A number of regulatory, market and economic challenges face capital markets businesses as they try to regain profitable growth. There are also changing client behaviors: as clients themselves seek higher returns, they’re putting pressure on firms to lower fees and spreads. To recover return on equity (ROE), capital markets firms must transform their businesses, taking out long entrenched costs related to complexity that can no longer be supported by current revenue streams.
As firms seek to strengthen and simplify their business and operating models, they also find themselves wrestling with technology platforms that may be better suited to supporting their businesses in the past. In the coming weeks, I’ll delve deeper into the topic of technology transformation, but first let’s look at the three elements of a successful transformation.
Accenture finds that capital markets firms need to address three major elements to enable an effective transformation:
- Business model – Firms’ business models often need a more targeted focus on key clients and relationship management. Leading firms also will seek to optimize their client and product portfolios to maximize return on capital. Enablers include client-level profitability models, new sales organization and roles, measuring and managing capital allocation at finer levels, and optimizing their use of global collateral across businesses—to name a few strategies.
- Creating a stronger operating model – Many firms have discovered that vendors, outsourcing and industry utility solutions can support better levels of client service while delivering significant cost savings. Keeping common functions that don’t provide sufficient competitive differentiation in-house is no longer economically feasible.
- Implementing transformational technology solutions – First-movers are implementing packaged, best-in-breed technology solutions to replace entrenched, high-cost, custom systems.
For many capital markets firms, technology is the most challenging part of transformation, yet it is at the core of addressing many of the challenges firms face today. Join me next week when I discuss how firms can select the right technology transformation.
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