Roger Trapp reports on innovations and risks in financial services
One thing that is going to confront graduates entering the world of finance more than any other is change. Now, just about every industry claims that it is changing at an unprecedented rate. But there can be no doubt that the world of pin-stripe suits and bowler hats that their fathers came across has been replaced by computer screens and other mainfestations of high technology.

The stable situation that existed in financial services until comparatively recently was characterised by a bank executive quoted in the recently- published book Igniting Innovation as the "3-6-3 rule". This translated as "pay 3 per cent for deposit money, lend it out at 6 per cent and be on the golf course by 3pm".

Any graduate expecting a career in banking or a related business to be as simple as that today is going to be in for a rude awakening. Rising expectations on the part of customers and increasing competition are putting tremendous pressure on financial services organisations. The spate of mergers and takeovers is one response to this situation. Another is to seek to be innovative.

The arrival of operations such as Direct Line demonstrates how the market can be fundamentally altered by one good idea. But the recent slide in that business's results as rivals have sought a piece of the action also shows that it is impossible to sit back and relax.

One banking organisation that - after a rocky period at the end of the 1980s - has established a reputation for innovation is Citibank, the US financial services giant headed by engineering graduate John Reed. He claims the organisation's hallmark is "our energy and innovation". Consequently, it seeks recruits who have the imagination and the drive to keep the bank one step ahead of the competition. That is the sort of thing all businesses are liable to say. But the delivery of it - particularly in the financial services sector - is rather more tricky.

Another new book, Market Unbound, by McKinsey & Company consultants Lowell Bryan and Diana Farrell, argues that the globalisation of capital - which is one of the drivers of the immense changes everybody is talking about - will create many opportunities for companies of all shapes and sizes. Work being done by Andersen Consulting also suggests that - despite the growth of financial behemoths - career opportunities in finance will not be confined to big-name organisations. There will even probably be many niches for single-person operations.

But this will not reduce the pressure. Bryan and Farrell imply that advances in technology make isolation of risk - a central part of financial services - much easier. But that does not mean there will be no failures.

As Kari Lampikoski and Jack Emden point out in Igniting Innovation, "The continuous change in financial markets is a kind of two-edged sword: it constantly brings new challenges and opportunities but it also causes major risks to financial institutions."