Challenges for investment banks 2017 (Part 4): Location, Location, Location

Beat Monnerat, Senior Managing Director of Financial Services for Asia Pacific; Owen Jelf, Senior Managing Director for Capital Markets; Accenture

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

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As global financial institutions look to retain market share, and smaller regional players seek to internationalise in search of new revenue opportunities, there are a number of key internal and external drivers that are influencing the location strategies of investment banks. These decisions may have a significant impact on the CIOs of the banks who are tasked with making the nitty gritty of a change work.

Revenue generation, cost reduction and organisational effectiveness are the classic internal factors driving location changes.Some global investment banks have already taken an aggressive approach to nearshoring and offshoring technology. By streamlining other processes and transitioning key services, companies could seek to achieve further cost savings. For revenue generating functions, however, maintaining a physical presence should remain essential - so decisions on moving are often about what parts of the business to relocate.

In addition to the perennial issues of macroeconomics, regulatory requirements and tax considerations, geopolitics increasingly is impacting location decision making. For example, the Brexit vote has a number of companies considering transferring jobs from the UK to other European trading hubs or lower-cost locations. This may require reorganisation of the existing workforce and training for new employees-all at cost that could have global ramifications.

So what should a bank consider before pressing the reset button?

A clear strategic vision (with a bias for action) should help investment banks to identify the optimal location plan. The correct choice might naturally vary depending on the individual organisation, with the target client population, the legal entity structure, the maturity of the operating model, digital workforce effectiveness goals, the modernity of the technology infrastructure, and the willingness to keep costs low all being contributing factors.

From a CIO perspective, the considerations for advice of relocation centres around the operating model. CIOs need to ensure adequate staff training is available to align operation models regardless of local working cultural norms. A mistake we often see, is the implementation of technology in the wrong order, or without proper preparation, planning and education.

Technologies and processes need to be set up in a scalable manner to ensure that operations can be launched safely and with ease when moving, causing minimal risk to the rest of the network. This means firms need to have the necessary resources in place to enable quick pop-up teams in low-cost locations to help, which can keep rents/headcount down in the higher-cost locations. At the same time, the focus still has to be on attracting top talent - firms should take advantage of a mixed global talent force, leveraging niche skills in given local markets.

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