The retail banking sector is extremely competitive. Financial institutions must vie for new customers and leverage more business opportunities out of existing customers, while trying to improve shareholder appeal through increased profitability and better operational performance.
However, the many faceted aspects of banks make it difficult to obtain a clear understanding of key performance issues.
Performance management (PM) is being recognised as a key enabler to fast-track success within the financial sector, providing the means to obtain the answers to the three golden questions: how are we doing; why; and what should we be doing?
Laurence Trigwell, Cognos Senior Financial Services Industry director: EMEA and Asia Pacific, recently visited our shores to consult with the company's local banking clients. He discussed some of the challenges facing this sector and how PM and Cognos' proven industry blueprints can assist to drive performance and, ultimately, profitability.
One particular area of interest included challenges facing branches, driving the need for PM down to this level within banks.
Explains Trigwell: "Branch networks are notoriously expensive to maintain but are favoured by customers. Banks, therefore, need to maximise the performance of their branch networks and drive increased ROI. Top-down and branch-up planning is needed to align the branch network to achieve strategic objectives."
However, procedural and system challenges often mean that banks impose targets on their branch network. In so doing, they risk losing regional/branch insight and, perhaps more importantly, their ownership of the targets.
Continues Trigwell: "The branch plan needs to be shared collaboratively with product management, marketing, IT, risk, capital and finance teams. However, without a framework to support collaboration and alignment, it's most often the finance function that manually stitches together business plans and manually validates headline assumptions.
"Once the financial period starts, performance against plan needs to be shared appropriately and consistently throughout the branch network and divisional functions. However, banks all too often share inconsistent glimpses of performance information taken from multiple disconnected systems.
"This results in inconsistent information, manual processes and limited agility. This performance fog makes it seemingly impossible to understand which branches are most profitable, what makes them profitable and what actions and plans should be undertaken to optimise branch performance.
To address this and other challenges facing banks and financial institutions, Cognos has created PM blueprints, incorporating proven best practices and allowing businesses to implement PM easily and practically. Its PM blueprints for banking and financial industries incorporates a branch performance blueprint, assisting banks to meet and monitor performance, including targets, goals, operational needs and profitability, at a branch level. This blueprint also enables accurate branch network-wide planning, modelling and budgeting.
It creates a top-down, branch-up approach to revenue and expense planning, ensuring a cohesive strategy that eliminates dependence on segmented plans that are loosely linked by budgets. Anchored in Cognos' Planning, Cognos 8 BI suite and based on banking industry best practices, the branch performance blueprint extends planning processes beyond finance, down to the branch network level. This allows branch managers to drive profitability planning, analysis and reports at the product and customer segment levels.
However, the blueprints are not limited to the financial and banking sectors. Designed for different industries, they encompass the universal approach of incorporating proven and pre-defined policy, data and process models, allowing businesses to leverage the benefits of shorter time to implementation. These blueprints ultimately provide better planning and forecasting, and can be connected dynamically, ensuring strategic company goals and objectives are aligned.
"A performance management solution is central to overcoming the branch performance challenge and leveraging the intrinsic value in the branch network and customer base."
Concludes Trigwell: "PM is a key issue that local financial institutions need to consider. Cognos' PM blueprints can assist these organisations considerably, providing a successful shortcut to implementing PM based on proven and best practice methodologies. This ultimately provides the power of better decision-making, allowing businesses to predict outcomes that will steer the company into a more profitable and sustainable direction."
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