Increased job volume within Investment Banking Operations - the outlook is not so bleak

Steven Howden March 4, 20204 mins read

It should come as no surprise that Investment Banking has been in decline since 2008. After boasting record profits from largely complex and leveraged financial transactions in the proceeding years, 2008 commenced a decade of unprecedented structural change.

New regulations have limited the type of transactions banks can facilitate and have required them to keep more capital in reserve. New technologies have disrupted the industry and made traditional, relationship-driven banking vulnerable to new banking models.

Nowhere has the impact been more pronounced that in the areas of operations and middle office. With profit margins tight and increased competition from nimble, low-cost financial institutions, the main investment banks have sought opportunities to cut costs within these areas. First, banks offshored any roles that could be completed oversees. Then they looked to outsource functions that are not required to be done internally and could benefit from economies of scale. And more recently they have looked to employ AI and more sophisticated automation techniques. Although it must be said that the latter requires considerable upfront investment, and so has not been fully employed yet in Japan.

All of this does not make for pleasant reading if you are currently working with Operations in Japan. But the outlook might not be so bleak. Recent job volume within the areas of Operations and Middle Office have actually increased year on year. Most foreign investment banks are hiring – even the ones that have the most pessimistic forecasts. Also, Japanese banks have started to hire again; their focus on cost cutting and reduced hiring has been the main source of low turnover in the market for the last few years.

But given what we know, how can this be? There has never been a more important time for investment banks to get “operations” right. The reputational risk of operational errors makes competing in the current market almost impossible. If clients are going to pay the higher costs of using an investment bank, they expect a high level of service.

All banks are looking to upskill their operational staff. They expect them to be fully-bilingual and to act as a link between the business and clients in Japan and off-shore teams. They expect them to be client focused and to understand the impact of their work on the business. They expect them to understand the regulatory nuances in Japan. They expect them to understand technology better and how efficiencies can be gained from employing new technologies. Lastly, they expect them to understand the transaction life-cycle and how their role contributes to this. They must be able to identify potential issues outside of their normal scope of work and oversee work done by oversees teams.

Opportunities for operation professionals who exhibit some of these qualities could not be better. Roles within operations will offer more fulfillment, opportunities for progression and chances to work with new technologies and business lines. You will be better recognized for the work you do and the impact your job has on the business. There will be less process work, with more focus on adding value to various stakeholders across the organization.

Better opportunities also exist for operational professionals outside of traditional banking. Japan is a paradox in so many ways. But one of the biggest inconsistencies is in retail banking. Despite being at the forefront of most technological revolutions over the last 50 years, Japan remains a largely cash-based society. But there are signs that this is changing. With the Tokyo Olympics imminent, there are many initiatives in place to encourage retail customers to end their reliance on physical money. As has been well-documented, we are seeing more and more ‘payment start-ups’ entering the market in Japan; either home-grown or from oversees.

With 2020 projected to be a good year –buoyed by the Olympics in the summer – we will undoubtedly see continued investments in these new financial technologies. And with Big Tech companies threatening to invest in similar areas, we will continue to see opportunities arise within this space.

In the past Operational professionals working within Investment Banking had few opportunities to move into new industries. Unfortunately, the skill-sets that these professionals develop are unique to banking. Opportunities do exist within professional services and some technology firms, but other than these it can be very difficult to change industries.

But with the recent growth in payments, and the drive to move away from a cash-based society, there will undoubtedly be new opportunities within this area. Indeed, we are already seeing some operational professionals making the jump.

Whilst these organizations fail to offer the security of a big bank, they make up for this by offering a dynamic working environment, work flexibility, exciting career opportunities and more responsibility.

So whether in traditional investment banks or new “financial-technology” focused firms, opportunities do exist for talented operation professionals.

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If you are keen to hear about some of these opportunities or would like to discuss the market, please feel free to reach out.

Steven Howden's picture
Associate Director | Financial Services Recruitment
showden@morganmckinley.com

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