Investment banking companies have faced several challenges over the last few years. The new regulations after the financial crisis have brought in several changes and have made it slightly difficult for the investment banking companies to earn profits from numerous traditional lines of business by creating funding, onerous capital, and requirements for liquidity and raised complexity and operational costs. Simultaneously, technological advancements have modified client interaction models, execution platforms, and the process of operations. The strategy for growth varies from one bank to another but all investment banks need to restructure and reposition their strategies if they are aiming at sustainable growth and profitability in the current scenario. Here is the list of four best practices for investment banking companies that must be followed:
Structuring Strategic Coherence
Strategic coherence is a chief component of success for any investment banking company. By strategic coherence, we mean the proper alignment of products, services, and capabilities with one clear way to play. This is one of the best practices that is a must follow for any investment banking company. Investment banks need to keep regulatory considerations and capital efficiency notions in mind.
Shifting to strategic optimization
There is a need to invest extensively in the optimization of strategy for the investment banking companies. This requires analyzing the most efficient and effective ways to enhance performance considering all performance factors like the franchise and operational synergies along with financial and other constraints.
Re-examine client profitability
Investment banks have typically been less focused than purely consumer-oriented companies when it comes to examining their customers’ profitability and using client segmentation strategies to analyze which activities are creating or degrading value. A client-centric approach to profitability is one of the best practices to evaluate the effect of the external macro forces. These external factors include market structure changes, counterparty behavioral changes, and pressure of regulations that have been compressing revenues and increasing the cost of business.
Concentrating on change execution
It is very important for the investment banks to make the right selection of leaders and team personnel, define goals and expectations, and build up momentum for change. This is counted as one of the best practices in investment banking.
Functions of Investment Banking
- Investment banks act as an intermediary between investors and issuers
- It facilitates financial, strategic, and valuation of advisory services
- Securities, debts, and private equity help investment banking companies to raise capital
- It acts as an advisor to companies in their mergers and acquisitions and restructuring transactions
- Investment banks provide special services and products to the government and corporate clients
Over the last couple of years, the global banking industry is driven by a weak global economy, digitization, and stringent regulations. Investment banks at large play a pivotal role in assisting companies, government, and other market participants to raise capital. With the recent regulatory concern, prominent investment banks are planning to shift from traditional underwriting businesses to mergers and acquisition advisory to reduce the capital investments. In addition, the recent recovery from the financial crisis is also compelling banks to redefine their business models to reduce operational costs and manage potential risks.
Several factors that may curtail the growth of the investment banking space include:
- Block-chain technology: Despite robust advancements, leading investment banks are facing the need to streamline their front-office functions to improve their efficiency and leverage new business opportunities. With the introduction of the blockchain technology, prominent banks in the financial sector are necessitating the need for these technologies to minimize counterparty risks and increase transparency into the process.
- Cybersecurity: In the recent years, cybersecurity becomes a major concern for the businesses in the investment banking space, where it becomes essential for the business to safeguard customer and transaction data. The current environment has witnessed a relentless growth in the cyber threats with criminals hacking operations and stealing information about institutional vulnerabilities. So, to keep pace with the rising threats, investment banking businesses should maintain and allocate their internal resources to actively curtail the vulnerabilities.
To address such challenges and gain relative insights into the market landscape, organizations are augmenting the need for a market intelligence solution.
A market intelligence solution provides a comprehensive understanding of the market landscape, the direct and the indirect competitors, and the financial factors in the market. A market intelligence solution also helps businesses in the investment banking space gather information on various data sets to improve the business models and projections.
The Business Challenge
- The client: A renowned investment banking service provider
The client, a renowned investment banking company, wanted to gain relevant insights into the existing company’s market, customers, problems, and competition and the growth potential for new products and services. With the help of a market intelligence solution, the investment banking client needed to analyze the market opportunity to drive better decision making. The primary concern of the investment banking company was to increase the presence of the brand in the market and minimize the risk of investment decisions made wrong.
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To gather intelligence specifically to customer satisfaction, Infiniti’s market intelligence experts carried out extensive research comprising interviews and discussions with prominent stakeholders in the investment banking space. To fine-tune their resources, the experts also compiled information across a wide array of reliable sources such as trade shows, paid industry databases, and company presentations in the banking industry.
The Solution Benefits and the Business Impact
The market intelligence solution offered by Infiniti helped the investment banking client better understand the market, competition, and the landscape surrounding the target audience. The solution offered insightful ways for the investment banking company to reach out to the target audience, with the right channel, and at the right time. Infiniti’s market intelligence solution also focused on potential ways to analyze the competition and devote more resources to meet the business requirements specifically. In addition, the investment banking client was further able to deliver more personalized offerings to generate better returns on the investment.