For the seventh year, Accenture has published its annual Top 10 Challenges for Investment Banks. This year, the collection of reports focuses on the importance of successful execution, which is vital during a period of transition. The industry, while nearing the end of a decade of change following the financial crisis, still has transformational challenges ahead as it is no longer the renowned profit generator it once was.
The market itself has also made a fundamental shift as it’s weathered a battering from regulatory changes, more onerous capital requirements and diminishing demand from clients. This shift is characterized by new structures, economics and an emerging set of services or “utilities”. In response, many investment banks have modified their strategies accordingly.
Some banks have significantly cut back on their focus and support for some or indeed many of the investment banking business lines to focus on other areas, such as wealth management. Others have ramped up their current operations to replace players who have exited. Of course, the remaining firms have continued on their existing path, their historic strategy unchanged while in some cases being “second guessed” by industry analysts for this lack of change. Regardless of their approach, few if any organizations have fully completed their restructuring efforts. We say this as we still see major inflight programs at most large institutions – legal entity restructurings, new operating models and alternative service model approaches.
Winners execute, while the rest risk being left behind
Accenture sees the defining challenge for investment banks over the coming year as being the execution and implementation of these strategic visions. This execution will be especially challenging for large, geographically and culturally disparate firms.
There is, of course, not a one size fits all approach to business transformation, but we have identified three major elements that are present in successful implementations:
- A simple, targeted and clear business model backed by requisite amounts of capital.
- An optimized operating model able to support change.
- Streamlined technology to enhance development opportunities.
Banks must begin by outlining the scope of the execution to ensure they have the necessary capabilities to monitor and evaluate their progress and deliver on their stated goals.
Attributes of a successful transformation
We believe the following attributes will help organizations implement their strategies:
- Readily available talent – both the right skills but also making sufficient time available for these resources to play their role.
- Governance – the right decision making and oversight mechanisms to effect change and deal with inevitable challenges and shifting priorities.
- Pragmatic approach to technology including how to manage legacy, third party offerings and the trade-off between investments and run rate savings.
- Effective communication with both the market and clients.
- Active management of the change at all levels of the organization.
The Top 10 Challenges for Investment Banks 2015 is a collection of reports intended to be viewed through the lens of execution. Our aim is threefold:
- To highlight the salient factors behind the most pressing drivers of change, putting our focus on execution in context.
- To assess how the response is reshaping the business and operating models of investment banks.
- To investigate trends and opportunities that have the potential to revolutionize the operations of the industry.
In short, Accenture provides a view of the key battlegrounds on which some banks will emerge as winners and some will lose ground in the coming year.
To learn more, visit www.accenture.com/tenchallenges.