The Upside of a Down Market

Market volatility has many investors wringing their hands, but not Andrea Orcel. The president of UBS Investment Bank is energised by the challenge — and poised to conquer it.

It’s been nearly 10 years since the financial crash, and yet the aftershocks of the disaster are still reverberating across the global markets. In fact, market volatility seems to be only worsening in the face of regulatory changes, low liquidity, geopolitical unrest and fiscal policy changes, among other factors.

As many investment banks scramble to cope with this new reality, UBS Investment Bank stands confident and hungry for the challenge.

“You can look at this as daunting dislocation, or you can look at it as a phenomenal opportunity,” says President Andrea Orcel MBA’90J. “Because when you get this kind of dislocation, there will be players that make the right decisions and quantum leap forward. And there are players that will get taken out.”

While it’s yet to be seen where UBS Investment Bank will fall on that spectrum, the odds are increasingly looking in its favour. In the last several years, to Orcel’s credit, the bank has undergone dramatic changes — slashing staff, refocusing its portfolio and revamping its culture — that leave it well positioned to compete in this unprecedented environment.

For example, Orcel has directed the investment bank to focus on its core strengths in equities and advisory, while funnelling its fixed-income business through an electronic venue to address balance-sheet and inventory challenges. This leaner, specialised approach to investment banking is a bit of an anomaly in the industry, which historically has lacked differentiation.

“Before, we all competed everywhere; we all did the same thing,” Orcel says. “What we are now seeing are banks increasingly focusing on those areas where they can excel and lead, and having to make tough decisions about where they don’t.” He believes this will produce a very different landscape to what we have seen historically.

From a management perspective, Orcel is also changing the way that teams are held accountable for their investment decisions. Going against the top-down hierarchical structure that’s typical of financial institutions, Orcel wants to empower managing directors and executive directors to make decisions independently and develop the tactics that will deliver on the strategy — while abiding by the overarching framework established by Orcel and his management committee. He believes this model incentivises people to “live and breathe the business, to feel fundamentally part of it and in turn responsible for its outcomes” and, in turn, mitigates financial risk.

“If I can get all of [the directors] to think as owners and entrepreneurs, then the navigation in this environment is going to be a lot more effective,” Orcel says. “I tell everyone, ‘UBS will give you a brand. UBS will give you a platform. UBS will unite you through a common ambition, shared strategy and strong culture. But we win or lose because of you as an individual and our partnership with each other.’”

One degree, 10 job offers
How does a person catapult to the top of an investment-banking powerhouse? In Orcel’s case, it starts with finding your passion — in a magazine article.

During his late teens, Italian-born Orcel went on holiday to the United States and came across an article about a topic he’d never heard of before: mergers and acquisitions. He immediately became enthralled with the subject.

“For an 18-year-old guy from Italy, it was inspiring,” he recalls. “It sounded fascinating — how you analyse a company, how you merge, how you create value.”

That interest remained strong as Orcel entered the University of Rome, prompting him to major in economics and embark on an intensive, six-month thesis study about M&A in hostile takeovers. Post-graduation, he joined Goldman Sachs to work on bonds, always with the goal of transitioning into M&A. But as one of his mentors at Goldman informed him, to make that kind of career move, Orcel would need to get his MBA.

Orcel chose INSEAD for several reasons. One, the MBA programme’s one-year format meant that Orcel could return to work quickly, an important factor given the speed of change in investment banking. Two, INSEAD’s rigorous academics would equip Orcel with the building blocks he needed to evolve his career focus. And three, the diversity of the school’s students and faculty would help prepare him to work anywhere in the world.

One benefit that Orcel didn’t expect was the close friendships that he formed with his working group, thanks to long nights of studying and debating case studies together. “What united us was wanting the same thing: to learn,” he says. “Everyone wanted to be there. Everyone wanted to evolve.”

And evolve he did: By graduation day, Orcel had a whopping 10 job offers — one of the highest figures in his class. He accepted a position with Boston Consulting Group, briefly serving as a strategy and restructuring consultant before finding his way back to the investment-banking world.

‘What’s the next challenge?’
In 1992, Orcel joined Merrill Lynch’s Global Financial Institutions Group and quickly rose through the ranks, eventually becoming executive chairman of Bank of America Merrill Lynch in 2009. In 2012, he was appointed head of UBS Investment Bank and executive board member of UBS AG. In 2014, accepted additional responsibility to serve as chief executive for UBS Limited and UBS AG London Branch.

The speed of that trajectory is of Orcel’s own design. “I’m not a cruise-control kind of person,” he explains. “I’m all in or all out. I do like to surpass myself or prove that we can do things that people say could not be done. In my career, all the time, it’s like, what’s the next step? What’s the next challenge? How do we achieve excellence in all that we do?”

There is one person, however, that can get Orcel to take his foot off the gas, albeit ever so slightly: Allegra, his 5-year-old daughter. Though Orcel is famous for putting in gruelling hours at the office, he carves out space in his calendar to spend time with Allegra, including walking her to school.

“It’s certainly not even close to what I would like it to be in terms of time,” Orcel says. “But I don’t let anything affect that time. When I commit, I always deliver.”

Editor’s note: UBS is actively recruiting and invites INSEAD students and alumni to consider career opportunities with the firm.

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