Sunday, April 14, 2024

McKinsey fires investment bank researchers after policy violations

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McKinsey fired or suspended several members of its investment banking research team as it investigated violations of its policies, an embarrassing blow to the consulting giant’s nascent attempt to become a dominant provider of information on the industry. industry on Wall Street.

Partners informed clients last week that the team at CIB Insights, which sells data to corporate and investment banks, is halting work on their projects and has since removed references to the unit from its website. . A person familiar with the case said some team members were made redundant while others were put on administrative leave and the unit’s work was suspended.

“We have decided to suspend production of a banking analytics product (known as CIB Insights) pending a review of various personnel issues. Our review is ongoing and we are taking appropriate action, ”a McKinsey spokesperson said. He declined to comment on the nature of any alleged violation of the policy.

One of the largest management consulting firms in the world, McKinsey created CIB Insights in 2019 to provide analysis to large financial services clients such as Goldman Sachs and Deutsche Bank on their advisory and trading activities.

McKinsey hoped to build the dominant industry platform by aggressively poaching staff at Coalition, a small company whose rankings are the traditional yardstick used by many investment banks in external presentations and internal reviews of their companies.

CIB Insights quickly saw some success, attracting several European banking clients, but only had six active clients when its work was halted. In recent weeks, customers have only been told the service has been “on hold” pending an internal investigation, three people familiar with the matter told the Financial Times.

A customer said he was told the investigation was into unspecified violations. “Despite the fact that we insisted on getting more details on the ‘violations’, we were not told anything but that we will be informed in due time if the violations impact us,” the client said.

A second customer said they had not received information on the nature of the investigation. A person familiar with the matter said McKinsey could not find any evidence that employees misused important non-public information, compromised bank data security, or provided inaccurate information to customers.

The flip side of McKinsey’s ambitions comes after a series of blows to the reputation of the 30,000-person company. Last week, the FT reported that it was close to a deal to pay hundreds of millions of dollars to settle claims by U.S. states over the advice it gave to drug companies at the center of the epidemic of opioids in the country.

Last December he agreed to reimburse tens of millions of dollars in charges to South Africa for alleged irregularities in some of its contracts in the country, and in 2019 it hit a $ 15 million settlement with the US Department of Justice to resolve allegations that it failed to properly disclose conflicts of interest in bankruptcy cases.

Kevin Sneader, who was appointed global managing partner in 2018, has tried to strengthen its legal and governance teams and enforce its policies.

The suspension of CIB Insights represents a setback to its strategy of adding more data analytics to its core consulting offering.

However, CIB Insights is unlikely to have been a significant source of revenue for the multibillion-dollar consulting firm. Coalition, which works with more than 30 global commercial and investment banks, achieved a turnover of just £ 35million in 2019 and a net profit of £ 11.4million, according to accounts filed with by Companies House.

Recent job postings described CIB Insights as a team of McKinsey partners, data scientists, analysts and banking specialists in New York, London and Gurgaon in India.

Among the “global benchmarking solutions” it offered to customers were “granular” details on costs, revenues, capital and workforce in the industry, drawn in part from data provided by companies. customers themselves.

“The combination of the data made available to us and our in-depth expertise with major financial institutions allows us to provide unparalleled information on the allocation of resources within their financial institution”, a post a d claims.

Additional reporting by Arash Massoudi in London


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