As important as the front office is the workings of the middle office when it comes to investment banks. The larger investment banks need all three back office. They need the front office, the middle office, and the back office in order to function properly. If one of these office are experiencing failures or difficulties, it could result in many problems for the investment firm and the clients. The bank requires that the middle office completes their tasks so that the front office can work more smoothly and accurately. The middle office deals with internal corporate strategy, internal controls, and treasury management. As one could see, the middle office handles the vital workings of the bank.
Treasury management is one of the most valued department of a bank. As a matter of fact, most banks have a treasury management department for the support of the needs of the client. One task that treasury management is responsible for is the management of what the investment bank holds. This is to make sure that the financial, operational and reputation risk of the company is handled through the management of the liquidity of the firm. For larger firms, treasury management deals with trading in currencies, financial risk management, financial derivatives, and bonds.
Internal control deals with the effectiveness and efficiency of the handling of the objectives of an organization. It also makes sure that the investment bank provides financial reporting that is reliable. Internal control must make sure that the bank complies with regulations, laws, and policies. After all, if a financial firm is breaking the law, it can cause a lot of problems for the firm and the clients that do business with the firm. Internal control is responsible for preventing those problems from occurring. It is also responsible for preventing fraudulent activity on the part of the bank and the client.
Internal corporate strategy deals with the profit strategy and the management of the firm. After all, without a good strategy, the ability to bring in the profits is limited. If a firm just blindly conducts business, it is more likely to lose money. This department handles the part of corporate strategy in order to make sure that the corporation not only has a strategy, but it is a solid strategy that has a huge chance of bringing in the profits. While it is very responsible for the company bringing in the profits, it doesn’t generate any revenue of its own.
The activities of the middle office are very important or large investment banks. This is why Co-founder and president of Highland Capital, James Dondero has a middle office set up to handle the business of making sure that the business is running in a manner that is legitimate and fair. With his experience in finances, he can pick up when something is off in the handling of business in investment banking. He wants to make sure that his bank is operating in a fair and responsible manner. Highland Capital is a good investment bank to get involved in for people interested in this activity.