Process Refine Remove Reimagine

          March 15, 2019

          This article was first published on TABB Forum in March 2019.
          Much has been said in recent years, and quite rightly so, 

          that the “Golden Triangle” of People, Process and Technology should be a “Diamond” of People, Process, Technology and Data when considering organisational transformation. I would be the first to agree given data is the lifeblood that flows through processes, via technology used by people. However, what connects people, technology and data, are processes and without these connections you have a fragmented set of isolated actions and tasks. The strategy over the years has been to optimise these tasks and activities through automation, also known as straight through processing (STP). However, while STP often drives efficiency, it can also imbed and trap costs into the process. The new strategy therefore should be to eliminate steps in a process rather than simply automating them.

          Long distance relationships prove challenging The last 15 years have seen a trend in outsourcing functions to a “third party” in lower cost locations or offshoring to “captive operations” in lower cost locations. However, it has become clear that adding a new party to a process or remotely managing processes across multiple time zones has made them less efficient, imbedding costs despite the outlay for labour costs being lower at the outset. By introducing additional actors into the process, and by moving the work further away from the source, additional management complexities were introduced – not only making the process less efficient but as no one person/team owned nor understood the end-to-end process, optimisation became even more challenging.

          Then the focus shifted to “nearshoring”, where firms transferred operations to locations in the same or adjacent time zones to the source of the process. At first, there was an expectation that shifting operations from low cost locations would increase operating costs, but smaller, more skilled teams require fewer layers of management and being closer to the source provides the potential for more efficient management of the end-to-end process.

          The latest trend in sourcing is “rightshoring”, where firms leverage a mix of offshoring, nearshoring and outsourcing to seek to achieve the optimum level of costs and efficiencies. Rightshoring typically involves the outsourcing of simple processes while retaining complex processes at the local level. Regardless of the “shore” too many resources are allocated to too many low value processing steps.

          The trend for the future is to leverage a central infrastructure combined with best of breed talent to run standard processes as a managed service. 
          Not automatically the best idea
          There has been a great deal of hype around concepts such as robotic process engineering and machine learning, to the extent that some companies are tempted to implement these technologies without giving sufficient thought to why they need them. This is a classic case of looking for a problem to fit a solution and trapping costs in the process (no pun intended). To a large extent simply automating an existing manual process rather than eliminating or removing unnecessary steps in this process merely reinforces sub-standard processes and reduces workflow efficiency, adding to ‘run the bank’ costs.

          Data is the lifeblood To leverage artificial intelligence that provides actionable insight, it is crucial that an efficient process with accurate underlying data is in place. Firms need to change their processes to rely on data from credible authoritative golden sources; lineage between data sets so the same data is only stored once; versatility in storing data (cloud vs onsite) and finally have common data standards and governance to ensure integrity, reliability and usability. 
          Data has a key role to play in improving decision making, increasing profitability and fuelling the development of new products, whilst enabling lower margin business to remain profitable. Authoritative data and common data standards enable transformation and allows firms to achieve the improvement in cost/income and return-on-equity ratios the financial services industry so badly needs.

          “Refine, Remove and Re-imagine” processes Financial services organisations have recognised that the path to generating value does not lie in performing low quality, repetitive tasks. Eliminating unnecessary steps, standardising and centralising the remaining elements of the process will allow them to mutualise the costs and achieve the economies-of-scale. Low-end processing is now borrowing from the strategy already in place for core financial market infrastructures, leveraging the power of centralised infrastructure, managed by fewer, but highly skilled, resources – aka the managed service will be the future.

          The ongoing and increasingly fragmented regulatory environment, disjointed end-to-end processing and duplication of common, standard processes by all actors presents an operational conundrum: does the shift to centralised processing offer sufficient benefit to justify deviating from the status quo of individually performing common processes, persisting multiple infrastructures (both people and technology) and the constant replication and reconciliation of non-standard data? This is a decision requiring firms to re-imagine the end-to-end process flow. Are you?

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