The Need to Update Operating Models In Global Banking

By M. Isi Eromosele

Banks will have to change their operating models as a strategy and without an effective and relevant means of execution that will be sub-optimal or fail. Both front and back office operations need to be fit for purpose.

Branches, contact centers, corporate banking offices, online banking portals and the staff, processes and systems behind them that worked well for one set of business objectives are unlikely to be fully suited to a new set.

Similarly, back office functions which include credit checking, research, analysis, marketing, human resources, finance and so on that were designed to support yesterday’s business activities will not be wholesomely right for tomorrow’s.

Front and back office operations therefore need to be modernized to make them more relevant and effective. As such, banks need to:

• Review all operational processes and technology systems and software
• Simplify and integrate organizational structures
• Improve business performance management
• Enhance customer service
• Increase the speed and effectiveness of product manufacture
• Widen and deepen distribution channels
• Re-evaluate outsourcing policies

Banks have been using specific applications to address some of the above issues, but the costs of integrating and maintaining these applications is high and there is often no business benefit. The applications often require specialized skills and more than one support group to keep them functional and updated.

Review All Operational And Technology Systems

We live in a digital age, but many processes are still carried out manually. This needs to change as many processes as possible need to be automated and standardized, with straight-through-processing being the objective. Processes also need to be made more customer-centric and less product-centric.

Identifying which operations are in need of modernization can be a lengthy task, but an analysis of complaints from the business lines and central function units about delays, errors and shortcomings will highlight which processes require immediate attention.

All business units need the right technology support, but expense is an inhibitor and market and regulatory changes are additional complicating factors. Banks that have undergone mergers have particular problems in integrating disparate systems into one “ready-for-the-future” system.

There are two key stages in technology modernization: the first is to integrate the legacy systems and software; the second is to devise new technology architectures, buy in or create new software and embrace innovations such as cloud computing.

Simplify And Integrate Organizational Structures

As banks evolve and grow, they do so as a group of separate business units and operating companies, with each unit or company collecting, analyzing and using their own data. This separate development leads to inefficiency.

Organizational and management structures therefore need to be reviewed, simplified and integrated, because to do so will improve operational efficiency. This simplification process may involve selling or merging subsidiary companies, especially where a bank has grown through acquiring other banks.

Improve Business Performance Management

Business Performance Management (BPM) is a well tested methodology for managing and measuring the performance of executives. Its objective is to optimize the efficiency of business units, staff, finance, equipment and materials.

It does this by collecting and analyzing data from various sources to improve business processes such as planning, forecasting and budgeting and then measures any increase in efficiency using a set of key performance indicators (KPIs).

The problem is that many BPM frameworks have been in place for years. They have become hard-wired into technology solutions, which limit their flexibility to respond to changing expectations.

Banks therefore need to review and improve their BPM frameworks as part of their modernization project and separate their processes from the application codes. This will make the frameworks more relevant to the business, and help banks increase their competitiveness and reduce their operating costs.

Enhance Customer Service

Providing the best possible customer service is an obvious component of any strategy, in all banking sectors such as retail, investment, corporate, wealth management and so on, but the mechanics of how that is actually achieved are not always so obvious.

If you are a retail banker your run your bank as if it were a shop. Retail evolved to give customers what they want. Banks, with some exceptions, have not. Consumers want to be able to shop when, where and how they choose: in store, by phone or online from early

till late; seven days a week. Banks need to accommodate this customer desire.

Investment banks also need to consider the overall client experience, across all aspects of service delivery and all stages of the client lifecycle such as sales, service and relationship management.

Rich client management information is required at every stage of the client lifecycle and at every stage of the sales process. A single view of the customer is the goal to aim for across all lines of business. When a bank has such a view, it is able to offer better service and relationship-based pricing that takes account of the customer’s overall value to the bank.

Widen And Deepen Distribution Channels

When new delivery channels were created to complement branches, first ATMs, then telephone banking, online banking, self-service kiosks and mobile banking, many believed that branches were in terminal decline around the world.

Four or five years ago that decline was largely halted and in many cases reversed as banks realized the value of face-to-face contact and a high profile brand presence.

Today, the typical delivery model is multi-channel. All channels are valued and used as part of an integrated distribution strategy.

This approach is not without its operational difficulties. The multi-product, multi-channel environment of retail banks today presents a number of challenges. The first is an unfocused approach to delivering products and services to the market.

Banks can easily fall into the 3E trap of trying to be Everything to Everyone, Everywhere. Another challenge is the difficulty of integrating channels so that customers can enjoy a seamless experience as they move from channel to channel.

These challenges can be overcome, though, if the channels incorporate customer segmentation and profiling, so that the right product is directed to the right customer through the right channel.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

Copyright Control © 2012 Oseme Group