specialized functions in finance 201605

For Internal use only

Overview of specialized functions and

business areas in the Financial sector May 2016

Gerard Albà Soler

2 Finance Professionals


Contents

1. Asset Management

a. Asset Management b. Risk Management c. Compliance d. Middle Office and Operations

e. Internal Audit f. Legal, Finance, Onboarding and Other

2. Investment Banking

b. Global Markets c. Corporate Finance d. Research

e. Transaction Banking f. Risk Management g. Compliance, Internal Audit h. Back Office i. ALM j. Other Departments

3. Private Banking (Wealth Management)

4. Commercial Banking

Finance Professionals 3


Asset Management

Asset Management (Front-Office)

Risk Management

Compliance

Middle Office

Internal Audit

MANAGEMENT COMPANY

Legal, Onboarding, Other

Fund Administrator (Back-Office) CUSTODIAN (Bank)



Asset Management: asset managers (Front-Office)

Key functions:

Fund and Portfolio management. Investment management

Research (Buy side)

Sector and Strategy specialists (Equities, Fixed Income, Alternatives , etc)

Quantitative Investment Strategies (analyst and trading)

Fund Analysts (FoF)



Asset Management: Risk Management

Key functions:

Monitoring and Control of quantitative and qualitative risks of funds (market

risk, liquidity, counterparty credit risk)

Detect and solve breaches of regulatory (compliance) limits or investment

policies. Instrument eligibility

Measurement systems and controls

Policies and procedures

Asset valuation

Operational Risk

UCITS, AIFMD

Independent function (CRO - Conducting Officer – four eyes principle)



Asset Management: Compliance

Key functions:

Management of compliance risks (legal and regulatory, reputation, litigation,

codes of conduct and good practices)

Due Diligence of counterparties and delegates

Internal policies, procedures and guidelines

Prevention of money laundering

Confidentiality of information

Insider trading and market abuse

Relationship with the regulator

Ethical environment and best practices



Asset Management: Middle Office

Key functions:

Trade matching and confirmation of transactions

Reconciliation of trades and positions of multiple order management systems

(custodian, management company, administrator)

Over-the-counter (OTC) derivatives processing

Corporate actions, proxy voting (custodian)

Investment and fund accounting control.

Control of delegates (fund administrator, custodian)



Asset Management: Internal Audit

Key functions:

Review the administration and governance of the organization

Assess internal control’s efficiency and effectiveness

Monitoring of compliance with the regulation

Assess the adequacy of the administrative, accounting and IT organization

Assess the adequacy of the segregation of duties and the execution of trades

Direct reporting to the Board of Directors



Asset Management: Fund Administration

Key functions:

Fund accounting (NAV calculation; income and expense accrual)

Accounting for all daily activities of the fund (buy/sells, income accruals)

Reconciliation of cash and fund share transactions

Prepare financial statements of funds and sicavs

Transfer Agent:

Maintain a register of fund investors/shareholders

Account balances of transactions (subscriptions/redemptions)

AML

10 Finance Professionals


Contents

1. Asset Management

a. Asset Management b. Risk Management c. Compliance d. Middle Office and Operations

e. Internal Audit f. Legal, Finance, Onboarding and Other

2. Investment Banking

b. Global Markets c. Corporate Finance d. Research

e. Transaction Banking f. Risk Management g. Compliance, Internal Audit h. Back Office i. ALM j. Other Departments

3. Private Banking (Wealth Management)

4. Commercial Banking



Investment Banking

Global Markets (Front-Office)

Corporate Finance

Research

Transaction Banking

Risk Management

INVESTMENT BANK

Compliance

Internal Audit

Back Office

ALM

Other Departments: Capital Modelling, Middle Office, IT, Finance, HHRR, etc



Investment Banking: Global Markets (Front-Office)

Key functions:

Trading and Sales of securities: Equities, Rates, FX, Credit, etc

• Brokerage. Cash securities

• Market Making

• Derivatives books (Equity derivatives, IR derivatives –Swaps, Caps/Floors,

etc- , Credit derivatives –CDS-, FX, etc)

Structured products:

• Investment products

• Hedging instruments (Rates, FX import/export, etc)



Investment Banking: Corporate Finance (Capital Markets)

Key functions:

Equity Capital Markets

• Equity Placements:

− IPOs

− Rights Issues

• Block trades, Tender offers

Debt Capital Markets

• Bonds issues

• Private placements

• Capital structure advisory, restructurings, convertible bonds, etc

M&A Advisory

• Mergers & Acquisitions

• Management buy-outs, takeover/defense strategies, Valuations etc



Investment Banking: Research

Key functions:

Equity Research (sell side)

• Reports on businesses in various sectors

• Ratings and price targets (valuation) for stocks

• Financial modelling

• Fundamental analysis, Technical analysis, Quantitative analysis

Credit Research (sell side)

• Debt reports on businesses in various sectors

• Credit ratings and investment recommendations

• Financial modelling

• Fundamental analysis, Technical analysis, Quantitative analysis



Investment Banking: Transaction Banking

Key functions:

Global custody

Global correspondent banking

Global brokerage (B2B)

Trade finance



Investment Banking: Risk Management

Key functions:

Monitoring and Control of:

• Market Risk: Trading Risk, VaR and Stress Testing, Modelling and Reporting

• Counterparty Credit Risk: CVA, EAD, PD, LGD etc. Credit Analysis and

approval. Economic Capital

• Liquidity Risk

Valuation of securities and portfolios

Financial modelling of derivatives and complex instruments (i.e. OTC)

Collateral management and Credit risk mitigation

ALM Risk Management



Investment Banking: ALM (Asset-Liability-Management)

Key functions:

Treasury

Bank’s Balance Sheet Liquidity Management

Management of Interest Rate Risk and FX Risk

Capital Risk Management

Financial Risk management of propietary market risks

specialized functions in finance 201605

Economy & Finance