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Transforming capital market finance operations: New research provides focus

Read Accenture's 2014 High Performance Finance Study finding five key areas capital markets firms can focus on to increase revenues and return on equity.

Overview

Capital markets institutions have been hit hard by the financial crisis, and face the challenge of balancing growth and realignment. At the same time, new regulatory and compliance requirements have placed pressures on internal structures.

The Accenture 2014 High Performance Finance Study surveyed more than 600 senior finance executives, including 58 from the capital markets sector. The results suggest capital markets institutions will continue to face strong cost pressures for the foreseeable future, while also striving to increase revenues and return on equity.

Accenture presents five key findings for capital markets firms transforming to meet these needs:

  1. Capital markets institutions are striking a careful balance between growth and realignment.

  2. Integration of risk, regulatory and compliance requirements will remain a central necessity.

  3. Capital markets firms share a desire for more enterprise-wide regulatory management.

  1. Managing complexity is an important opportunity for capital markets firms.

  2. Key aspects of transformation (like managing the change process) remain a real challenge.

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Background

Capital markets institutions have been hit hard by the financial crisis, and face the challenge of balancing growth and realignment, while at the same time dealing with the pressures that new regulatory and compliance requirements have placed on internal structures. Siloed risk, finance and operations organizations make it more difficult to establish effective regulatory reporting processes, and organizations must also cope with other aspects of complexity such as managing new and complex risks, dealing with complex legacy systems and managing the needs of different stakeholders.

Against this background, there is an evolving role for the CFO in managing multiple transformation requirements across the business. Our 2014 High Performance Finance Study comprised surveys of more than 600 senior finance executives across the globe and key sectors—of those, 9 percent were from capital markets institutions. We also conducted interviews with a number of chief financial officers (CFOs) and other senior finance professionals from capital markets firms.

Analysis

  1. Capital markets institutions have been hit hard by the financial crisis and regulatory response, and are under pressure to increase revenues and return on equity. In addition, the scale of transformation in the industry provides opportunity to reposition for market share.

  2. Organizations 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.

  3. A number of capital markets firms say their risk, finance and operations organizations are siloed, with limited governance over regulatory reporting processes. An enterprise-wide approach is expected to become more prevalent, letting companies manage new regulations more efficiently.

  4. Capital markets institutions face spiraling complexity both internally and externally, while under pressure from shareholders to revenue streams, increase market share and maintain margins.

  5. Many capital markets institutions have recently undertaken radical cost reduction exercises while also responding to a barrage of regulatory change. Managing multiple transformation programs is a significant organizational pressure.

The CFO plays an instrumental role in juggling these multiple demands. The notion of a CFO focused primarily on cost control is now a thing of the past; in most organizations, finance leaders are demonstrating they have a larger role to play in a broader transformation agenda.

Recommendations

Capital markets institutions will continue to face strong cost pressures for the foreseeable future, but they must also increase revenues and return on equity. CFOs will have a key role to play in ensuring a balance between growth and realignment. They will also need to ensure closer integration between risk and finance in order to deal effectively with new risk, regulatory and compliance requirements. Companies will increasingly migrate to a more enterprise-wide approach to regulatory management.

Complexity will remain a major challenge, and the CFO will need to drive the business to find new ways of managing complexity—for example, by standardizing and optimizing processes to streamline and simplify the organization. The finance function has shown that it has an important role to play in business transformation, and there is scope to deepen further this role as companies struggle to keep pace with far-reaching changes in the industry. The CFO has the opportunity to emerge as the value architect of a successful capital markets business.