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As capital markets firms seek to strengthen and simplify their business and operating models, they find themselves working with technology platforms that may better support the businesses of the past.
In the face of regulatory, market and economic challenges, more and more firms see the need to transform their capital markets businesses to achieve profitable growth—but transformation won’t be easy.
In this report, Accenture outlines the elements of a successful transformation, the basic principles for technology transformation and ways to overcome barriers to transformation.
While these may not be the worst of times for capital markets firms, they are far from the best of times. That’s because, despite vigorous cost-cutting and other initiatives, most banks have not reached pre-crisis levels of return on equity. Adding to this reality are a number of other challenges that face capital markets businesses as they try to regain profitable growth.
As capital markets firms seek to strengthen and simplify their business and operating models, they find themselves working with technology platforms that may better support the businesses of the past, rather than of the present and future. In the face of these and other challenges, more and more firms see the need to transform their capital markets businesses.
In our experience, capital markets firms need to address three, major elements to enable an effective transformation:
Focusing the business model on key clients and relationship management. Firms need to manage each relationship in a detailed and coordinated manner to maximize profitability. To compete effectively in less specialized areas, capital markets firms also need to simplify their organizational structures and their compensation arrangements.
Creating a stronger operating model. Vendors, outsourcing and industry utility solutions can support better levels of client service while delivering significant cost savings.
Implementing transformational technology solutions. For many firms, technology is the most challenging part of transformation. First-movers are implementing innovative technology solutions to replace entrenched, high-cost, custom systems.
The challenges facing capital markets firms make transformation necessary, timely and feasible, and each organization needs to make its own decisions about architectural and organizational simplification.
While there are many paths to transformation, there are also many obstacles that stand in the way of successful efforts. These obstacles can be placed in four, main categories:
Business and cultural. Achieving long-tern benefits may take a back seat to short-term goals. Proper sponsorship and project governance, along with a clear commitment from business leadership, can help address these concerns.
The IT organization itself. In many capital markets firms, technology organizations have been built around the custom applications they develop and support. The project team leadership needs to communicate the importance of cost-effective, high-performing applications while addressing any concerns.
Financial concerns. No matter what path is taken, there will be significant upfront investment. The business case should find investment from additional sources and consider the optics of different structures, like a “wind-down desk.”
Transformation risks. Any major undertaking runs the risk of budget or cost overruns, as well as the possible loss of key personnel. In addition, changes in the firm’s situation or in the industry landscape may push the transformation off track. Careful planning, close tracking of financial metrics, clear assignment of responsibilities and establishment of well-marked rollback points can mitigate most transformation risks.
December 18, 2013
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