Approach & Reporting Challenges & Responses
Credit Suisse was faced with numerous challenges in 2016.
Challenge: How has Credit Suisse responded to the impacts of the UK referendum on continued EU membership?
Response: Markets were particularly challenging towards the end of the second quarter of 2016 in connection with the outcome of the UK referendum on EU membership. We implemented a number of precautionary measures to ensure operational and infrastructure stability leading up to and following the referendum. From an exposure, earnings and liquidity perspective, the overall impact of the referendum on Credit Suisse to date has been successfully managed. We experienced substantial trading volumes in the days following the result of the referendum. However, we suffered no significant operational issues due to our active management of these volume increases. In addition, the demand for the expertise of a global financial institution is even greater in times such as this – providing us with an opportunity to stay close to our clients and to help them carefully navigate the post-UK referendum environment. There were no immediate implications from the result of the UK referendum for Credit Suisse, its employees or its clients. We remain committed to our longstanding presence in London. We already provide a comprehensive range of services to our clients through both our London operations and a number of different subsidiaries and branches across Continental Europe. This provides us with the flexibility to respond to potential changes in the UK and EU financial services industry in the future, as we develop our plans to address the impact of the UK's withdrawal from the EU. These plans are focused on continuity of client service.
Challenge: Is Credit Suisse doing enough to capture the potential of digitalization while executing on its cost reduction program?
Response: Digitalization is already fundamentally altering our industry and is therefore an important topic for Credit Suisse. For example, the evolving digital landscape is one of several factors transforming the way clients interact with their bank. We recognize that innovative concepts are essential to ensure we can continue to offer clients excellent products and services in the future via the channels they prefer. At the same time, we recognize the potential of digitalization to drive cost efficiencies across our organization and to support labor-intensive processes in areas such as Compliance. One example is the use of specialist software developed by Signac – a joint venture between Credit Suisse and Palantir – to analyze vast quantities of trading data in order to identify any signs of irregular conduct by employees in the area of trading. In the future, we expect the use of digital technology will help the bank to address reputational and conduct risks already at an early stage.
Challenge: In 2015, the UN Climate Change Conference (COP21) in Paris reached an agreement to limit the rise in global temperature to well below 2° Celsius above pre-industrial levels. This agreement entered into force in 2016. "Climate Action" is also among the UN's 17 Sustainable Development Goals. How does Credit Suisse address the challenge of climate change in its risk management processes?
Response: Our principles and our approach to climate protection are set out in our "Statement on Climate Change", underscoring our commitment to playing our part in addressing this global challenge through our role as a financial intermediary. When managing transaction-related risks, climate aspects are examined using our Reputational Risk Review Process. Based on our sector policies and guidelines, we evaluate factors such as a company's CO2 footprint or its energy efficiency targets. In addition, some of our policies and guidelines require clients to have a plan in place to deal with climate change risks. In 2016, we further developed our policy on mining and our guidelines on power generation. Furthermore, we piloted an approach to identify and understand portfolio-level climate policy risks, and we participated in a workshop on environmental risk assessment hosted by the Swiss government as a contribution to the G20 Green Finance Study Group.
Challenge: Products and services that incorporate economic, environmental and social aspects are becoming increasingly important, and there is still significant potential for further investments in this field. What steps does Credit Suisse undertake to promote sustainable investing?
Response: Public awareness, education and training are key to promoting and further developing the sustainable investment sector. As a financial institution that is committed to sustainable investment, Credit Suisse is a member of various industry networks and initiatives, and we collaborate closely with a number of stakeholders to foster a dialogue among investment professionals and advisors. In 2016, we participated in a working group managed by Swiss Sustainable Finance in order to develop learning opportunities and tools for client advisors to better integrate sustainable finance into their work. Furthermore, we co-founded the Coalition for Private Investment in Conservation (CPIC), which aims to contribute to the preservation of the world's most important ecosystems through new return-oriented investment products.
