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Thriving in turbulent times

A collection of strategies and ideas to make the most out of the current situation


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After the crisis, financial institutions will be benchmarked against regulatory excellence and their focus on strategy and profitability and can only succeed by using the most effective levers within their organisation.

After the period 2008/2009 trust in financial services providers will need to be restored
  • The market capitalisation of banks has shrunk by hundreds of billions in just a few months
  • Some banks, even though financially sound, came close to bankruptcy as a result of the liquidity and confidence crisis
  • For the first time since long, clients feared for their deposits, which were always considered safe beforehand
  • In addition, the developments in the banking sector gave rise to concerns as to the ability of the asset managers to design investment strategies in line with fundamental client needs and risk profiles
  • In that same context, the lack of open architecture, the tendency to sell in-house products, and an industrialised (as opposed to a customised, tailor-made approach) approach exacerbated client reactions
  • The first banks to recognise and manage this issue can be expected to gain a long-term advantage over their competitors
In the current environment, not all players have the required critical mass
  • A significant number of smaller players do not have the required size to remain competitive in the current environment
    • Revenues are too small against variable and fixed costs
    • Already in the past, regulation has put strain on the profitability of smaller and larger players. Expected additional regulatory tightening following the financial crisis will call for new solutions for those players operating around break-even
  • Therefore, both smaller and larger players should consider pairing with others to allow for a sustainable service to clients
  • Deloitte can act as a "go-between" maximising your interests in acquisition and disposal transactions
    • We will profile you and possible «matching pairs» based on our thorough understanding of the market
    • We will limit the involvement of interlocutors to a minimum to protect confidentiality
    • We will accompany you through all transaction stages, irrespective of whether you wish to acquire or to sell
While the focus is clearly on tactical improvements to realise rapid benefits, strategy execution must not be altered
  • Short term gains usually are not sustainable in the long term. What makes it different this time around?
    • Banks are in a crisis situation, facing severe margin erosion, and a total uncertainty exists whether the crisis will further deepen: no choice but to promptly contain their costs using every cost lever they can ("just do it")
    • However another major question is about when will the business recover: cost restructuring needs to avoid damaging the business and needs to position the Bank for the upturn
  • By capitalising on our unique multidisciplinary approach, Deloitte is able to propose a team of highly experienced industry specialists, utilising a robust set of diagnostic and implementation methodologies, to address cost reduction from every angle (operations, IT, HR, tax, corporate finance, business)
Cost reduction assessments should address 7 key questions and look broadly across all dimensions of IT
  1. Which IT cost elements are driving overall IT costs and potentially causing a drag on IT efficiency ?
  2. If some IT costs are higher than industry benchmarks, what are the root causes, and how should these be best addressed? Are these costs linked to a higher level of IT efficiency ?
  3. In functions where IT is deemed to be providing effective support to the business, is that support being provided in a cost-effective manner from an absolute (i.e. what is potentially achievable) perspective, as well as compared to peer IT organisations within the industry?
  4. What opportunities exist to reduce the cost of selected IT elements while preserving current services levels to the business?
  5. What is the range of savings potentially available?
  6. If any/all the current business constraints on IT could be reduced, what levels of cost-efficiency could be potentially realised?
  7. What is the appropriate set of metrics that should be employed going forward to properly monitor IT efficiency?
Technology optimisation overview

Our approach to technology optimisation addresses the entire IT operating expense base of an organisation and provides a comprehensive view of IT across business silos

Effective talent transition management is crucial in adjusting your organisation to your short-term requirements while ensuring your future pool of qualified workforce
  • The current crisis might oblige banks to reorganise and restructure their human capital. They can either:
    • Reduce costs by deciding to outplace some of their staff
    • Maintain profitability by enhancing and/or leveraging on worker’s employability
    • Opt for a combined approach of both
  • Even though you might need downsize jobs today, be prepared to meet Luxembourg’s shortage of key talent effectively when activity improves
    • Providing strategic outplacement support to leavers allows you to turn them into a highly valuable alumni group of potential future re-hires, clients, and referees
    • Facing the crisis does not necessarily imply lay-offs. In the spirit of the Government’s job maintenance plan, you might focus on increasing your staff’s employability and on adjusting their competencies to internal reorganisation needs. A strategic approach of talent transition is crucial to obtain the best cost-benefit ratio
  • Deloitte’s human capital advisory department offers tailor-made talent transition solutions that give you the flexibility to face the crisis and manage your future needs by:
    • Enabling your organisation to adjust quickly to changing workforce needs with:
      • the least possible internal disruptions
      • the maximum personal results for the employees and leavers, while
    • Reflecting a positive image of your bank in the public
Deloitte’s talent transition approach – put flexibility first

Our approach is built around a diversified set of services/modules from which you can choose from, combine and adjust to meet your bank’s specific needs.

The importance of an active and sound risk and capital management when taking major business decisions has never been greater

An active and sound risk and capital management process includes specific features such as:

  • The definition of the type and amount of risk an organisation is willing to accept in its pursuit of profit making and value creation (i.e. the organisation’s appetite for risk)
  • The translation and articulation of the organisation's risk appetite into a consistent set of both financial and non financial thresholds defining tolerance levels for the various risks to which the organisation is exposed to
  • The active monitoring of tolerance levels to ensure that risk exposures are kept within the organisation's intended risk appetite
  • The enforcement of a risk governance and risk management structure clearly defined and operating systematically and effectively to actively identify, assess and make decisions regarding any existing or emerging risks
  • The active planning of future capital needs to sustain business strategies and risks taken and ensure that the organisation'srisk appetite and exposures will remain within the organisation's risk capacity, even in extreme unforeseen situations (stress tests)
Liquidity management should be tackled as an essential pillar within a comprehensive risk assessment framework

Deloitte provides valuable insights into liquidity risk management:

  • Accurate overview of the typology of liquidity risks you are exposed to
  • Stress test scenario analysis under specific market conditions (liquidity crunch, credit rating deterioration, etc.)
  • Comprehensive simulations under a liquidation perspective will highlight the liquidity risk arising from collateralised assets
  • Thinking beyond averages, means and normal distribution, by systematically working in the framework of extreme risks and relevant probability distributions
  • Definition of a trade sale strategy under crisis conditions (cash first or cash last strategy)
  • Systematic approach to compute haircuts and loan-to-value (LTV) ratios for securities collateralising loans

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