Fiducitation: CEO Concerns
Authors: Brian O’Keeffe
and Ray Ferrara
Date: January 9,
2002 © 2002 Fiducite.com, Inc.
Fiducitation: A
synthesis of public Internet resources on the topic.
Instructions: Use the Table of Contents to navigate the document. Each citation has up to four distinct parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source document) help you decide whether to view the document. The source document may be viewed by clicking on the Source URL or by opening the embedded Cached File. All information is attributed to its source.
This report has been prepared for the purpose of providing
some background information for a speech at an annual CEO conference. The
speech will highlight the major concerns facing CEO’s in the coming year. While
the focus is on the financial services industry, content from other industries
both here and abroad will be included where appropriate.
2001 was a year unlike any other in recent memory, featuring
a new Presidential Administration, the end of the longest economic expansion in
history, and a catastrophic event that struck not only the nation’s psyche, but
also its financial and military centers.
Going forward, we all feel that American industry will change
dramatically and permanently. The financial services industry will certainly
bear its share of the changes, and this uncertainty over the nature of upcoming
changes – and how to prepare for them - is the biggest concern facing Chief
Executives across all industries.
There are a number of other concerns that have come up as
well. Notably, businesses have made
concerted efforts and large investments in recent years to expand their global
reach, and to improve their technology infrastructure. Now that the corporate
belts are being squeezed, senior management is faced with the challenge of
generating profits out of their recent investments. Other industries
(investment banking, for instance) are facing the prospect of exiting new
businesses that they just recently established.
The remainder of this document provides citations from
leading sources or individuals on CEOs’ concerns for the coming year, including
some common objectives and initiatives that CEO's believe are critical
success factors for their businesses in the near future. Please
note that there is more information available on most of these topics, and we
would be happy to look into it further if you wish.
Author:
Nine Ideas that Shaped Financial Services in 2001
Annotation:
This
article from American Banker highlights nine important factors from 2001, many
of which will continue to mold the industry in the coming year. Included are
changes in regulatory attitudes, technology applications and general business
attitudes.
Clip: Many but by no means all of the items we catalogue below emerged as a consequence of the Sept. 11 attacks. Some of them represent genuinely new ideas and approaches to the delivery of financial services. Others are better understood as having "come of age" in 2001 -- phenomena that have been kicking around the boardrooms for a while but for one reason or another managed only last year to win themselves permanent places in the industry's collective lexicon.
Source: http://www.thebankingchannel.com
Cached
File:
The Strategic Enterprise
Annotation:
This
is from Marsh McLennan’s Viewpoint magazine, and details the evolution of
popular corporate structures since WWII.
The author discusses his views of effective future organizational
structures.
Clip: After
World War II, the U.S. economy was relatively strong, and pent-up demand from
the Great Depression and the war outstripped industrial capacity. In this
favorable environment for growth, the prevailing organizational model for
business was the integrated operating company. Companies like U.S. Steel and
General Motors tended to be tight collections of closely related operating
units with similar business designs. With a powerful, centralized bureaucracy
that associated inconsistency with inefficiency, the integrated operating
company was built for command and control.
Source: http://www.mmc.com/views/winter_01_nadler.shtml
Cached
File:
Moving Mountains in the New Economy
Annotation:
This
report from Cap Gemini E&Y is somewhat dated (the date is not explicitly
stated, but the file name implies that it is from 2000), but is an insightful
general strategy article. Because of the timing, there is quite a bit of “new economy”
talk, but the ideas are not much different today than they were at the time.
The authors do a particularly good job of highlighting the differing opinions
and lack of consensus on some major issues within the industry.
Clip: According to participants in a Cap Gemini Ernst & Young
study, CEOs who steer their enterprises with confidence and take prudent risks
in order to achieve significant rewards are the most likely to create new
wealth for their organizations. This mindset, although it may run counter to
the cultures found in some traditional financial services companies, promises
to reward advocates richly in the years ahead. In the era of e-Commerce, the
risk/reward decision-making process mandates speed: Firms need to confront more
variables and address higher degrees of risk and return in shorter time frames.
Furthermore, the need for rapid decision-making in today’s connected economy is
likely to require the adoption of dynamic corporate cultures and more accurate
measures of financial performance.
Source: http://www.cgey.com/finance/pubs/FSI_CEO_REPORT_8_00.pdf
Cached File:
Bridging the Gap: Global CEO as Manager of Human Capital
Annotation:
This
paper by Amrop addresses the ever-growing complexity of the top post in any
company. This is based on a survey conducted by a Harvard Business School
researcher, and makes the argument that a CEO’s biggest challenge is and will
always be managing the people below him.
Clip: Running a global company–already a complicated proposition
–is getting more challenging with every passing year. Regional economic crises,
the convergence of the European Union, the economic emergence of countries in
Eastern Europe, Africa, and South America, global consolidation, and the
relentless technological revolution, present CEO’s with a seemingly
overwhelming number of challenges. So
much so that many of the CEO’s and senior executives interviewed for a prior
Amrop study –‘Balancing Tensions’–seemed to question whether any single person
could handle the job effectively.
Source: http://www.amropworld.com/ceo_human_capital.pdf
Cached File: 
Countering Strategic Risk With Pattern Thinking
Annotation:
Originally
from the Mercer Management Journal, this article talks about applying “pattern
thinking” to an organizations strategic planning as a means to stay ahead of
competition.
Clip: The primary task of senior
executives seeking sustained value growth can be succinctly described as the
management of risk for the benefit of shareholders. Risk is an essential
element of any strategy; take on too little or too much and the returns are not
there. The business lexicon is filled with terms that reinforce this connection,
such as "bet the company," "risk/reward tradeoff," and
"calculated risk."
Source: http://www.mmc.com/views/strategic1.shtml
Cached File: 
Internet Related Business Risks
Annotation:
This
article is taken from an interview with a Manager at Guy Carpenter, Inc. The
discussion focuses primarily on new risks that are a result of the increase in
electronic commerce.
Clip: Clearly, cyber risks were not contemplated when existing property and casualty policies were first developed. Consequently, litigation will almost certainly take place to determine what protection, if any, is granted under these policies.
However, traditional policies, which were designed to protect physical assets against perils such as earthquakes and hurricanes, will likely not protect information or reputation assets against such cyber perils as denial of service or theft of information.
Source: http://www.mmc.com/views/oellrich.shtml
Cached
File:
AT Kearney Financial Institution Forum 2001
Annotation:
AT
Kearney publishes this document, a collection of five separate articles they
authored. Each of the five articles
covers a completely different topic, from e-Business to Rural Banks to Capital
Market exchanges. All highlight significant issues that will define the near
future of these segments.
Clip: At first glance, the themes of the
articles in this collection appear to have little in common: Innovative
e-Engineering, distribution strategies, the future of securities exchanges,
product profitability in life insurance and community banking in Thailand. Look
a little deeper, however, and a common thread begins to emerge. Financial
executives are looking beyond the chaos of the past few years to reevaluate
both where they are and where they are headed. Now that the meteoric rise and
fall of the new economy is beginning to stabilize, executives across the board
are finding their solid footing.
Source: http://www.atkearney.com/pdf/eng/FIG_Forum_2001_S.pdf
Cached File: 
New Risks in International Business
Annotation:
This
article, also form Viewpoint, highlights risks that, while always present, have
grown in significance because of recent world events. The author also points
out that the increased risk comes at a time when global events are creating new
opportunities for major multinationals.
Clip: Yet even before the September 11
attacks, broader trends in international affairs were creating new political
risks for U.S. multinationals. On one hand, the collapse of the Soviet
political system, the conversion of state economies to free-market principles,
and the forces of globalization have created stunning business opportunities
over the past decade. On the other, the rapid expansion of the Western economic
model, the relatively free flow of capital, goods, and services, and the
explosion of information technology have contributed to political and social
tensions in some countries.
Source: http://www.mmc.com/views/autumn_01_bremer.shtml
Cached
File:
Looking Ahead: The Financial Institution of Tomorrow
Annotation:
In
this article from IBM, the author argues that Financial Institution of tomorrow
will be largely based on today’s models, and that most changes will be driven
by technological advancements.
Clip: The shape and utility of financial services companies
will be determined by a continuing parade of rational technological
developments, and we can get a glimpse of them by examining what essentially is
a continuum of financial services strategies that differ only in the way they
are applied. New channels, network security and bandwidth, improved customer
experience, and global markets are all givens, and some products will not
change for decades. You just don't do revolutionary things with money. Even
talking about it causes people to check their account balances.
Source: http://www-1.ibm.com/industries/financialservices/bae/BAEN_ITEM_68467.html
Cached
File: 
Celent’s Top 10 Banking Concerns
Annotation:
This
is a Press Release by Celent citing their view of the ten largest concerns
facing CEO’s of both retail and wholesale banks. It is important to note that
other vendors quite often quote these lists, as well as the brokerage list, in
promotional materials.
Clip: With increased competition from brokerages, insurers,
non-banks and global players, banks are focused on finding ways to attract and
retain profitable customers. This may include new marketing efforts, branding
changes, modification to existing products and/or pricing structures, improving
customer service, expanding product reach, partnering where appropriate to
offer value-added services, etc.
Source: http://www.celent.com/PressReleases/20010928/top10.htm
Cached
File: 
Measures That Matter
Annotation:
This
article discusses the differences in the measurements that CEO’s use to gauge
performance, versus those of investors and analysts.
Clip: The findings show that non-financial performance
indicators, or intangibles, such as quality of management and execution of
strategy, significantly influence investors' decisions in the banking sector.
They are, in fact, just as important as the banks' past financial performance
records. This is hardly surprising, but does not explain why the market
under-values most banking shares. The findings also suggest that banks are not
successful in managing the intangibles and, worse still, CEO's are not
listening to the investors.
Source: http://www.ey.com/global/gcr.nsf/International/Measures_That_Matter_-_News_Release_-_October
Cached
File: 
Celent’s Top 10 Brokerage Concerns
Annotation:
This
is a Press Release by Celent citing their view of the ten largest concerns
facing CEO’s of both retail and institutional brokers.
