RESEARCH REPORT

In brief

In brief

  • Capital markets firms have the chance to assist other businesses during the looming credit crisis created by the COVID-19 pandemic.
  • Data and analytics could help firms create innovative new product offerings to help small and medium sized businesses and society during the crisis.
  • Looking to their own financial health during the pandemic, capital market firms should also create their next-generation operating model.
  • From footprint and outsourcing to accelerated digital transformation, capital markets firms should rethink the way they work, scaling their core.


Capital market firms: Filling a financing gap

The vaccines are out, but COVID-19 continues to wreak havoc on the broader world economy—and this is not expected to be resolved in the near future. While financial markets are again near their peak valuations and the private equity industry sits on record dry powder, many of the industries capital markets firms invest in may now be facing unprecedented challenges and potential bankruptcies.

This crisis presents capital markets enterprises with an opportunity to grow revenues by offering new capital solutions that also address important societal needs, as well as adapt their operating models to finally address perennial cost structure issues.

The credit crisis in three phases

Looking at the current scope of responses from governments and the performance of companies of different sizes over the last months should give us enough data to forecast how a looming credit crisis could play out. We anticipate it might move through three phases.

Phase 01

Iterative global government stimulus packages

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Phase 02

Financial institutions providing liquidity via other credit solutions

Phase 03

Moving to equity and industry ownership implications

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While some parts of the world are still in phase 1, other parts are in phase 2 because there weren't enough resources to complete phase 1 or government stimulus is running dry.

What we need: Innovative solutions, scaled

A constructive response to this challenge could help redefine the public perception of the capital markets for years to come and could also provide new potential sources of return for yield-starved investors. But what do firms need to do?

Develop innovative products

Access to data and analytics could help point the way for clients and improve the risk/reward relationship when making decisions.

Create a next-generation operating model

Firms should reevaluate their footprint and talent strategy and infuse operating models with next-generation tools like artificial intelligence.

Leverage industry scale

Think of using any upcoming consolidation waves to acquire firms that can help jumpstart specific capabilities while scaling your core.

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Capital markets firms are facing unprecedented challenges, while at the same time liquidity from global central banks is providing markets with stability. Even during a global recession, companies in the securities industry have some cushion to improve their operating models.

Moving forward

COVID-19 has made it impossible for firms to maintain the status quo. It’s clear that innovation is a precondition not just for profitability but for survival. At this moment, there’s a need for new products that meet the requirements of small- and medium-sized business leaders who increasingly need help from capital markets.

Capital markets firms are facing unprecedented challenges, while at the same time liquidity from global central banks is providing markets with stability. Even during a global recession, companies in the securities industry have some cushion to improve their operating models.

This is a moment where your capital markets team can take bold steps. It’s also a period where the industry is transforming itself. Innovations which can create revenue or cut costs are a necessity. Complacency is not.

About the Authors

Michael Spellacy

Senior Managing Director – Global Capital Markets Lead


Nicole Bodack​

Managing Director – Capital Markets, Growth Markets Lead​


​Matt Long

Managing Director – Capital Markets, Europe Lead


Laurie McGraw​

Managing Director – Capital Markets, North America Lead


Soichiro Muto

Managing Director – Capital Markets, Growth Markets Lead


Kimberly Richards

Managing Director – Banking and Capital Markets Strategy

MORE ON THIS TOPIC

COVID-19: A capital markets industry perspective
COVID-19 and the looming credit crisis

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