We’ve seen the heightened challenge lately that business managers face in building internal consensus to take on new initiatives in today’s financial institutions. This article presents lessons learned from our recent project work.
The culture of securities finance and derivatives has changed significantly since the Global Financial Crisis of 2008. Risk tolerances are low and oversight is strong. Most firms have broadly dispersed authority matrices: few groups or divisions have complete top-to-bottom (and side-to-side) control over strategic initiatives, even within their own sphere of responsibility. For individuals looking to implement a vision, the trick lies in communicating that vision to the rest of the organization and achieving internal agreement (also known as buy-in). This feature of internal management existed long before the Crisis; our observation is that the need for building that buy-in has increased notably.
In the securities finance/collateral/derivatives world we have many anecdotes that leaders have strong visions for what they want to accomplish, but end up abandoning the effort when confronted with the need to achieve the necessary broad-based internal consensus. More than one has said that they don’t have either the time or the internal resources to spare to move these initiatives through their organizations. In this environment, the most significant challenge for the forward-thinking leader looking to effect change is not so much to come up with the vision and the idea, but to ensure the ideas are backed up and confirmed by solid data and credible analysis that can be easily communicated.
As one example, in a recent consulting engagement Finadium worked with an executive whose experience, industry knowledge and positive feel for the market – his gut instincts – had led him to the conclusion that his firm should invest in a certain initiative. What he needed to make this happen was a rock solid business case to take to his colleagues. The business case had to:
- Quantify the market opportunity
- Visualize and explain the goal for a broad audience of varying expertise in the subject matter
- Lay out the costs and benefits
- Document a variety of alternatives
- Articulate a go-to-market strategy
- Outline the business process requirements/outcomes for the technical team
Finadium delivered the business case, building from our existing research work, but the job was far from complete. The real work then lay with presenting the information and walking the broad decision-making team through the idea, objectives and rationale. The work got done (on time and on budget, like all good consulting projects), but the dynamic that was laid out showed us the heightened importance of consensus building in today’s financial institutions.
Few managers, executives or other leaders have the autonomy to make independent, gut instinct decisions anymore. This is reflective of the evolution of modern data-driven management processes, and means building up skills in multi-level management. It does not reflect any lack of expertise, leadership skills, trust or courage. Alongside the numbers and data, this is the real work of management in the securities finance/collateral/derivatives space going forward.