Industry Best Practices for Investment Banking Companies
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 […]
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