Strategies for Depository Companies in Financial Crisis

Strategies for Depository Companies in Financial CrisisIntroductionThe development of capital commercializes is highly dependent on the activities of related securities grocery infrastructure institutes that include, inter alia, alluviation companies engaged in provision of the work for record-keeping of entitlements below securities (registration and transfer of rights to securities), collection of coupon and dividends ( assumeable income) arising from the portfolios, facilitation of corporate actions processing (such as tetchy offer, proxy voting, buy-backs), and different values. This study focuses on the issues and relevant remediation steps applicable to sedimentation companies being integral part of the stock market place infrastructure.late(a) volatility in the stock markets provided a positive impetus to change the business model of depository companies. Securities market participants seek to use the go of depository companies as an additional measure of protection for a significant amount of assets and portfolios. Moreover, the market is shrinking and brokerage houses are going bankrupt that also boosts customers entrust to move their assets to specialized players in depository business by establishing direct relations. Nevertheless, the global turmoil has affected the research market segment resulting in rapidly decreasing value of assets at a lower place custody, reduction of on-exchange and OTC trading volumes, and redistribution of portfolios of assets by risk-averse investors seeking alternative strategies in times of crisis.Keywords capital market, strategic alternatives, competitive strategy, depository services.The objective of the research paper is to identify the key strategic options that would increase economic profit of the depositories organizations amid ongoing financial crisis. Effectively, we would like to develop and propose unalike approaches towards the companies strategic options aimed at defining current condition, future growth factors and drivers for relatives companies of the market segment.The findings section of the research paper describes most topical problems that depository companies are currently facing in Russia. The economic value drivers are identified and can be use to translate them into the economic profit model of depository companies. Furthermore, the primary(prenominal) strategic options are identified to high luminousness client portfolio rebalancing opportunities in the market segment.MethodologyThe methodological base of the research paper is based on the synopsis of data and information available in public sources, and made through desk study, along with the opinion expressed by the market experts. The hobby sources of information were used for different sections of the reportLegal framework federal laws on securities and custody operations, information on securities market volumes and other statistics was retrieved from the Russian National Association of Securities grocery store Participants (NAUFOR) and the telephone exchange Bank of Russia (CBR) official web-sites, the official publications and documents of the Federal State Statistics Service (Rosstat), and the Ministry of Economic DevelopmentThe problems were identified through interviews conducted with securities market specialists in RussiaSecurities services domain development the data was retrieved from annual NAUFOR Russian Stock Market. Facts and Events survey of 2014.The research paper is represented by six chapters that include introduction, methodology, the main part hypothesis, findings, conclusion, footnotes and bibliography.HypothesesWe suggests the following hypotheses to be tested in the course of empirical researchHypothesis 1 The growth strategic alternative (merger / acquisition, and integration / alliance) is winning in price of achieving the objectives set by the confederation during crisis.Criteria Cost-saving through synergies with other small providers introduc tion of new product offering.Hypothesis 2. Companies that apply product expansion strategy sooner of infrastructure needs can be more effective during crisis times, create competitive advantage and fulfill the objectives of the fraternity.Criteria The presence / absence of the relation between the mark of product diversification of the company (interoperability with the Central Depository, Central Counterparties, communication standards) with product standardization.Hypothesis 3. Depositories companies prone to invest in quality assurance (service organization), rather than withstand cost reduction strategies.Criteria The presence / absence of large market players, including investment funds and wealthy individuals.Characteristics of the research objectObject depository companies that provide services to broker / dealers, investment funds, private individuals and other depositories.Characteristics and features of the market segment Approximately 570 companies. From 15 to 80 emp loyees. Revenue from 0.1 to 5 million dollars a year. Clients local and immaterial residents. Entry barriers licensing requirements, IT technology, staff competencies. Large number of small companies with a small scope of operations and market share. Trend towards consolidation of businesses.The market segment of the securities market industry has a number of distinctive features that influences application of discussed strategic alternatives in the crisis.FindingsThe current global financial crisis requires depository companies to respond quickly to all macro-environment changes and vex competitive player with large amounts of assets deposited. The securities services are fairly stable line of business, where the client portfolio (equities and fixed income instruments) size