Question

What are some constraints that limit investment bank’s development? How do banks due with these conrtaints? Give examples.

Answer 1

Following are the constraints which limit the investment banks development,

1. Relationship Management constraints-For the success of investment banking well trained relationship manager is required which require huge fund for recruitment as well as for training purposes. For investment bank relationship management make proper planing regarding requirement of customer,importance to nurture clients ,understand their needs and provide product according to their needs.So a very basic element in marketing will have to be applied to the investment banking business: ‘know thy customer’s needs well’.it is called effective Customer Relationship Management,

2..Technology- . An Investment Bank will need to keep itself upfront  with the latest technology. A particular technology could help in reducing cost,improving quality of service as well as improve their financial position.

3.Structuring Skills- The increased sophistication of the corporates has led to their financial requirements becoming more complex. The opening up of the economy and the thrust on infrastructure over the past few years is increasingly presenting situations, where the financing needs of certain transactions cannot be met through conventional financing methods.

4..Competition- The entry of foreign banks, the domestic investment banks within the country too are witnessing stiff competition. Fee levels are shrinking by the day, leading to an increased pressure on margins. To be in a position of charging a premium , an Investment Bank has to have an edge over its competitors and that would come from providing better value to the client.

5.Size-in recent global competition  talent and experience has been gravitating towards larger investment banks and it has been extremely difficult for the smaller firms to hold on to expertise. The future belongs to well-integrated investment banks.

Banks deal with above constraints by following way:

1.Use proper recruitment process-Bank shoul make proper plan to recruit skilled relationship manager who can understand the need of customer and attract customer to invest in their bank.

2. Keep focus on new business opportunities-Investment Banks have spread their activity in advisory services and consultancy,.Investment bank should provide  advisory services in the infrastructure sector.

3.Increase size of business-For competing with their rival investment bank should make proper plan to start their business in big size so skilled and efficient relationship manager willing to join the investment bank.

4.Keep focus on technological upgradation-Time to time investment management should update their technology according to requirement of business.

5.Compete with rival by better strategy-For success of investment bank investment bank require to make proper strategy,clear about their vision and mission and keep focus on policies and procedure require for implementation of strategy,

Apart from above investment bank also consider:

1.Political environment

2.Social environment

3.Economical environment.

4.Technological environment.