金融危机的结果造就了新一代的投行模式

Building an Operating Model for the Next-Generation Investment Bank

Carsten Baumgärtner, Chandy Chandrashekhar, Nick Glenning, Nicolas Harlé, Duncan Martin, Shubh Saumya, Achim Schwetlick, and Tjun Tang July 2009

金融危机的结果造就了新一代的投行模式

Building an Operating Model for the Next-Generation Investment BankThe financial crisis can still dominate the day’s headlines, but its concussive impact has started to diminish. Investors, businesses, and governments seem to be searching more for signs of a recovery than for indicators of a depression. For their part, investment banks are no longer focused solely on survival. Most are busy working out how to thrive in the new normal.Even after the turmoil subsides, investment banks will face significant challenges. Some effects of the crisis—such as tighter oversight, lower leverage, and higher capital costs—are here to stay. As a result, banks will need to make their business models simpler and more specialized. On the whole, the industry will be less profitable, and investment banks will have little room for error in the way they run their businesses.

In light of these challenges, banks will need to evaluate their operations more closely. The next-generation operating model will need to be extremely robust and cost effective to ensure regulatory compliance and to counterbalance the forces weighing down returns on equity (ROE). For most investment banks, renew-ing the focus on clients—a must in this unsettled environment—will require an overhaul of operations.Most of the principles for improving operations are both basic and perennial. But they were also easy to put aside when the industry was focused so intently—and profitably—on growth and innovation. Even during past downturns, the conflicting objectives between some of the tenets stymied efforts to transform operating models. Although the principles are not revolutionary, their implementation is far from straight-forward.

The current crisis, despite having lost some of its shock value, remains a powerful catalyst for change. It has already prompted some banks to recast their business models. Without a commensurate change in opera-tions, however, these new businesses will have little more than a strategic vision to ensure their success.New Business Models and the Need to Transform Operations

Most investment banks are searching for ways to match their core strengths with the businesses that will dominate the postcrisis landscape. A select few institutions will create business models based on acquiring and distributing risk (including proprietary risk taking). Most banks, however, will gravitate toward business models that are based on facilitating client transactions. They will concentrate on mature businesses involving high-volume, low-risk activities. A combination of low profitability and increased competition will force them to prioritize scale and automation.

For most investment banks, the impact of the downturn on ROE is going to outlast the crisis because the downward pressure on performance stems from a fundamental shift in how banks compete. Their cost-cutting efforts will therefore need to extend beyond short-term initiatives, which can help restore stability but can tend to be more superficial than substantial.

The challenge is significant. Even if the industry were to achieve outstanding revenue productivity, banks would still need to cut costs significantly in order to counteract the effects of weaker leverage and profit-ability. In addition to improving revenue yield, a bank would need to cut costs by more than $100 million for every $100 billion in balance sheet assets to increase ROE from single to double digits.

As a result, operational efficiency will become a critical source of competitive advantage for most invest-ment banks. But cost is only part of the equation. Operational efficiency, when achieved as part of a broader transformation, leads to operational excellence, which will underpin client-centric business models.

金融危机的结果造就了新一代的投行模式

The push for operational efficiency will provide the greatest momentum for change, but it cannot be a one-dimensional effort. Other forces must be factored into the program for transforming the operating model. (See Exhibit 1.)

Investment banks face a higher degree of regulatory scrutiny and will need to ensure greater transpar-ency throughout the business. Providing this transparency will become more challenging as banks shift to business models that rely on high transaction volumes.

The move to high-volume, high-frequency activities will require financial institutions to develop industrialized processes. More so than before the crisis, banks must have operating models that facilitate automation and maximize economies of scale.

Banks have had to redouble their efforts to manage operational risk, which caused many of the losses associated with the crisis. Recent high-profile failures have done even more to highlight the importance of operational risk.

As they set out to transform their operating models, investment banks will need to account for these factors and achieve substantial cost savings—all while improving client service. They will face difficult tradeoffs between conflicting objectives and will almost certainly run the risk of cutting into vital process-es and capabilities as they streamline operations.

Time is not on their side. Financial institutions are under increasing pressure to shift to business (and operating) models that suit the new competitive landscape. As one executive told us, “We have to make decisions based on one-third of the information we require, in one-tenth of the time we normally act.”

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