is crucial and steady income for the maintenance would assist the development of the company. However, the depositary companies are affected by unstable situation, which is observed in the stock market in r ecent years. Therefore, we would like to see new threats and opportunities that experience emerged recently.We analyze the strategies of corporate governance of companies affected by the financial crisis on this basis, the following assumptions that were designated for the research paper We assume that all actions are undertaken in the interests of the stakeholders of the company or business. Set of strategic alternatives designated for the management in order to adjust the companys goals, drivers and incentives. It should be aimed at achieving long-term stability and development of the companys competitive advantages.We offer tercet strategic alternatives focused on the development of depository companies.Strategic integration opportunity is aimed at further increasing the scale of production for the purpose of reduction the share of the unit cost. The implementation of the strategic alternative is expected to be done either by modify production processes or acquiring other dep ositary companies of market segment for the purpose of achieving the economy of scale. The strategy also suggests the possibility of further acquisitions and development of the most profitable depositary companies of the group.The strategy of product expansion in companies offering depository services promote the interests of customers and investors in attracting new portfolios. This strategy, however, requires a systematic approach and professional competence to be successful. The Russian capital market has grown rapidly over the last 15 years, but the securities market infrastructure could not keep up the pace. Effectively, depository companies that had specialized in improving the securities market infrastructure of the stock market, promoting new electronic document interchange, new product offering and interconnection services, can achieve success in the crisis. minded(p) the opportunity to work with local authorities on the development of the securities market infrastructure in the long term they can lead to key roles in the value chain. These depositories companies has a fundamental knowledge and significant resources to identify and resolve discrepancies in connection with the accelerated development of the stock market.The strategic alternative of the service organization if they can meet service level claimed by sophisticated investment funds, private individuals and global custodians forced by the credit crunch to hold their assets through depository companies using them as extra protection during the financial crisis. For depository companies, there are many opportunities to retain these customers and grow the business, if they can grant and guarantee services that their customers demand. Nevertheless, many questions arise when thinking about the possibility of service in the framework of this strategy, there is no innovation component. It may be difficult to implement such a strategy for large depository companies whose business models are based on cost reduction and unification of services provided. However, the innovative component cannot be a panacea for all the ills in the short term. The decisive role is played by the demand and requirements of the customers and investors, and also supervise and control regulatory bodies.Business model of depository companies are highly dependent on the cost of fees for safekeeping as a percentage of supply assets in custody, as well as fees for each transaction in securities. Probably the situation could become worse, given the negative reaction from politicians and regulators in light of the financial crisis. One of the key areas which will have an impact on the financial services sector is information transparency.Stagnation of business activity in the stock market has provided many opportunities for depository companies, and put some pressure on the volume of investment and resources management companies. Business and operational models were tested under the conditions subject t o increased demands of customers in the pursuit of improving the quality of service and flexibility of services provided. The rapid reduction in the value of client assets under custody put pressure on revenues and spending in order to remain profitable.ConclusionThe practical conclusions of the study can be summarized as followsThe limited strategic alternatives have been formulated for depository companies acting in a financial crisis. Each option describes opportunities and focus group, and is presented as optimal one for the company with certain level of expertise and specific client types.Each of the strategic alternatives is aimed at selected market participants and shall provide opportunities to survive, improve operational activities, and also to strengthen their piazza in the market segment.In conclusion, we notes that at the present time, when the whole world is deepening the financial crisis, more and more companies risk losing their ability to pay. Accordingly, it is n ecessary to pay more attention to the anti-crisis strategy of corporate governance.BibliographyRubcov B.B. Modern Financial Markets M. Alpina Business Books, 2007. 926 p.Clearnet. Rules conditions for clearing house membership. Paris, 2000.-p. 114Group 30. Report of Committee on Interbank Netting Schemes of the Central Banks of 2005www.cbr.ru/sbrfr CBR legal framework, financial market participants, market statisticswww.naufor.ru NAUFOR Russian Stock Market Fact Book 2014www.gks.ru Federal State Statistics Service.www.ved.gov.ru The Ministry of Economic Development of the Russian Federation.1