Performance management in focus

As retail banking gets more complex and firms race to meet compliance legislation, Laurence Trigwell, Cognos, writes about the impact of performance management on profitability.

It is hard enough to service retail banking customers through a complex web of delivery channels, with the most appropriate and profitable product mix and with the most efficient processes. Add to all this the complex array of regulatory legislation and governance best practices across multiple constituencies (geographical and industry bodies) and the challenge seems almost impossible.

To try to address these challenges and gain competitive advantage, technology investment amongst retail banks has been significant. The more pressing operational challenges have meant that investment has largely been in systems at the transactional level. Business challenges are often answered by taking a holistic approach – typically across the functional, geographic and technological boundaries that have arisen. Perhaps this is why ‘making better use of information’ was one of the three growth areas in a recent survey of IT spend in UK newspaper the Financial Times. While we have always had data at our fingertips, now it’s how we analyse that data to identify trends, make predictions and track performance, that is all-important.

Pragmatically, of course, the CIO and other senior managers need to prioritise and focus on those areas able to unlock the greatest performance gains. Accurately identifying areas of under-performance, planning performance enhancement and measuring achievement against those goals without a performance environment or culture, all raises their own challenges. However, looking at the competitive landscape, common targets for retail financial services firms seem to be emerging.

Corporate governance and compliance

The requirement for deeper levels of performance visibility (internally and to external stakeholders) engendered by regulations such as the Sarbanes-Oxley Act and Basel II, has led to fundamental changes across all businesses – not just banks. The companies that have had most success are those that have taken on board the true meaning of ‘visibility’ and used it as an opportunity to change the mindset and processes within the business, rather than seeing it as a box-ticking exercise.

For example, achieving a single aggregated and consistent understanding of enterprise risk is difficult to achieve when starting with multiple transactional level risk management systems. As a common performance framework is required, for capturing and deploying that risk information to appropriate staff throughout the organisation that supplementing the transactional level risk detail for day-to-day operation management.

Channel effectiveness

Demanding retail banking customers expect high levels of accessibility across multiple channels and service with relatively low charges. Retaining the most valuable customers as cost effectively as possible requires complex planning of channel investment programmes, accurate measurement of channel effectiveness against performance targets and, perhaps even more compelling, the ability to understand current performance through those channels to effect the most appropriate change for the subsequent periods.

It is also extremely important to optimise the value of the bank’s customer base by targeting the appropriate product(s) to the right customer segments by marketing and distributing through the right channel. Savvy customers, lower switching barriers and the availability of specialist mono-line providers make customer loyalty difficult to achieve – even more so when customer information is stored in product silos. To that end, setting realistic but challenging sales performance targets, funding those plans with effective (and measured) marketing plans and understanding and learning from these activities is perhaps one of the most important mechanisms to unlock customer base potential.

Data use

Some might suggest that replacing incumbent banking systems is the answer, but in such a fast-moving and competitive market, it isn’t an option. The issue is not the shortage of data. The challenge is turning it into inform-ation that allows senior management to make more informed decisions. Using enterprise planning, balanced scorecarding and business intelligence as a performance management environment can achieve this.

Cognos Ltd has working with more than 1000 financial services organisations in Europe and the USA, including Deutsche Bank, Citigroup, UBS and Prudential, creating an understanding of the business issues they face and the complex performance requirements they have to meet the challenge of profitability.

Further information

Cognos Ltd
Tel: +44 1344 707654
Fax: +44 1344 485124
Email: sally.hanson@cognos.com
Website: www.cognos.com