Focus for Success | Executive Summary
The High Performing Investment Bank
Focus for Success The High Performing Investment Bank Executive Summary
Executive Summary Focus for success The ongoing financial crisis has forced many businesses to face some grim realities, none more so than investment banking Banks have had to undertake largescale restructuring and cost cutting, hilst scrambling to meet even reduced revenue and rofit targets, all ithin an environment of intense regulatory ressure and lacklustre economic erformance It has been the erfect storm for the industry emerged, roving that success is ossible through The result is that investment banks have to disciline and clear strategic ositioning hilst reexamine the very rinciles of ho they these findings rovide insight into the building do business To survive, let alone thrive, banks blocks of high erformance, they are not the only have to use the ne economic realities to or definitive anser iven the game is changing, fundamentally reform the ay they aroach banks ill need to understand hat it ill take the market, and ensure they remain relevant to be high erforming in this ne era to their clients To this end, our study has identified a number It is because of this aradigm shift that €ccenture of key characteristics that ill define the ne has conducted a detailed examination of hat industry Banks ill have to face u to multile it ill take for banks to be high erforming in s ueees on rofitability, ithin an increasingly this ne era ith over „… years orking at the comlex marketlace, all under rising cometitive heart of the industry, €ccenture has a uni ue ressures The combination of these factors leaves ersective on hat it takes for banks to be high little margin for error Banks need to diligently erforming e have seen a number of banks focus on those areas that ill generate sufficient rise and fall, building extraordinarily rofitable returns and are relevant to their clients businesses before sectacularly crashing †n Building a strategy in such an uncertain and many occasions, as banks’ senior managers volatile environment is challenging Hoever, readily admit, banks dodged a bullet They ere market dislocation ill bring oortunities for able to avoid structural change by hiding behind those able to look beyond shortterm concerns high rofits and extraordinary revenue groth To take advantage, banks need to build structural rates Hoever, as €ndre Haldane at the Bank change into their strategic lanning To rovide of England recently noted, ‘the urchaser of a banks ith the tools to drive this rocess, ortfolio of global banking stocks in the early €ccenture has identified five business models to ‰ ‰ŠŠ…s is today sitting on a real loss’ ‹learly, hel understand ho to reach high erformance no is a time to reassess and rebuild in the ne era These are‚ To better understand hat has driven high • The Flow Monster, hich harnesses highly erformance in the ast, €ccenture has carried efficient infrastructure to rocess huge trade out a detailed financial analysis of the recent volumes at tight sreads erformance of ‰Œ leading investment banks, as • The Regional Champion, hich crosssells ell as reflecting on historical trends This has risk management and financing solutions to an rovided insight into the recent inners but, more existing client base of midsied cororates imortantly, has shon that banks have achieved high erformance through multile routes To • The Product Specialist, hich achieves traditional scale layers have stretched clear of the cometitive differentiation through niche ack, but three smaller ‘focused inners’ have also roduct offerings
• The Primary Markets Powerhouse, hich uses secialist caabilities and renoned talent to advise on or structure highly rofitable issuances and deals • The Risk Master, hich relies on effective controls, oerful infrastructure and management confidence to take on and manage risk These are not rescritive business models, rather an articulation of hat constitutes high erformance in the different discilines of investment banking €s such they are designed to frame a strategic lanning exercise The first stage for a bank is to revie its ortfolio of business lines Žising caital constraints and sluggish groth rates are hamering the ability to generate sufficient returns on caital, meaning a bank must reork and re‘ustify the economics It is ossible for a bank to be successful in one, of the businesses lines in hich it oerates It or a combination, of models Hoever, it is crucial must then rationalise its ortfolio to focus on to areciate that each model is fundamentally only those in hich they ill feasibly be able to different and must be treated indeendently hile comete and that are relevant to its core business many of the features, such as investment in talent, strategies ’nderstanding ho current business are ubi uitous, the focus for investment varies in lines fit to these models ill hel in analysing the each one, meaning that the caabilities are rarely trade offs in the decision making rocess Further, transferable If a bank ishes to adot more than and crucially, it must ut the needs of its clients one model it must understand ho its uni ue at the centre of this exercise strengths can rovide linkages, but also ensure that it is able to back each chosen model ith sufficient Secondly, a bank must focus on building a investment to build a inning roosition cometitive advantage in each of its chosen models Each model outlines the key features €s investment banks fight to remain relevant re uired to be successful, highlighting the necessary in the turbulent marketlace, no is the time management choices, and resulting conse uences for strategic action Banks must abandon the of these To develo a inning roosition, banks recrisis mindset of trying to be all things to all must diligently focus on effectively stringing these eole and instead reevaluate their ositioning, features together and building marketleading to ensure lasting relevance to their clients and caabilities to underin each one a viable roosition to their shareholders ‰ “‹ontrol rights ”and rongs•”, Seech given by €ndre Haldane, Executive —irector, Financial Stability and ˜ember of the Financial Policy ‹ommittee, at the incott €nnual ˜emorial ™ecture, ”estminster, ™ondon•, š› †ctober š…‰‰
€bout €ccenture €ccenture is a global management consulting, technology services and outsourcing comany, ith more than š››,……… eole serving clients in more than ‰š… countries ‹ombining unaralleled exerience, comrehensive caabilities across all industries and business functions, and extensive research on the orld’s most successful comanies, €ccenture collaborates ith clients to hel them become higherformance businesses and governments The comany generated net revenues of ’Sœšžž billion for the fiscal year ended €ug „‰, š…‰‰ Its home age is accenturecom €ccenture Exerts To discuss any of the ideas resented in this aer lease contact‚ Bob ach anaging Director, loal Capital arets robertgachŸaccenturecom ¡‰ Š‰¢ ›žš žŠžš —ean £ayson enior ecutive, Capital arets deanl‘aysonŸaccenturecom ¡›› š…¢ Œ›› ŒšŠž £ames Sroule Head of Capital arets esearch ‘amesrsrouleŸaccenturecom ¡›› š…¢ Œ›› „„Œ¢ †liver ¤night Capital arets trategy oliverhknightŸaccenturecom ¡›› š…„ „„ž š¥¥¢ ‹hristoher Hook Capital arets trategy christoher‘hookŸaccenturecom ¡›› š…„ „„ž ‰„¢„ Copyright © 2012 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademars of Accenture.