Better operating models for financial institutions

Every operations executive faces the dilemma of supporting with rising business volumes without allowing parallel rise in costs. Some of the most common methodologies and practices used to manage costs are centralized shared services, automating transactions & outsourcing. However few executives consider the value of evaluating the entire operating model.

Below I will tell you how some institutions are beginning to reap enormous benefits by improving the entire operating model (the way people, process and technology interact to deliver a common objective) than just concentrating on part of the operating model.

By “operating model,” we mean the way people, technology, and processes interact to deliver a common objective, as well as where these resources are located and who owns them.

In today's markets the comsumers ahve become more mature and the companies find itdifficult to innovate at the pace at which people are maturing, so they need to find alternative ways to do so. Few such could be;

1. Global sourcing. Foremost among these trends is the rising quality and accessibility of resources in low-cost locations, combined with inexpensive telecom bandwidth for managing operations remotely. Financial industries have led the way in tapping global labor markets to run their back-office operations, and now they can exploit their experience of coordinating these activities across remote locations to offshore even more advanced operations.
2. Technology. The financial sector is also ahead of others in adopting IT systems for the rapid and accurate capture of data, inexpensive information storage, and high processing capacity and performance, as well as the ability to share and process data across multiple locations.
3. Process improvement. A third enabling factor is the financial sector’s adoption of process-improvement methodologies, including lean techniques and Six Sigma, that got their start in industrial settings but are now increasingly applied to service organizations. A core principle of these techniques is to change mind-sets by teaching employees how to improve a process constantly. Once trained, these employees can become effective internal change agents, spurring transformation across the organization.

But the question is, when to start this process, well these points will help you to judge, when you have to go through,

1. Ambitious growth objectives. Many companies undertake the redesign of end-to-end processes as an essential component of achieving ambitious growth objectives. Often, this scale of growth cannot be realized profitably without significantly rethinking operations and technology in order to keep unit costs down.
2. Competitive threats. In some instances, a threat from new, more nimble entrants forces established players to rethink their operations and IT fundamentally to keep pace. When incremental changes are not enough to protect market share, a more comprehensive redesign will be required.
3. Change in focus and positioning. In other cases, companies may be launching new products or services, extending existing services, or entering new markets. Without a redesign, existing processes may not be able to cope with the additional demands.
4. The complexity of the required change. Companies sometimes find that applying only one or two improvement techniques doesn’t go far enough: a more comprehensive program of change (redesigning the entire operating model) is required.

In the end it could be said that, a successful transformation program will provide for flexibility as the organization learns. Most banks will launch their initiatives before the end state operating model is fully fleshed out. So to gain quick wins and build momentum the program must be flexible to manoeuvre unanticipated roadblocks. The authors conclude saying that each organization will have to manage change which is acceptable to the leadership. In many cases skills, technologies and personnel will have to be bought in from the outside. In all cases the organization will have to clearly articulate the need for broad change, build momentum for the program and remain committed till completion.