A Libyan wealth management firm, WealthCo*, faced the daunting challenge of stagnant profits despite its considerable potential. To address this, the company sought Qabas’s expertise. We recommended a strategic refocus on the private banking unit and the divestment of the asset management business. This strategic shift resulted in substantial shareholder value, surpassing the nation’s growth rate by over 17 percentage points within six months.
The Situation
WealthCo*, a prominent entity in Libya’s wealth management sector, was grappling with stagnant profits and required a clear corporate vision to maximise value for its shareholders. The firm operated multiple distinct businesses, including an asset management division and a private banking unit. The asset management division had been experiencing declining profitability, while the private banking sector, although highly profitable, was not fully leveraging its potential.
Several critical issues were identified as contributing to these performance problems:
- Fragmented Operations: The lack of integration between the various business units led to operational inefficiencies and missed opportunities for leveraging synergies. Each division operated in silos, preventing the realisation of potential cross-selling and cost-saving benefits.
- Market Underdevelopment: WealthCo had not fully capitalised on its presence in core markets. There was significant potential for growth that remained untapped due to a lack of targeted strategies and effective market penetration techniques.
- Organisational Inefficiencies: The existing organisational structure was poorly defined. This led to unclear leadership roles and responsibilities, creating bottlenecks and reducing overall efficiency.
- Strategic Ambiguity: The private banking unit lacked a coherent strategy. Without a clear direction, it struggled to fully realise its potential, resulting in underperformance relative to its capabilities.
Our Approach
We undertook a detailed and methodical review of WealthCo’s operations. This involved several key steps:
- Organisational Review: We began by developing a profitability fact base and conducting a high-level analysis of business and product area potential. This included a 3Cs analysis (competitors, customers, and capabilities) to understand the competitive landscape, customer needs, and internal strengths and weaknesses.
- Cost Allocation Exercise: We performed a thorough cost allocation exercise to identify areas where efficiencies could be improved. This helped pinpoint specific areas where costs could be reduced without compromising service quality or operational effectiveness.
- Strategic Planning: We focused on understanding the broader business dynamics and potential product areas. This included conducting a competitor analysis, identifying key market trends, and recommending strategic corporate directions. These insights were critical in laying the groundwork for subsequent phases.
- Refining Strategies:We refined the strategic plans and designed an optimal organisational structure. This involved aligning the organisational capabilities with the new strategic vision, ensuring that each business unit could operate at its full potential.
- Implementation: We helped WealthCo implement the identified business strategies. This phase involved ensuring that the new strategies were effectively integrated into the company’s operations, driving the intended performance improvements and growth.
Our Recommendations
We recommended that WealthCo divest its asset management business to concentrate its resources and efforts on the private banking unit, which demonstrated greater potential for growth and profitability. This strategic decision was based on several key observations and analyses:
- Industry Dynamics: The asset management sector was experiencing rapid globalisation, marked by the emergence of large-scale national and international players. The market had become commoditised with accelerated consolidation, requiring significant dedication and investments to maintain competitiveness. In contrast, the private banking sector was characterised by high growth and profitability. Although it was geographically confined and fragmented, it had substantial untapped potential due to its secretive nature and considerable barriers to entry.
- Position and Capabilities: WealthCo was not prepared to make the substantial investments required to stay competitive in the asset management market. The sale price for the asset management business was currently high, presenting a timely opportunity for divestiture. On the other hand, the private banking unit was extremely well-positioned and aligned with WealthCo’s traditional strengths. The unit required focused investment to fully realise its potential and deliver healthy returns.
- Strategic Focus: By divesting the asset management business, WealthCo could streamline its operations and allocate resources more effectively. The focus on the private banking unit would enable WealthCo to leverage its strengths, improve operational efficiency, and enhance its competitive edge. This would involve significant investments in refining strategic plans, designing an optimal organisational structure, and implementing advanced sales management and productivity programmes.
- Resource Allocation: Concentrating resources on the private banking unit would allow WealthCo to unlock synergies across its operations, improve service offerings, and expand its market share. The strategic refocus would also support the development of innovative financial products tailored to the needs of high-net-worth individuals, further strengthening WealthCo’s market position.
- Operational Efficiency: The divestiture would simplify WealthCo’s corporate governance and align its organisational capabilities with its strategic vision. This alignment would facilitate the implementation of a robust operational framework, enhancing decision-making processes and improving overall efficiency.
By implementing these recommendations, WealthCo was expected to achieve substantial benefits, including increased operational efficiency, enhanced profitability, and maximised shareholder value. The strategic refocus on the private banking unit was projected to drive long-term growth and establish WealthCo as a leading player in the Libyan wealth management sector.
The Results
The implementation of the new strategy led to significant gains for WealthCo’s shareholders. The company stabilised its profitability and significantly outperformed the national growth index. In a remarkable achievement, WealthCo exceeded the Libya’s growth rate by over 17 percentage points within six months. This strategic refocus maximised shareholder value and positioned WealthCo as a leading player in the Libyan wealth management sector, setting the stage for sustained growth and long-term success.
*We take our clients’ confidentiality seriously; whilst names are changed, outcomes remain real.
