Bringing out the best – from resources to results

On the face of it, banking is about banking products, services and transactions. But there is more to it than that. Our aim is to make sure our stakeholders – be they investors, clients or employees – get positive long-term results out of their relationship with UBS. Ultimately, it is about making a difference by what we do – and how we do it.

 

Over the past six years we’ve brought a more traditional banking mentality to UBS, really focused on our clients, sustainable performance and excellence in everything we do. We’ve incentivized behaviors that underline the importance not only of what is achieved, but also how it’s achieved. And we’ve set targets that drive long-term success. To capture the opportunities ahead, we’ll continue to do just that.

Letter to Shareholders, UBS Annual Report 2017

Assessing our stakeholder's needs

One of the ways to understand if we are on the right track on our value-creation journey is through an annual materiality assessment, which is based on the Global Reporting Initiative (GRI). We reflect its results in a GRI-based materiality matrix.

We evaluate which topics are relevant for our stakeholders, and we make an assessment of their topics’ impact on our firm’s performance and development. As in previous years, the Corporate Culture and Responsibility Committee (CCRC) of our Board of Directors carefully reviewed this assessment in 2017.

So how does this process work? A group of experts collates stakeholder views on key topics pertaining to our firm’s financial, economic, social and environmental performance and feeds it into the materiality assessment. Participating experts form a Group-wide, cross-regional and cross-functional team and interact with various stakeholders every day. Key stakeholder groups are:

  • Shareholders
  • Clients
  • Employees
  • Governments and regulators
  • Society as a whole

In 2017, this process was supported by a major online survey, which was completed by nearly 1,600 stakeholders (with clients making up nearly half of this amount).

Once the topics that matter most are identified (as well as those that are perceived to be less significant), we summarize the results in our materiality matrix. The matrix shows the current state of play, and also indicates how the topics and stakeholder priorities may develop in the future.

The things that matter

This year’s most material topics were fairly consistent with last year’s, which shows that we have a robust method for identifying the right topics, in other words, those that have an impact on long-term value creation. Several topics are considered material, the top five being:

  • Client protection
  • Combating financial crime
  • Conduct and culture
  • Financial stability and resilience
  • Digital innovation and cyber security

Our goal of seeking out the views of stakeholders on what they regard as relevant in the long term was also evidenced by their responses to a question on the United Nations’ (UN) Sustainable Development Goals (SDGs) that we included in the survey for the first time. The stakeholders showed a particular interest in UBS working for quality education (SDG 4), climate action (SDG 13), and clean water and sanitation (SDG 6).

The SDGs are a set of 17 non-legally binding goals, which aim to end poverty, protect the planet, and ensure prosperity for all by 2030, as part of a global sustainable development agenda. Stakeholders were asked which SDGs UBS should contribute most to.

Capital strength

Financial stability and resilience continues to retain a high position on the agenda across the entire range of stakeholders, not only our clients. We view this as a confirmation that our strategy is giving our stakeholders, notably our clients and shareholders, the confidence that our strategy is working under a variety of market conditions.

Capital strength is the foundation of our strategy. We are well positioned to meet the fully applied Swiss too big to fail capital and total loss-absorbing capacity requirements when they become effective on 1 January 2020.    Capital strength

We’re no longer in restructuring mode, so efficiency has moved from being a program to how we run the bank day to day.

Letter to Shareholders, UBS Annual Report 2017

The right kind of behavior

As a global bank we are responsible to our clients: we must treat them fairly, always act with integrity and earn and retain their trust. Conduct risk is the risk that the firm’s or employees’ conduct could unfairly affect clients and distort competition and the integrity of the markets.

We have therefore strengthened conduct risk management throughout the organization to continuously improve our understanding of how our activities can affect our clients and integrate these factors into our day-to-day decision-making.    Risk management Integrity

One example of how we combine our three keys to success to achieve a good risk culture is our Wealth Management Risk Culture program. Training events are organized across the division to discuss real-life situations and best practices. We also created a risk culture award competition for individuals and for teams to highlight the right behavior and show what is expected.

The program also includes temporary job rotations allowing risk managers to put themselves into the shoes of a client advisor and vice versa. This improves our employees’ understanding of the challenges other businesses face and results in better cross-sector communication and collaboration.  Collaboration

The right kind of product and people

A key component of our client focus Principle is the question of product suitability. This is about clients’ quite natural expectation to be offered only products that are appropriate and that they understand.    Client focus

That’s why our wealth management business and Personal & Corporate Banking have put in place a suitability framework. This allows us to develop an investor profile for mandate and advisory clients from which we create a corresponding invest- ment strategy for the client portfolio. In addition, advisory platforms and tools help define products according to their risk characteristics and support both clients and their advisors in assessing the impact of investment products and services.

A skilled workforce to execute our business strategy is crucial to our success. We provide learning and development opportunities to all our employees to support them in enhancing their knowledge and skills at all ages and career stages.

Our key talent programs prepare high-potential employees for line management or senior leadership roles. Training for ­client-facing staff in 2017 included a Master in Wealth Man­agement degree program and a rigorous training program for aspiring financial advisors in the US.    Excellence

Money well spent

Innovation and digitalization are key priorities and we invest heavily in those areas. Technology is transforming the way banks operate and is expected to remain the key change driver for the financial industry in the years to come. While IT spend used to be considered a means to make banks more efficient, it has now become an imperative to stay relevant in the face of competition from other banks as well as non-traditional financial services providers. Banks are increasingly leveraging digital technology to provide a more compelling client experience. Additionally, client advisors benefit from integrated IT solutions that reduce the time required for administrative tasks and increase capacity for value-adding activities for clients and for UBS. We believe that technology-­driven changes in bank operations will allow efficiency gains through automation. Technologies such as artificial intelligence and robotics can be used to automate selected back- and middle-office processes, thus reducing error rates and increasing efficiency.

To shape our digital future, we intend to keep investing at least 10% of the Group’s revenues in technology, adding around CHF 1 billion in tech spend over the next three years. We’ll focus these investments on enhancing and differentiating the client experience and product excellence UBS offers, while also accelerating effectiveness and efficiency.    Efficiency and effectiveness

What our BDs are doing

Global Wealth Management continues to invest in our digital capabilities to offer clients a combination of market-leading investment advice tailored to their personal goals and innovative digital service solutions. With our One Wealth Management Platform (1WMP) we are standardizing our processes and unifying the way we develop new services by integrating our historically fragmented infrastructure onto one platform. The platform enables us to provide a better, more consistent client experience and delivery of our investment products and services to better assist our clients to protect and grow their wealth.

The strategy of Personal & Corporate focuses on promoting profitable growth while continuously improving our banking services for clients within Switzerland. To achieve this, we have launched Client Experience 2020, our strategic digitalization program, which aims to strengthen our position as the leading universal bank in Switzerland and enhance our digital leadership position.

Our IB Research offers clients key insights on securities in major financial markets around the globe. Together with UBS Evidence Lab, UBS research analysts refine investor questions into testable propositions and apply various primary research methods, such as quantitative market research, digital footprint analysis, geospatial analysis or data science.

In Asset Management we are expanding our B2B fund platform solutions offering for wholesale clients, including UBS Partner, a new and innovative technology solution set to transform bank advisory services.

In our Corporate Center, we seek to increase value by leveraging common capabilities and creating centralized functions. In 2017, we successfully completed the transfer of substantially all shared services functions to our separate Group service companies, which, in addition to meeting regulatory requirements, allows us to further strengthen our approach to service management while remaining efficient in the way we operate. In our technology landscape, we continue to upgrade our infrastructure, simplify our portfolio of applications and deliver digital innovation, such as artificial intelligence.

Cyber security is at the forefront of operational resilience, and we continue to invest in preemptive and detective measures to defend against evolving and highly sophisticated attacks. We have set our cyber security objectives in line with prevailing international standards and our investment priorities focus on behaviors, readiness to address a cyberattack, data protection, and application and infrastructure security. We have implemented cyber recovery playbooks for various scenarios, as well as regular cyber crisis exercises up to the Group Executive Board and Board of Directors level.