Challenge: The low or negative interest rate environment, digitalization, increasing regulation and political events are key factors shaping the development and competitiveness of financial centers worldwide. What contribution did Credit Suisse make to the debate about these different topics in 2016?
Response: We engaged in a constructive dialogue with policy-makers, standard-setting bodies, regulators, trade associations and other relevant stakeholders during the year. As part of our contribution to discussions about key trends affecting our industry, we published the third edition of our "Swiss Financial Center" study in 2016. It examines trends including the growth of wealth in Asian countries and the impact of negative interest rates and it identifies success factors for the Swiss financial center. We also participated in discussions about the finalization of the Basel III framework and the impact that the outcome of the UK referendum on continued EU membership may have on the UK, Swiss and other financial centers. In Switzerland in particular, we addressed topics including appropriate financial market regulation, favorable framework conditions and the relationship between Switzerland and the EU. Another area of focus was digitalization and fintech: We published a white paper "RegTech: How a New Wave of Technologies is Transforming the Regulatory and Compliance Landscape for Financial Institutions".
Challenge: How can we strengthen collaboration between all our public and private stakeholders to achieve sustainable impact and produce positive results for society, clients and the bank?
Response: Throughout 2016, we included clients, partners, industry bodies and local authorities in new projects aimed at bringing more social and financial capital to the organizations we support for initiatives addressing important issues. In addition to funding our global initiatives, the Credit Suisse Foundation also supports activities in communities across Switzerland through the Jubilee Fund and responds to natural disasters globally by providing financial support for immediate and longer-term assistance to affected regions. Moreover, our Micro-Donations program enables clients and employees to make small direct online donations to a select number of our partners in Switzerland. We also continued our partnerships with the Asian Development Bank and the Swiss Agency for Development Collaboration (SDC) in the impact investing and microfinance sectors.
Challenge: Make responsible use of resources and ensure that our work is performed by employees in the most appropriate locations. What impact does this have on the structure of the company?
Response: In view of the ongoing transformation of the financial services industry, as well as low interest rates and rising costs, we transferred additional services from regional headquarters to our captive Business Delivery Centers (BDCs) around the world in 2016. This meant that we reduced the number of positions in regional headquarters while at the same time moving functions and services to our BDCs, which now account for 18 percent of our workforce. Targeted training to further enhance the expertise and management skills of our employees provides increased career development opportunities and helps us to attract and retain the best talent for our BDCs, actively strengthening their role by assigning them functions with greater responsibility.
Challenge: The preservation of the world's natural habitats is a vital challenge, and one of the 17 Sustainable Development Goals adopted by the UN in 2015 is to protect, restore and promote the sustainable use of terrestrial ecosystems. What steps is Credit Suisse taking to tackle this challenge?
Response: Credit Suisse addresses the issue of environmental sustainability and sustainable land use in a variety of ways. Recognizing the need for capital in conserving ecosystems, we have continuously expanded our activities in the area of conservation finance. In order to consider biodiversity-related issues in our risk management processes, we have incorporated this topic into our sector-specific policies and guidelines. Our policy requirements for the forestry and agribusiness industry are aligned with sustainability initiatives for relevant sectors, including the standards of the Roundtable on Sustainable Palm Oil (RSPO) and the Forest Stewardship Council (FSC). To promote good forestry and agribusiness practices and to discourage net forest conversion, our policies include restrictions on financing activities related to High Conservation Value Forests, provisions for the particular scrutiny of peatland operations, and the prohibition of financial services for operations in protected areas such as UNESCO World Heritage sites. In that context, we are also a member of the RSPO. In addition, we contributed to sustainable finance workshops initiated by the Indonesian Financial Services Authority and WWF in 2016. We continue to engage with clients and collaborative NGOs on key environmental and social issues. Furthermore, Credit Suisse maintains a dialogue with key stakeholders on the topic of conservation finance and the protection of natural habitats, for example through our 2016 workshop in London with banks and representatives from WWF.