A GlobeRisk Perspective on strategy development in the financial sector
GlobeRisk specialises in firms where the taking or pooling of risk is core to the business model, a definition that covers most of the financial sector and one or two areas beyond.
Our experience throughout many strategy and business planning engagements is that most attention is generally given to:
- Products and markets in relation to offensive thinking, or profit growth, considerations
- Operations in respect of defensive, or cost management, considerations
In our view, whilst these may indeed be the core issues to be addressed by strategy, the risk management environment often has strategic importance. In our strategy development work we combine traditional approaches with a thorough understanding of the business model which we breakdown into 4 types of risk driven strategic consideration:
- New activity which may offer better risk adjusted returns, or simply more revenue at acceptable risk
- Opportunities to cut cost where risk management activity costs more than the value it adds. Since risk management activity, infrastructure and resource typically represents 20%-40% of the cost base important opportunities regularly arise
- Opportunities to use risk management capabilities to increase revenue. For example, better risk discrimination tools permit firms to replace negative margin business with new profitable business. Alternatively, there may be opportunity to reduce price margins to increase volume thereby increasing overall profit, especially if cross sale into other products is important
- Opportunities to manage profit and the consumption of risk taking resource over the economic cycle. An obvious example is achieving lower formal capital requirements and/or targets. More important however, is the ability to develop strategy and plans around economic cycle prospects.
The firm that judges the timing of the cycle well with actions to match will produce proportionately more profit than any other player.
GlobeRisk Strategy development assistance
GlobeRisk strategy development is about combining traditional consultancy approaches with a thorough understanding of the business model and its drivers. Risk driven initiatives and capabilities are not always important, but important opportunities emerge more often than not.
Other Strategy services available in 2007 include
- Maximise your Share Price
- Review and redesign of a firm’s strategy development framework
- Review and redesign of a firm’s business planning framework