Investment Bank Infrastructure
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Investment Bank Infrastructure
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However, progress has come as a cost. Many Investment Banks have found that the support costs of maintaining the status quo, i.e., keeping legacy systems and processes in place, are a major proportion of their business expense. More importantly however, the cost of keeping up with competitors is growing rapidly and, in many cases, with diminishing returns. This is particularly true in the case of support functions where there is limited commercial advantage in providing an above-satisfactory level of service. In other industries, more attention has been given to "delivery mechanisms" and in many cases, outsourcing of non-core competencies has become the rule rather than the exception. In Investment Banks, this concept is still in its infancy but there are signs that the market will grow substantially over the next few years and for those who believe that they have the capability to be insourcers, the potential is huge. Before an Investment Bank takes the decision to insource/outsource, a formal commercialisation strategy should be developed and applied across the bank’s entire infrastructure. Piecemeal change can cause huge issues in boundary areas and prevent supposedly non-impacted areas from realising their own goals. In creating this strategy one must first examine the bank’s business strategy and then review how support functions are placed to react. This review should incorporate external trends and initiatives and assess key cost benchmarks against the market. Core and non-core competencies should be identified and classified. The result of this work will be a recommended series of initiatives for each infrastructure function supported by a risk/reward analysis. Implementation of strategy is the next step and needs to be approached as a programme rather than as a series of individual projects. In functions where insourcing or outsourcing is the aim, the scope of services provided will need to be tightly documented into Service Level Agreements. The programme will need comprehensive management, not just to monitor that deadlines are being met but also to ensure that benefits are realised. This oversight will need to continue on an ongoing basis with continual re-assessment against benchmarks. As the UK’s leading risk/reward management firm, Z/Yen is ideally suited to helping Investment Banks in this process of commercialisation. Z/Yen’s proprietary risk/reward methodology is not only culturally suited to the banking industry, but unifies banks’ strategies from the trading floor to the settlement team. This methodology has been developed over a number of assignments for major Investment Banks. Z/Yen works hard through market surveys, research and comparative studies to identify best practice in the industry, e.g. our recent market survey for OTC Derivative Processing Services. Z/Yen participates actively in organisations which are attempting to expand the boundaries of financial research, for example, the Centre for the Study of Financial Innovation or The Financial Laboratory, of which Z/Yen was the founder and concept developer of this £1.9 million joint research initiative and won a 1996 DTI Foresight Challenge award. |
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