SOURCE: Rothman Research

Rothman Research

March 16, 2010 09:11 ET

Financial Titans 'Tweaked' Business Models to Buoy Recession

JOHANNESBURG, SOUTH AFRICA--(Marketwire - March 16, 2010) - -- Analysts from the world over agree that today's economic instability and resulting write-downs proved the most serious threat to the financial services organizations, and is by far the most prolonged crisis since the 1930s. The downturn continues to contaminate more sections of the markets, driving most companies to re-evaluate their strategic moves or risk bankruptcy. Equity values have become more volatile. Financial products and services are falling back in its demand amid the accelerating slowdown in the global economy leading to a dip in the business and consumer confidence.

Organizations have to show their thorough understanding and control on risk factors to rebuild investor confidence to attract funding and to stabilize their businesses for the short-term. Looking forward, many organizations have to reinvent their business models linked with their performance objectives as part of a more stable long-term approach to value creation. Looking at the demand side, the current market environment could throng up valuable opportunities for growth. The Stronger capitalized groups in the sector are in a better position to pursue the ambitious roads for acquisition and business development strategies. Emerging markets and alternative investment sectors continue to offer significant potential for expansion. team of researchers dissected Goldman Sachs Group Inc. (NYSE: GS) and Nasdaq OMX Group Inc. (NASDAQ: NDAQ) to evaluate the strategies these companies are using to buoy the recession.

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"Many companies need to transform their business models and associated performance objectives and incentives as part of a more sustainable long-term approach to value creation." says Jack Benassi, head analyst at, "Decisions have to be made. Although private investors were initially hesitant to partner with the government, the various plans seem to be gaining some traction, notably with the Term Asset-Backed Securities Loan Facility (TALF) -- the plan aimed at restoring the securitization market. The plans are also gaining investor attention and participation, which should help continue to thaw the credit markets."

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Despite having a reputation for being one of the savviest business dealers on Wall Street, Goldman Sachs Group Inc. had to adapt to certain "unorthodox" business models to stay afloat. The credit markets - through the company's credit default swap spreads -- and the equity markets -- through the stock price -- have voiced concerns about the viability of the firm's business model. In response, Goldman -- formerly the largest pure investment bank in terms of net income, balance sheet, and market capitalization -- opted to change itself into one of the largest bank holding companies. The high-risk, high-return days may be in the past for this firm, but a future of more moderate risk and above-average returns looks like a decent trade-off.

Nasdaq OMX Group Inc. (NDAQ) also opted for a slight change in their business model. NASDAQ recent announcement about the purchase of the business of North American Energy Credit and Clearing Corp. (NECC), a Chicago-based clearinghouse for the over the counter (OTC) power and gas markets sparked interests in the company's enduring acquisitions despite a failing economy. The move is part of Nasdaq OMX's longer-term strategy to expand its OTC commodities business and it's clearing efforts.

The global economic crunch managed to humble even the most stalwart of financial titans. With a revised business trajectory and thorough understanding of the economy and the recession, these major players managed to stay afloat and even outgrow the recession.

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