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A transformation is coming for investment banking operations

In these tight financial times, it may surprise many in our industry to learn that some banking organisations are now looking to make a significant investment to fully transform their investment banking operations. As a change delivery specialist with my sights on large scale programmes, naturally I can’t help but feel good about this. But why is this happening now?

The key drivers seem to be profit and survival. In order to redress profit margins eroded by increased capital obligations, banks are now tasking their COO and MD level executives with finding completely new ways to look at their operations and associated cost base. They’ve been told that a step change will not do and that a transformed and significantly smaller operation is essential.

Some are choosing to take on this challenge with clean page thinking. In other words, by taking a view on what a target operating model would look like if they could redesign it from scratch, drawing upon latest technology solutions and resourcing models.

To do this requires an open mind, unencumbered by the constraints of current working practice and systems. It also requires a sense of ambition, a strategic architectural capability and a willingness to consider best practices from beyond the investment banking industry.

I recently worked in collaboration with an influential banking executive and a chief business architect. Between them, they revealed an operating vision that is likely to emerge across the investment banking sector.

The vision is based upon the adoption of six key operational principles. In my version of their terminology, these are: Push-based exception step processing; Process engineering & continuous process automation; Client self-servicing; Client-centred processing; Globalisation and simplification; and Processing intelligence and anticipation.

To implement these requires an organisation to bravely remove financial product operating siloes, to automate to a more extreme level, to empower clients to do more self-administration, to re-profile operations resources into ‘factory’ style actors, and to introduce ‘process engineer’ roles. On the systems side, its goodbye to multiple “best of breed” systems and hello to new cross-asset class solutions and highly business configurable workflow tools.

Very little of the above could be implemented with limited programme capability and funding. In order for such programmes to succeed, investment banks need to invest in this journey in a sustainable and convincing way. If this feels too ambitious, a word of caution. Some banks are already planning for the mid-term and transformationally. Those that do not could eventually find themselves with an out of line cost base when compared with their peers.

The message? If you’re a major investment bank, and you are intending to continue being one, it’s worth exploring a transformational vision for your operations. Your competitors have already started to do so.     


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