Clip: As firms struggle to remain competitive while cutting
costs, it is imperative that they implement plans for closer collaboration
among business lines. This means providing a channel for business line managers
to communicate freely with one another, reorganizing revenue reporting in some
cases, and more importantly, incentivizing all lines of business to participate
in such a scheme.
Source: http://www.celent.com/PressReleases/20011130/top10.htm
Cached
File: 
Managing the Asset Manager
Annotation:
This
article discusses the difficulties that Asset Managers have in getting the best
performance out of their employees. The
lessons from this can easily be applied to other human capital-intensive
businesses like consulting and banking.
Clip: Since the success of these firms depends to a
critical extent on the quality of the talent that they employ to make
investment decisions, they must excel at recruiting, developing, rewarding, and
retaining talent, right? Wrong, according to their own people.
Source: http://www.mckinseyquarterly.com/article_abstract.asp?tk=362299:1124:10&ar=1124&L2=10&L3=53
Cached
File:
Author:
Statement of the American Council of Life Insurers before the Subcommittee on Capital Markets, Insurance & Government Sponsored Enterprises of the House Financial Services Committee On Insurance Product Approval: The Need for Modernization
Annotation: This is
congressional testimony that is somewhat wordy and difficult to read, but it
does an excellent job of highlighting a large concern of the Insurance
industry: that all insurers be subject to the same regulations, regardless of
their primary lines of business.
Clip: Speed-to-market
connotes a very different, external competitive consideration that reflects the
new marketplace environment in which life insurers increasingly find
themselves. Historically, life insurers competed only against other life
insurers. Whatever the inefficiencies of multi-jurisdiction insurance
regulation, companies incurred them equally. Things have changed
radically in recent years. Financial services integration and
modernization is occurring at a breakneck pace throughout the insurance and
financial services sector. Life insurers, as providers of life insurance,
annuities, and other financial security and retirement security products, must
compete directly with non-insurance financial institutions such as banks and
mutual funds. These firms enjoy regulatory efficiencies that translate
into significant marketplace advantages.
Source: http://www.acli.com/public/media/releases/2001/nr062101a_att.htm
Cached File: 
Creating Breakthrough Value in Life Insurance
Annotation: This article
from AT Kearney addresses the increased pressured on Life Insurers due to
increased competition. The author believes that the solution is a complete
overhaul of the traditional structure of life insurers.
Clip: Market pressures faced by major players in the insurance
industry call into question the viability of the traditional vertically
integrated approach to the life insurance business. Customers and capital
markets no longer value many of the traditional functions that insurance
companies perform and are looking for increased return from the remaining
activities. Successfully addressing these pressures requires a new vision and a
bold approach—in essence, a disaggregation of the existing business model and a
fundamental refocusing on the core components of the business. The linchpin of
this effort is the transformation of mundane processing and servicing functions
into new strategic capabilities. Together, these capabilities are the catalyst
to unlocking value in the industry.
Source: http://www.atkearney.com/pdf/eng/creating_breakthrough_value_S.pdf
Cached File:
Mutually Assured Survival
Annotation: This article
addresses the growing trend towards demutualization of large insurers. The
author believes that demutualizing is often more trouble than it is worth, and
that there are other ways to improve capital uses.
Clip: Being
a publicly held company puts much more performance pressure on management,
often to the good of the company and the policyholders. But demutualization is
a time-consuming and expensive process, and not every mutual insurer wants to
experience the rigors of public ownership. There is another solution, one that
will give mutuals many of the same benefits, with less risk and cost.
Source: http://www.mckinseyquarterly.com/ab_g.asp?ar=1084&L2=10&L3=52
Cached File: 
Author:
Boeing CEO Talks About Security Technology, Impending Layoffs
Annotation: Given their
exposure to commercial aviation and military contracting, Boeing is in a unique
position to experience the effects of the recent terrorist attacks. Here, CEO
Phil Condit discusses some changes that will soon reach his industries.
Clip: Condit
said, "Part of the challenge now is not putting things off. We're asking,
'How do we move ahead to make the [airline] system more secure and get on with
the business at hand?'“
Source: http://www.idg.net/spc_700520_190_9-10025.html
Cached File: 
What’s Right With the US Economy
Annotation: In this
refreshingly optimistic piece from McKinsey Quarterly, the author points out
that, despite huge concerns, there is plenty of reason to believe that the US
Economy has bright days ahead.
Clip: Surprisingly, the primary source of the
productivity gains of 1995 to 1999 was not increased demand resulting from the
stock market bubble, as some economists have claimed. Nor was information
technology the source, though companies accelerated the pace of their IT
investments during those years. Rather, managerial and
technological innovations in only six highly competitive industries—wholesale
trade, retail trade, securities, semiconductors, computer manufacturing, and
telecommunications—were the most important causes.
Source: http://www.mckinseyquarterly.com/ab_g.asp?ar=1151&L2=19&L3=67
Cached File: