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The days of the full-service investment bank—able to use cheap capital and access to leverage to operate across all products and markets—are over.
The investment banking industry is in a phase of transition. We are nearing the end of a decade of significant change, and the industry is almost unrecognizable from the huge profit generator it once was.
In this new environment, historical business models cannot deliver the required returns for shareholders. Average return on equity across the industry continues to bump along in the single digits, while revenues continue to decline in many lines of business.
In the context of this fundamental shift, banks have been forced to make some tough decisions regarding market participation—and define a strategy for returning to growth. And whilst most have now settled on a strategy, no investment bank has yet been able to fully execute on a strategic vision.
For the seventh consecutive year, Accenture has published the “Top 10 Challenges for Investment Banks 2015.” This year’s Top 10 Challenges focuses heavily on the importance of execution in:
Revolutionizing business models
Identifying a need and making the decision to change is a relatively short-term process, but real transformation can only be achieved through effective implementation. We believe that execution will be the defining challenge for next year and, indeed, for the coming decade.
Learn more about the "Top 10 Challenges for Investment Banks 2015."
We followed up last year’s Top 10 Challenges collection with a paper that explores the key requirements for executing strategic change, "Transforming the Capital Markets Firm: Proactive Steps to Profitable Growth."
There is of course no “one size fits all” model, but we identified three major elements that are present in all effective business transformations:
A simple, targeted and clear business model—backed up by requisite amounts of capital
An optimized operating model able to support change
Streamlined technology to enhance development opportunities
Banks must focus on definitively outlining the scope of any execution—ensuring that the requisite capabilities to deliver are present, and evaluating the progress of execution toward the stated goals through robust monitoring.
We believe the following attributes will determine successful execution:
Readily available talent
Fit-for-purpose technology platforms that complement and buttress the business model
Effective communication with both the market and clients
Receptiveness of all levels of the organization to change
The "Top 10 Challenges for Investment Banks 2015" is a collection intended to be viewed through the lens of execution. It is structured in three sections:
Our aim is first to draw out salient factors behind the most pressing driver of change, putting our focus on execution in context. We then assess how the response is reshaping the business and operating models of investment banks.
Finally, we investigate trends and opportunities that have the potential to revolutionize the operations of the industry. In short, this publication provides our view of the key battlegrounds on which some banks will emerge as winners and some will lose ground in the coming year.
October 30, 2014
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