Balancing growth and realignments—that’s the challenge capital markets firms face in the wake of the financial crisis. Yet despite this challenge, firms are striving to increase revenues and return on equity.
These are two of the industry specific findings from the latest Accenture High Performance Finance Study, which encompasses replies from 600 senior finance executives, including 58 respondents from the capital markets sector. The survey points to five key findings for capital markets firms, two of which I’ll be sharing today.
Finding 1: Institutions are striking a careful balance between growth and realignment
Capital markets firms are continuing to pull back from capital-intensive activities and are transforming their business models to reposition themselves for the future. In fact, almost 80 percent of respondents say that they have focused their investment on core businesses.
Some large investment banks are recruiting thousands of additional employees
and spending billions of dollars annually on risk and compliance. This means that costs outside these functions will remain under close watch. Consider this: almost 85 percent of respondents say that a greater appreciation of the inherent risks in a business has been a significant driver of the strategic business realignments they are making, while 57 percent point to the rising cost of servicing clients.
Bottom line: the scale of transformation in the industry provides opportunity to reposition for market share.
Finding 2: Integration remains a key barrier to managing new risk, regulatory and compliance requirements
Firms understand that closer integration between risk and finance will drive better decision-making, capital management and a deeper understanding of business threats and opportunities. In practice, however, this integration has been difficult to achieve. Firms continue to struggle with integrating existing finance and risk processes. Almost six out of 10 respondents cite this as a challenge.
A silo-based organizational model and governance also serves as a barrier to effective risk, regulatory and compliance management. So, how do firms expect to address this challenge? Join me next week when I explore that very topic and the other key findings from our survey.
In the meantime, to learn more, read: