Investment Banks and Globalization

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“Global reach and local know how ' investment banks and globalization.”

“Investment banks are facing many challenges, not least the need to become global in scope and ambition, but local in understanding and execution”.

(Comments on the article by Anshu Jain, head of Deutsche Bank's Global Markets Division).

In the article the main though is represented by a statement that: “We cannot easily talk about alternatives to globalisation in investment banking; only of the different strategies for meeting its challenges”. According to the author, globalisation is rather mature phenomenon in the business. Globalising capital flows and ever more sophisticated financial instruments have created extraordinary challenges and opportunities for financial intermediaries like investment banks. This also forced global firms to develop the skills and expertise required to co-ordinate and manage financial and operational risks. These risks have become ever more complex as companies respond to customer demand and extend their reach across continents.

It is beyond doubt that globalization has been a key issue in the business for a long time. It essentially increases the chances and opportunities available in investment banking: instead of focusing intensively on individual countries or regions ' as was previously the case ' the business now looks for lucrative investment opportunities throughout the world, at the same time offering services globally. But what about the risks? Do higher risk exposure come with ever broader scope of business? In general yes, but as a result of increasing complexity, there are now also more opportunities for global diversification. Consequently, globalization also offers opportunities for broader risk diversification.

Mr. A. Jain claims that a successful global firm (like Deutsche Bank) will necessarily be global in reach and ambition, but it will also be local in understanding and execution. It will do business with large,...
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