Delivering The Bank
Martin Hood, UBS
Cooperation between the bank’s four business groups stands at the core of the UBS strategy. It is this "integrated business model" that underpins the recently unified UBS brand.
In Asia, private bankers scout for opportunities on behalf of the UBS Investment Bank. In New York, financial advisors sell funds created by investment bankers in London. Securities issued by a central funding entity are transmuted into structured products for private clients. This is the UBS integrated business model in action today.
UBS does not encourage its business groups to work together for the sake of it. Rather the case for cooperation centres on the customer. "We focus on our clients and aim to deliver the whole firm," says UBS President Peter Wuffli. "One of the main objectives of the integrated model has been to give our clients access to the complete range of our products and services across the whole firm, and this is what our clients want," he amplified at a recent senior management conference.
Delivering the firm in this way means drawing on its total resources. Only by doing so can private bankers devise best-in-class solutions for extremely wealthy private clients. Or investment bankers tap the specialised skills available within UBS Global Asset Management to create new structured products.
But UBS is not out to reinvent universal banking, Wuffli notes: "We integrate only where it adds value or eliminates wasteful duplication of infrastructure." These criteria clearly apply to UBS’s group treasury function where cash and interest rate exposures from across UBS are centrally managed to mitigate risk, cut costs, and maximize tax efficiency. (See box.)
The synergies captured by the centralised treasury alone amount to several hundred million Swiss francs every year, according to UBS’s Group Treasurer. Meanwhile, a separate internal study has concluded that cooperative efforts across the entire bank generate value equivalent to a significant fraction of the firm’s total revenues.
If cooperation makes such good sense for both clients and the bottom line, how is it that the UBS integrated model has only recently come to prominence? Peter Wuffli explains that the concept has deep roots but that implementation had to wait for the right conditions.
"When we were debating the shape of the future UBS around the time of the 1998 merger, we decided to create a powerful group that leveraged the synergies between its different components," he recalls. "Unlike the holding company or conglomerate model, we believed that a successfully integrated firm would be secure against the threat of subsequent break-up."
Before integration - and, with it, a single UBS brand - could come into play, however, the individual businesses first had to establish leadership positions in their respective markets. By 2000, most businesses were well on the way to achieving this goal. More management time could therefore be devoted to exploring and exploiting the synergies between business groups.
An early outcome of this new emphasis on cooperation across the bank was "UBS. The Bank for Banks", the all-bank programme launched in 2001 to position UBS as the partner of choice for financial institutions worldwide. (See box.) Encouraged by the success of this and other initiatives, the bank’s top management then moved to institutionalise the integrated model.
Last year, individual members of the UBS Group Executive Board took on responsibility for promoting cross-divisional cooperation in specific regions. They are backed by "country facilitators" in most of UBS’s major markets. These efforts are already bearing fruit in the shape of joint logistics, marketing, and product development.
"Our products, services, and expertise make us an exceptionally broad and deep institution," says Marten Hoekstra, a UBS executive who has contributed to the development of the integrated strategy. "The challenge is to deliver this to the client in a focused and consistent way. That is what the integrated business model is all about. It is simply a better way to serve the client."
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