The main responsibility of the Board of Directors and Management is to respond to the strategic challenges identified so as to ensure sustainable value creation for the owners. IFBC assists banks with the process of defining and then implementing their strategy as follows:
The bank’s strategic positioning and the business model have to be periodically reviewed with respect to its medium and long-term chances of success. The starting point is a detailed analysis of current market conditions and expected medium-term developments. That analysis is then used to devise and assess options for strategic action from various perspectives. We perform the necessary analyses and assist banks with developing their strategy and defining strategic initiatives.
The growing trend towards “digitisation” entails risks as well as opportunities. Both earnings and efficiency can be boosted by automating internal processes and developing new digital solutions for the customer interface (front-to-end processes required). At the same time, the accelerating “digital disruption” (break-up of the bank’s value chain) is leading to the appearance of new market participants and the need to realign the old business models. We assist our customers with formulating their digital strategy and updating the bank’s business model. We also help them work out business cases to evaluate new digital solutions.
Besides the analysis of the strategic positioning and resulting definition of a strategy, systematic implementation of the strategic initiatives is of central importance. Thanks to years of experience with projects, we can take charge of general project management or assist with the implementation of sub-projects. In addition, customised project monitoring ensures the necessary transparency for the evaluation of the results of implementation.
Stricter capital and liquidity requirements are forcing banks to conduct a critical examination of their business models. The new capital adequacy requirements also entail a reassessment of the dividend policy and the procurement of additional risk capital may have to be considered, too. Our expert team helps banks define a tailor-made capital and liquidity strategy that both satisfies the regulatory requirements and complies with the bank’s risk policy guidelines. We also consider the costs of the equity capital employed to ensure risk-adjusted returns and allocate the capital among the various business units.
In the context of M&A, IPOs or capital increases, well-founded valuations are decisive for the success of the transaction. Compared to the valuation of industrial enterprises, the valuation of financial institutions has certain special features, such as the performance-based components of the assets and liabilities and specific regulatory requirements. As independent experts, we help our customers perform valuations of their bank and to develop and evaluate the finance plans necessary for the valuations.
Many banks are considering possible corporate transactions in connection with the strategic reorientation of their business models. While some banks are focusing on specific activities of the value chain and wish to dispose of lines of business that no longer comply with their strategy, other banks are interested in acquisitions in order to gain access to new markets, gain market share or achieve economies of scale. We provide our customers with ongoing support throughout the entire transaction process and our experience contributes to their success.In addition to an efficient evaluation of the transaction readiness based on the IFBC Transaction Check, we support our clients during the realization of their transaction in particular with process management, transaction structuring, conducting negotiations, valuation of the target entity and the performance of substantiated Financial Due Diligence.
Effective performance management is a prerequisite for implementing a strategy successfully. IFBC draws the following distinction between centralised structure management and sales and distribution management: whereas central structure management focuses on meeting targets for risk, returns and profitability on the groupwide and divisional levels, sales and distribution management provides support for the actual provision of services to customers. Specifically, we assist our customers in the following areas:
Our dynamic approach to planning and budgeting replaces the static annual budgeting process. By setting an “Ambition Level” based on the med-term planning and the minimum returns expected by the owners, targets are set for the entire bank and allocated to the divisions. In connection with the decentralisation of sales and distribution management (see Retail & Private Banking), a rolling planning and budgeting process is implemented groupwide thanks to the development of customised planning tools. That process enables efficient planning that is constantly up to date.
Besides defining well-targeted KPIs aligned with the bank’s strategy, the instruments and methods of measurement are of central importance in performance measurement. We assist our customers with defining appropriate indicators, establishing proper methods of measurement and implementing the associated management tools.
Risk-adjusted pricing, as a tool for cost estimation, and transparent management of preferential terms facilitate earnings and risk optimisation. Our banking team assists our customers with developing a pricing tool by setting the individual pricing components (costs of refinancing, risk, equity and processing) and helps with defining and implementing a suitable policy of preferential terms.
Direct costing as a tool for determining actual costs yields important data for operational bank controlling, strategic planning, performance management and the incentive system. Our specialists provide special assistance with designing a direct costing method, specifying the individual income and expense components (including accounting for imputed income and expenses) and setting up internal transfer pricing.
All interest risk items are summarised in the balance sheet structure portfolio as part of the market risk. Changes in market interest rates therefore have an impact on the bank’s balance sheet (effect on net worth) and income statement (effect on income). The strategic management of such risks is the responsibility of Management and of the Board of Directors, whereas tactical management is the responsibility of the CFO and Treasury. We assist our customers with the extremely important control of interest risk. This mainly involves defining the ALM Governance, formulating the targets, issuing reports to Management and to the Board of Directors and analysing the impact of the ALM strategy on operational performance.
Both Retail Banking and Private Banking are faced with countless challenges that must be met in order to optimise costs and to secure or increase earnings. Our experts, with long-standing experience in their sector, assist retail and private banks in the following areas, in particular:
Our approach to management helps with structured sales and marketing management and ensures efficient financial management. Decentralising responsibilities while encouraging entrepreneurial thinking and behaviour can sustainably improve a bank’s sales and marketing performance. The bank constantly identifies potential improvements and takes measures to implement them. At the same time, setting up appropriate management tools and vehicles makes it possible to implement a rolling plan of action that provides for specific measures.
Changing customer needs and new technological possibilities are raising doubts about the existing branch network and branch structures. Based on our experience with business model transformation, we help banks define sustainable structures for their branches. At the same time, our banking team helps streamline the branch structure through optimal allocation and use of resources better attuned to their customers’ needs.
Credit, investment and support processes should be continuously examined to ensure the efficiency of the workflows, the employees involved and the systems used. Through specific analyses, we identify potential improvements while checking interfaces with outsourcers.
In past years, corporate banking has been comparatively solid, profitable and stable, with only moderate and manageable risks. Our approach to securing the current income, optimising costs and improving risk identification and management in corporate banking involves several initial steps. Specifically, we assist our customers in the following areas:
The orientation of corporate banking business should be periodically reviewed. We have the broad-based industry and conceptual know-how necessary to profile the strengths and weaknesses of a bank’s corporate clients and to formulate recommendations for possible improvements. In doing so, our analysis is not focussed solely on the credit process and underlying structural organisation but also covers the analytical and management tools and product ranges.
The areas of responsibility defined in the credit process affect the organisational structure and thus the costs of corporate banking (front-end units & credit office). By developing digital decision-making tools and reviewing the existing allocation of responsibilities, we help our customers streamline their processes and use resources in a more focused manner.
Knowing your customers and systematically identifying their business model is a sine qua non for loan approval and for making full use of cross-selling potential. An approach we developed that is used by a number of banks enables well-targeted business model analysis based on company-specific value drivers and risk drivers. By combining business model analysis with the debtcapacity approach, we create the conceptual basis necessary for credit decisions. At the same time, we help our customers with the systematic identification of the value drivers and risk drivers in active portfolio management and with setting up simple analyses and differentiated portfolio simulations.
Strategic crises on the customer side can be detected early based on business model analysis and the bank’s internal professional expertise. An early warning system, in contrast, has to indicate the first signs of a downstream crisis. We define early warning indicators that are summarised in a meaningful way in a Scoring Model subject to standardised analysis at regular intervals. This creates the basis for dynamic risk monitoring, enabling early risk recognition and improvement of the recovery rate. At the same time, this approach optimises the (annual) review process, since the resubmission intervals for low-volume credit exposures are brought into alignment with the early warning system.
Through periodic basic and advanced training, our customer advisors can keep up with the latest developments and theoretical approaches, which helps them work out value-creating solutions for the bank and its clients. Our practically oriented training seminars adapted to the bank’s specific situation train both corporate customer advisors and credit analysts on selected topics (e.g., business model analysis, use of debt-capacity analysis, company valuations, etc.)
Unfortunately, there is no panacea to ensure successful crisis management. How an unstable economic environment affects a company and what financial effects it triggers i...
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We are pleased to invite you to our seminar on the topics «Corporate transactions and valuation»...
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IFBC Sector Report - Swiss Banking published on finews.ch on 30 August 2022....
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