The global financial markets industry is changing, transforming the competitive landscape and leaving executives wondering how they'll make profits in the future. In the white paper, "Toward Transparency and Sustainability: Building a New Financial Order," you'll see how businesses are building sustainable, stable systems for the years to come, while fulfilling their brand promises.
IBM Global Business Services
IBM Institute for Business Value
Financial Markets and Banking
Toward
transparency
and
sustainability
Building a new
financial order IBM Institute for Business ValueIBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues. This executive brief is based on an in-depth study by the Institute's research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to iibv@us.ibm.com for more information.
Toward transparency and sustainability
Building a new financial order
By Suzanne L. Duncan, Daniel W. Latimore and Shanker Ramamurthy
How will the financial markets industry make money in the future? The current
financial crisis has exposed the problems with creating and exploiting "pockets
of opacity" across the system. If the industry is to deliver sustainable returns, it
will have to embrace change. It will need to begin by working with regulators to
build a financial system that is stable while still allowing for healthy innovation.
Individual firms will also have to specialize and learn to fulfill their brand
promises.
The global financial markets industry has been competition change? And what steps should experiencing significant turbulence over the financial services firms take to prosper over past 18 months, and executives in the sector the next three years? In short, where's the are understandably nervous. The current crisis money? We supplemented our findings with is transforming the competitive landscape, in-depth interviews with 185 executives and how the industry operates and the way in government officials, extensive secondary which its clients behave. Given these changes, research and quantitative modeling (see many senior executives are wondering how sidebar, Study methodology).their firms will make profits in the future. This is the question the IBM Institute for Business IBM's analysis shows that, for the past 20 Value set out to answer in its latest study of the years, the financial markets industry has prof-sector. ited by capitalizing on "pockets of opacity" - i.e., creating, buying and selling complex We conducted a survey of more than 2,700 products, often via lightly regulated entities. financial services industry participants to However, this does not produce sustainable determine four things: Which forces are value. Using sophisticated financial instru-disrupting the industry? What will clients ments and structures can indeed generate be willing to pay for? How will the basis for
1 Toward transparency and sustainabilityvery high returns, but it also results in more Study methodologyextreme risk assumption and mitigation cycles The IBM Institute for Business Value surveyed and makes the markets much more volatile. If 2,754 industry participants, including 1,076 the industry is to thrive in the future, it will have individual investors and 1,678 executives and to adopt a different approach. Specifically, it government officials, to determine how financial will have to: markets firms should prepare for the future. The survey, which was undertaken with support from . Join forces with regulators to develop a the Chartered Financial Analyst (CFA) Institute and framework that balances stability with inno- Economist Intelligence Unit (EIU), was conducted vation between September 1, 2008, and April 1, 2009. It . Deliver what it promises incorporates the views of representatives from a wide range of organizations:. Solve its identity crisis. . Buy side (institutional and retail asset management firms, including private banking firms, defined benefit and defined contri-bution retirement plans, endowments and foundations, hedge funds and sovereign wealth funds). Sell side (investment banking and capital markets firms) . Processors (wholesale and retail banks, custodians, exchanges, alternative trading systems and clearing firms). Other (governments, regulatory bodies, academic institutes, think tanks and industry associations). Thirty-three percent of the respondents are based in the Americas; 35 percent in Europe, the Middle East and Africa... [download for more]
