Meet Our Bloggers: Dean Jayson
Dean Jayson

Meet Dean Jayson

Managing Director, Accenture Capital Markets
Dean Jayson is a managing director in Accenture’s capital markets practice. Based in London, Dean works closely with investment banks across the world in delivering strategic management and technology consulting projects, and providing outsourced and offshore technology services. Dean has functional expertise in many areas, including front office, operations, risk and derivatives processing, as well as the impact of regulatory reform on the capital markets industry.

New disruptive technologies: How investment banks can seize the opportunities (2 of 2)

There’s no getting around it: new disruptive technologies are here to stay and for investment banks, it’s never been more important to take notice. The question banks face this year is not if they should embrace innovators, it’s how they should embrace innovators to further growth at their organizations. In my last post, I introduced you to one of the top 10 challenges we identified for investment banks in 2014—new disruptive technologies. Now, let’s look at how banks can respond.

Three strategies for success

Embracing innovation requires bold leadership and an appetite for change, and I believe there are three keys to successfully seizing the opportunities new disruptive technologies bring:

  • Reach out to the new start-up community. Start-ups bring energy, ideas and a positive attitude that is often lacking in more established businesses. It will be important, however, to understand that regulatory, security and resilience requirements may make it difficult to enter into a contractual relationship with a start-up that has only a few employees.
  • Foster innovation. Don’t lose sight of the big picture. Always combine innovation and experimentation with strategic insight and direction.
  • Be part of the change. If banks want to seize the opportunities available, they need to be part of the movement. Accenture’s FinTech Innovation Lab, for example, brings together start-ups with executives from the world’s largest investment banks. This move enables banks to experiment, test technology and share knowledge over a three-month period.

The bottom line is, for banks to gain the competitive edge this year, and in years to come, they’ll need to look beyond traditional banking methods. Banks will need to inject a fresh perspective to their operations to get—and stay—ahead.

Stay tuned for upcoming blog posts on some of the other challenges investment banks face this year. To learn more, visit:

Top 10 challenges for investment banks this year (1 of 2)

While it may still be early in the new year, now’s the time for investment banks to understand and respond to, what we believe, will be the most pressing challenges they’ll face this year. Since 2008, Accenture Capital Markets has been publishing the “Top 10 Challenges for Investment Banks,” and over the years, the list has easily become one of the most anticipated reads among banking executives—for good reason. From restructuring to regulation to harnessing new technologies, banks face unprecedented challenges. Over the next few months, my colleagues and I will dive into many of these challenges and explore the ways in which you can respond. Today, I’m going to kick off the series by looking at, what I feel, will be a significant area for growth in 2014.

New disruptive technologies: What banks are dealing with

Since 2008, investment in financial technology start-ups has grown by 18 percent year over year. The most obvious disruption has been through peer-to-peer lending, which connects buyers and sellers directly and cuts out the middleman. For example, platforms such as Zopa, Funding Circle and CrowdBank remove banks from the process altogether.

The disruption doesn’t end there. The sharing economy is giving way to new entrants like Airbnb, a service that connects tourists with people’s spare rooms. But the sharing economy doesn’t have to be looked at as a negative. Banking can benefit from the surge in start-ups such as OpenGamma, a company that has created an open source risk management platform, and OpenFin that uses technology to help investment banks seamlessly integrate traders’ desktop applications and develop new ones.

There are, however, risks and challenges in dealing with start-ups. Just choosing which one to back can often seem more like a gamble than a strategic decision. So, how should investment banks respond to this challenge? Join me next week when I’ll take a closer look at how banks can seize the opportunities disruptive technologies bring.

In the meantime, to learn more, visit:

Making decisions in uncertain times

It’s safe to say that global capital markets face an environment of extreme uncertainty. Consider that regulators in the United States have finalised just 51 of the 400 rules (less than 15 percent) that will eventually make up the Dodd-Frank Act. But until those details are finalised, investment banks must find a way to make decisions and conduct business.

Leapfrogging to high performance

At Accenture, we see five possible approaches, situated on a spectrum from reactive to proactive. We see the most potential for banks to adopt a proactive, or ‘leapfrog’ approach, which includes four key elements:

  • Thinking holistically, considering a range of possible scenarios.
  • Developing data-driven insight.
  • Making touch decisions, embedding client centricity throughout.
  • Being sufficiently adaptable.

Banks that adopt this approach will be able to:

  • Better understand their key clients, and therefore enhance their client acquisition, retention and cross-selling capabilities.
  • Develop future market understanding with detailed analysis and an effective transformation programme.
  • Understand their current process, risks and cost base to better minimise costs and maximise revenues.
  • Identify opportunities to scale commoditised processes and products.

Data and decision making

Recent Accenture research found that 40 percent of major business decisions are not based on data. We believe that superior analytics are the foundation of an effective decision-making process—one that enables fine-tuning, continuous optimisation and enables a competitive advantage.

Learn more about Accenture’s Top Ten Challenges for Investment Banks 2012 or download Challenge 1: Making Decisions in Uncertain Times (pdf; opens in a new window).

Living with the new trading environment

If 2011 was about revolution, then 2012 is about evolution. Regulatory requirements, especially the Dodd-Frank Act, have shifted the investment banking industry into an entirely new environment. Investment banks must identify ways to deliver acceptable returns on equity, adapt internally to retain competitive advantage, better serve their clients and leverage maximum benefit from their existing resources.

Five priorities for investment banks

At Accenture, we believe that investment banks should focus on five key priorities in this new landscape:

1. Be informed and decisive. To secure market share and drive revenue, banks must understand pricing levers, as well as bundle high-value offerings with essential client services.

2. Know your top clients. Banks must identify their clients’ priorities, then factor and influence pricing accordingly.

3. Be ready to manage complex operational change. Opportunities in emerging markets mean that investment banks must develop cross-business capabilities, integrate technology across products and functions, and effectively train employees in operations and middle-office teams.

4. Focus on technology. In today’s market, banks have one shot at winning business, and their technology must be able to support buy-side requirements from day one.

5. Think global, not local. With limited resources, banks must leverage maximum benefit from their investments. We recommend a global approach, especially where technology investments are concerned.

In short, banks must move beyond mere compliance. The new trading environment is highly competitive, and banks must be positioned and prepared to take advantage of opportunities when they appear.

Learn more about Accenture’s Top Ten Challenges for Investment Banks 2012 or download Challenge 2: Living with the New Trading Environment (pdf; opens in a new window).

Financial reporting challenges in investment banking

In the past, investment banks responded to financial and regulatory reporting demands by creating a bespoke solution—which, in the long run, has resulted in a number of systems, processes and workarounds. It’s expensive, inefficient and labour intensive, and industry consensus is that the finance function has to make some changes.

Challenges facing the finance community

The finance community has a number of key priorities to consider, especially IFRS conversion, the Dodd-Frank Act, Basel III and liquidity rules. Beyond that, there are ten major challenges to finance transformation:

1. Lack of common terminology between finance and other functions.

2. Absence of a consistent source of transactional data between finance, risk and operations.

3. Absence of a single source of reference to ensure that front- and back-office information is consistent.

4. Proliferation of manual adjustments.

5. An over-reliance on end-user developed spreadsheets (often referred to as a “spreadsheet jungle”).

6. Inflexible legacy systems.

7. Lack of standardised processes.

8. Dependency on key team members, creating potential for a single point of failure.

9. Knowledge silos that limit visibility and understanding across the enterprise.

10. An inability to align finance and risk functions on key requirements.

Recommendations

At Accenture, we recommend three key strategies for finance transformation:

  • Remove the need for risk and finance reconciliation with a single source of data for the two separate groups. This requires strong data management practices, a shared data warehouse and well-managed transaction data underpinned by solid reference data.
  • Increase transparency while reducing risk with a single downstream risk and finance data warehouse. This would enable banks to respond to increasing regulatory pressure, and be able to track data and prove consistency between reports.
  • Increase workforce engagement in meeting regulatory requirements by sourcing data straight through to daily profit and loss (P&L) and risk-weighted asset (RWA) calculations. This also has the benefit of empowering the workforce to deliver value-added activities.

We believe that finance transformation can help banks reduce costs and make better decisions. More important, we believe that banks that do not take these steps will find themselves held back with slow and inaccurate financial reporting.

To learn more, download Financial Reporting Challenges in Investment Banking: A Practical Guide to Reducing Risk in the Financial Reporting Process (pdf; opens in a new window).

The High Performing Investment Bank: Business Models (2 of 2)

Last week, Owen Jelf introduced the concept of high performance investment banking. This week, I’ll talk about how an investment bank can achieve success in a turbulent market: by choosing a business model that harnesses its inherent strengths.

Business models for high performance

In today’s competitive market, it’s critical for banks to justify the areas in which they operate, to concentrate on the ones where they can feasibly compete and above all, to put their clients’ agenda at the centre of their strategy.

Accenture has identified five business models that can enable high performance in investment banking:

  • The Flow Monster depends on highly efficient technology, highly competitive pricing and strong sales relationships. It’s based on processing huge trade volumes at extremely tight spreads, and requires a critical mass. We expect that only three to five players will be able to compete with this business model.
  • The Regional Champion is based on cross-selling risk management and financing to existing corporate clients. It’s a relatively simple model, but requires a strong foundation of loyal customers and the ability to apply intelligent segmentation for appropriate customer service.
  • The Product Specialist typically corners the market on a particular type of product, or very specific types of trades, in a single jurisdiction. Product specialists must be able to develop differentiated products and bespoke technology—and they must be prepared to innovate, given the increasing pace of commoditisation.
  • The Primary Markets Powerhouse is focused around advising on or structuring profitable, but infrequent, deals. It’s an attractive model because it’s non capital-intensive and the target market has low price sensitivity, but it requires long-term investment and depends on developing a strong brand.
  • The Risk Master achieves excellence in risk management, and also takes risk intelligently in an increasingly complex market. This is the most complex of the models and takes the longest to develop, but as Accenture research has shown, risk mastery is a key performance differentiator.

In the past, many investment banks were guilty of “strategic tourism,” but in today’s market, focus is paramount. High performance in the new investment banking landscape will require discipline, a keen understanding of the bank’s value proposition to its clients—and a business model that makes use of supporting capabilities to create a competitive edge.

To learn more, download Focus for Success: The High Performing Investment Bank (pdf; opens in a new window).