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Sectors: Financial – Investment banking Changes in the structure of the sector, deferred during the last cycle, are once again accelerating. At the same time, the customer base for capital markets and investment management is becoming increasingly sophisticated and demanding. Stable earnings result from deepening client relationships and delivering innovative products. However, clients of investment banks continue to demand more access to the balance sheet, creating exposures that make it difficult to extend the relationship further. This situation creates two imperatives: exploiting structural change to deliver better service to clients at a lower cost; and optimizing the deployment of risk and balance sheet capacity. The implication is that, for the entire sector, winning requires doing more with fewer but highly valuable people. Sales and trading compensation and hedging costs already account for more than 70% of a typical operation’s costs. Banks and investment managers must balance the cost of retaining their best producers and portfolio managers with the need to turn a profit across the business cycle. This requires that they understand how customers, producers and market position contribute to profits, and share the value each creates appropriately with each constituency. At the same time, banks and investment managers will need to make the most of their resources by supporting the business with better task automation, client intelligence, client connectivity and risk allocation. The best support may come from outside the enterprise. Stratiformis helps a number of industry sub-segments to respond to these challenges:
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