, and food prices.

This resulted in a further spike in fuel prices, reaping record profits for oil producers and intensifying the inflationary spiral. While inflation rates in both the United States and the eurozone displayed a slowdown through the latter half of 2022, extending into 2023, the issue continues to be a problem for many businesses and private citizens.

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While the European Central Bank (ECB) has kept rates stable, in its most recent update, it remains to be seen when inflation will subside enough for rates to be cut.

“The key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the inflation goal,” the ECB said in a statement.

In the third quarter of 2023, with the conflict in Israel, another regional crisis emerged to complicate matters further.

Commenting on the effects of the conflict on the Cypriot economy, former chairman of the Cyprus Securities and Exchange Commission (Cysec) and economist Marios Clerides said in October that “the big question is how long the conflict will last before we can make any assessments over the economic impact.”

“The consequences to the economy will depend on how soon or how late the war will end and if there are other geopolitical consequences in the surrounding area,” he added.

He explained that tourism would certainly be affected due to the large number of Israeli tourists that holiday in Cyprus, specifying, nonetheless that “Cyprus’ economy shows resilience.”

Meanwhile, the governor of the Central Bank of Cyprus (CBC) Constantinous Herodotou most recently highlighted the economic outlook of Cyprus, emphasising the positive growth prospects despite global challenges.

He acknowledged the adverse impact of the pandemic on the economy but commended the country’s resilience. Herodotou stressed the need for continued vigilance due to uncertainties surrounding the global economy and geopolitical tensions.

He also underlined the importance of sustainable policies and investments to support economic recovery, while noting the significance of the banking sector’s role in supporting the economy, urging for enhanced digitalisation and innovation.

“As regards the future, the current energy crisis has highlighted the importance of one of our key challenges, namely the need to speed up the green transition,” Herodotou said.

“To safeguard the long-term benefits of such a transition, policymakers need to be ready to address effectively any possible difficulties that may arise during the process,” he added.

The challenges will undoubtedly persist in 2024, to varying degrees, while new obstacles may present themselves, prompting companies to react accordingly.

Considering what has taken place over the past few years, financial institutions in Cyprus have not remained idle. They have readjusted their strategies, focusing on several key areas and initiatives that seek to boost their profitability, improve the services they offer to customers, and bolster their ability to absorb unforeseen external shocks.

Cypriot banks, specifically, have doubled down on their digitalisation efforts, something which is seen as a key driver for efficiency.

Indeed, the ECB has said that “technological innovation triggers structural change in all areas of the global economy, and banking is no exception.”

“Digital transformation is not just an option any longer for banks, but a necessity to remain competitive and continue meeting customers’ evolving demands,” the commission added.

Moreover, it asserted that “banks can thrive thanks to opportunities opened up by digital transformation if, along the way, they prove capable of properly facing inherent challenges,” such as strategic and execution risks, technology-related and operational risks, as well as any new emerging threats.

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Another area where firms in Cyprus have concentrated is talent acquisition, to staff their organisations with people who have the vision, desire, and necessary skills to take the company forward.

To be sure, consulting firm EY stressed the importance of young people in financial organisations, underlying the importance of banks winning over Gen Z workers.

The company explained that the ongoing modernisation of banking involves adopting digital platforms and automated solutions.

Banks actively engage in tackling societal challenges like social inequality via inclusive financial programmes and addressing the climate crisis through sustainable financing.

However, amidst headlines about bank failures or financial crimes, these impactful facets of a banking career risk being overlooked.

To attract future generations to the sector, efforts are needed to reshape the narrative, highlighting banks’ positive societal contributions and positioning banking as a sector that drives positive change.

“You can’t put tomorrow’s talent in yesterday’s jobs,” commented Stefanie Coleman, Principal, People Advisory Services, Ernst &Young LLP, United States.

“The next generation of workers expect to be digitally enabled in their roles and to do work that they find rewarding – creative, strategic and interesting,” she added.

“They want to experiment and try out a range of different roles, which will help them build as many skills as possible,” Coleman concluded.

Moreover, another important aspect to consider when crafting a corporate strategy is purpose, which refers to an organisation’s identity and fundamental values.

Advisory firm Deloitte has previously explained that “purpose-driven companies witness higher market share gains and grow three times faster on average than their competitors, all while achieving higher workforce and customer satisfaction.” In addition, the company said that “companies that lead with purpose and build around it can achieve continued loyalty, consistency, and relevance in the lives of consumers.”

“Those that fail to identify and articulate their purpose may survive in the short term, but over time, people are likely to demand more,” it added.

As we prepare to enter a new year, with all the challenges and opportunities it encompasses, it’s worth returning to the aforementioned CBC governor Constantinos Herodotou.

“We should pursue our efforts, always having in mind that we cannot change the direction of the wind, but we can adjust our sails to always reach our destination,” Herodotou said.

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