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Balance Sheet Management

The Challenge

The Client, a Global Capital Markets and Wealth Management Firm asked LP Squared to produce a best practice training manual explaining balance sheet dynamics as these relate to funding balances and costs.

Assignment – Delivered

LP Squared identified and engaged a number of SMEs with recent and relevant experience.

The final product delivered to the Client consisted of:

  • Industry practices white paper – created using SME’s knowledge and experience in the industry
  • Case Study combining industry best practices in light of revised regulatory guidelines and reporting requirements

The Case Study was built in sequential blocks:

  • Starting with the drivers of financing costs i.e. Trading Inventory
  • Looking at the liquidity profile of inventory and applying a benchmark cost to each position
  • Applying netting to realise both balance sheet and financing cost reductions
  • Comparing benchmark costs to actual costs achieved by the Firm
  • Creating analysis showing the size of the franchise benefits realised via:
    • Trade and Client netting
    • Optimal funding executed

Result – Value added

  • On time, under-budget delivery of the full engagement
  • Firm-wide communication of balance sheet and funding dynamics improved employees’ knowledge and led to better informed trade pricing
  • The Case Study was used as the design foundation for a renovated balance sheet reporting platform with full funding allocation for Secured, Unsecured and Contingent Funding