Is digital technology the key that will help investment banks transition from ongoing cost-cutting to sustainable cost efficiency? Learn more: https://www.accenture.com/us-en/insight-investment-bank-challenge-02-cost-reduction?c=fs_cmfy17sldshr_10000002&n=smc_0517hallenges

1. TOP 10
CHALLENGES

2. CHALLENGE 02 - Top 10 Challenges for Investment Banks
CHALLENGE 02
GETTING FIT:
AGGRESSIVE
COST REDUCTION
TOP 10 CHALLENGES FOR
INVESTMENT BANKS 2017
#IBTOP10
2

3. CHALLENGE 02 - Top 10 Challenges for Investment Banks 3
GETTING FIT:
AGGRESSIVE COST REDUCTION
01
02
03
04
05
06
07
08
09
10 GETTING FIT
AUTOMATION
LOCATION
STRATEGY
DIGITAL
TALENT
CLIENT EXPERIENCE
JOURNEY
TO CLOUD
INNOVATION
RESEARCH
FUNCTION
BLOCKCHAIN
PRUNING FOR GROWTH

4. CHALLENGE 02 - Top 10 Challenges for Investment Banks
INVESTMENT BANKS HAVE
BEEN PURSUING COST
REDUCTION FOR YEARS.
4
What will it take to achieve
sustainable cost efficiency?

5. GETTING FIT:
AGGRESSIVE COST REDUCTION
The financial reality for investment banks
across fixed
income, currencies
and commodities,
equities, equity capital
markets and debt
capital markets
year over year
between 2015
and 2016
in the first quarter
of 2016, up 3 points
from the first quarter
of 2015
AVERAGE
REVENUE
IS DOWN
AGGREGATE
REVENUE IS
DOWN 16%
AVERAGE
COST-TO-INCOME
RATIO HIT 68%
5CHALLENGE 02 - Top 10 Challenges for Investment Banks

6. GETTING FIT:
AGGRESSIVE COST REDUCTION
The regulatory reality for investment banks
REGULATORY INITIATIVES LIKE BASEL III AND
BASEL IV/FRTB ARE:
Tightening capital and
liquidity requirements
Shrinking revenue
pools
6CHALLENGE 02 - Top 10 Challenges for Investment Banks

7. GETTING FIT:
AGGRESSIVE COST REDUCTION
The competitive reality for investment banks
NEW MARKET PLAYERS ARE:
Driving value chain
disintermediation
Creating new
information platforms
that are digitizing
counterparty discovery
7CHALLENGE 02 - Top 10 Challenges for Investment Banks

8. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
Despite declining revenues and high costs,
regulatory pressure and growing competition,
several investment banks posted significant
improvements in the third quarter of 2016.
Does this mean that cost competitiveness
and profitability have been conquered?
If our survey results are any
indication, it’s not time to take
your foot off the gas just yet.
8

9. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
2012
Breaking the
“boom-and-bust”
cycle
2015
Simplifying complexity
through rationalization
and decommissioning
2014
Restructuring through
streamlining and
rationalization
2016
Value-based cost
reduction with
closed-loop and
zero-based budgeting
A journey in cost reduction through
the Top 10 Challenges
9

10. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
A truly front-to-
back process
A re-examination
of what is important
to own
A plan for the
savings generated
A journey in cost reduction 2017 – Building a
performance anatomy for sustainable change with:
10
A top-down mandate
An understanding
of costs and drivers

11. CHALLENGE 02 - Top 10 Challenges for Investment Banks
IN SHORT, BANKS NEED TO
FOCUS LESS ON HISTORICAL
BENCHMARKS AND MORE ON
WHAT IS POSSIBLE WITH
A NEW COST MODEL ENABLED
BY DIGITAL TECHNOLOGIES
11

12. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
The emerging digital ecosystem offers many opportunities
to help reduce costs and generate new revenues:
12
Fintech partnerships that supplement
offerings and increase efficiency
Big data and predictive analytics for
customer insights and improved responsiveness
Artificial intelligence that automates
complex tasks
Distributed ledger technology to deliver
efficiency in key areas

13. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
Building blocks for change
Simplify
operations
Establish alliances
with fintechs, other
banks or other industries
Redefine the
role of the bank
by tapping into the
wider ecosystem
Embrace
utilities
13

14. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
Competitive agility
is defined as winning
simultaneously across
three dimensions
Digital, new consumer
expectations and
increased scrutiny are
disrupting an already
complex world
Redefining the terms
and boundaries of
competitiveness
14
Volatility
Uncertainty
Complexity
Ambiguity
Disruptive
Speed
Growth
and Customer
New Contestable
Markets
Radical
Transparency
Profitability
Sustainability
and Trust
Here’s how masters of client experience play to win

15. GETTING FIT:
AGGRESSIVE COST REDUCTION
Just because cost reduction is a key
challenge for many investment banks
doesn’t mean that your organization
can’t be successful at it.
TAKE THINGS
ONE STEP
AT A TIME.
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16. GETTING FIT:
AGGRESSIVE COST REDUCTION
16
Three steps to successful cost reduction
01
Adopt a new performance anatomy
that addresses historical barriers to
change with good governance, strong
leadership and a long-term view.
CHALLENGE 02 - Top 10 Challenges for Investment Banks

17. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
Three steps to successful cost reduction
17
02
Understand and leverage rapidly
maturing digital technologies
to drive efficiency gains instead of
using backward-looking benchmarks
that could underestimate the need
for—and potential value of—change.

18. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
Three steps to successful cost reduction
18
03
Adopt an
approach to
cost reduction
that balances
all three
dimensions
of competitive
agility.
Profitability Sustainability
and trust
LICENSE
TO GROW
FUEL FOR
GROWTH
TRUSTED
COMPANY
COMPE-
TITIVE
AGILITY
Growth and
customers

19. CHALLENGE 02 - Top 10 Challenges for Investment Banks
GETTING FIT:
AGGRESSIVE COST REDUCTION
0–3 YEARS
Deliver value
today, while
transforming and
growing your core
business(es)
1–5 YEARS
Pivot toward
utilities and
alliances, and
grow your new
client-led business
A seven-year plan for sustainable cost reduction
3–7+ YEARS
Master the long
term by embracing
blockchain,
self-service and
digitization
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20. CHALLENGE 02 - Top 10 Challenges for Investment Banks
TAKE THE
NEXT STEP
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