Bluerock Review : February 2002

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Bluerock Review - February 2002 (225k)
Account Aggregation is the future. " Seeing the wood from the trees. " Business Process Outsourcing: A cure for all known problems?
Keywords: account aggregation, wealth management, risk assessment, business process outsourcing, BPO


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BUSINESS PROCESS OUTSOURCING: A CURE FOR ALL KNOWN PROBLEMS? Despite Business Process Outsourcing being banded as the answer to all known problems, Chris Beer outlines why outsourcing is not the only answer. Business process outsourcing has been accepted by management as an effective tool with which to manage a business. It has, in certain industries, been widely accepted as the only way to run a business. With today's pressures on costs and efficiencies there is greater pressure on senior management to explore outsourcing as an option. However, the virtues of outsourcing are often touted around by suppliers of such services making it difficult for financial services organisations to get a balanced view. It is our experience that outsourcing is not the panacea to all problems and what might be right for one part of a business will be wrong for another. Management need to think in terms of Sourcing. Sourcing can be broken down into four categories: - Retain in-house; the functions and processes making incremental efficiency improvements. - Build a Shared Service Centre; and leverage economies of scale by consolidating back office activities in a processing 'hub'. - Insource; retain functions and processes in-house and offer these back office services in the marketplace, turning a cost centre into a profit centre. - Outsource; transfer ownership of back office infra-structure, processes or functions to a third-party supplier, transforming a fixed cost base into a variable one. Clearly there are advantages and disadvantages with each category and there is no off the shelf answer. The questions you need to typically ask are: - What is the most appropriate sourcing strategy for my business? - What are the benefits and the cost implications? - How long will it take to implement? - Who are the players in this market? - What are my competitors doing? Chris Beer Bluerock Consulting "Executives are faced with the need to reduce their back office costs. The challenge for them is to make the right choice about this in today's economic climate." Management need to continually review whether their sourcing strategy is appropriate - external influences will affect your decision, be that of technology advances, new regulation or competition moves. Take for example UK cheque processing - traditionally this has been under-taken by the big four banks - last year Barclays and Lloyds TSB created a joint venture with Unisys to launch IPSL. Late last year HSBC bought into the venture which is now processing over 70% of UK cheques. Even just a few years ago, such co-operation would have been unheard of, now there are some banks sitting on the outside probably wishing they had done the same too. Other articles within this Journal include: - Account Aggregation is the future - but not for everyone... - Seeing the wood from the trees - a pragmatic approach for Project Risk Assessment Figure 1 - Developing Your Strategic Intent for Sourcing Management need to develop the Strategic Intent for Sourcing. This need not be a large exercise, but it does need structure and rigour. We have used a four step process as shown in Figure 1 that analyses your current business operation and the challenges you are facing, and evaluates available options which all feed into a strategic intent. If your strategic intent changes then a detailed business case is required prior to any evaluation and negotiation with the suppliers. All too often the supplier is talking to the organisation prior to them understanding what they want and why they want it - hence why many outsourcing deals fail. ACCOUNT AGGREGATION IS THE FUTURE - BUT NOT FOR EVERYONE ... Over the last six months there has been a lot of press written on account aggregation, which is due to become one of the hot topics in financial services in 2002. However, the question we are now pondering is whether this will follow the same path as Wealth Management, when every bank felt they needed to be in the same space offering similar products to a small, unwilling consumer base. Account aggregation is a potent extension of the on-line banking concept; there is no doubt that some aggregators will be very successful; however there will be many failed projects - those that don't attract the necessary customer base, and fail to make a return on the investment. Figure 2 - Account Aggregation at a glance There are two reasons to become an aggregator - to increase your customer base, and increase your share of wallet, or to retain it. While all the business cases will state the former, achieving this is far from simple. How will you up-sell or cross-sell? How will you capture, store and interpret the information to understand the needs and wants of the individual. How will you then sell your (better) product to them? The key to delivery is not about how screen-scraping technology works but how account aggregation works - from the creation of the single view of a customer's holdings right through to the consequential purchase of a financial product. This involves integrating your Internet front end with your CRM system and then feeding that back to either a call centre for outbound calling or to the web site - to proactively market to customers using wonderfully rich information about their financial situation. This may seem logical and looks easy on paper, but the challenge is that banks need to work with Legal, Compliance, Risk, Operations, Product Development and IT to deliver this - if any of these are out of step the initiative will fail. Maybe a key question to ask yourself is how successful has CRM been in your company to date? Have you increased your customer penetration as a direct result of CRM? Have you been successfully cross-selling your products? If you haven't, how do you propose to do this with less loyal, Internet-savvy customers? One of the stories we haven't heard to date is when account aggregation is NOT right for you. There are organisations where becoming an aggregator is wrong for their business strategy and the ROI will never be realised. These are typically organisations without a web presence, or perhaps single-product, niche organisations where being highly price-competitive is their strategy. The issue for them is how to ensure that they are properly and equitably represented on the aggregators' websites. The decision not to become an aggregator is not a decision to do nothing - you still need to participate in the market, providing data to others, working through the compliance and legal issues of your data being accessed by a third party. The correct selection of a third party provider of aggregation services is all important. The first Guide to Suppliers of aggregation services was recently published by Bluerock. What is clear from this Guide is that it is impossible to compare any of the providers like-for-like, since each has a different solution aimed at a slightly different problem. The appropriate provider isn't always obvious at first glance. Without a doubt account aggregation is here to stay, and will form an integral part of the package of on-line services some organisations will offer. There are hurdles to overcome, especially in producing a convincing, robust business case! Common with some other large initiatives, the project doesn't end when the software is delivered, tested and operational - the challenge of making this 'work' has only just begun. The project team needs to maintain a strong steer within the organisation to ensure that the return is provided on the investment. This article, written by Tim West, was first published in Financial World magazine February 2002. SEEING THE WOOD FROM THE TREES A PRAGMATIC APPROACH FOR PROJECT RISK ASSESSMENT Helga Mepham In today's business environment, senior management simply cannot allow projects to fail. Whether a project is large or small, simple or extremely complex, there is still an alarming number of those that do fail. While failure is a harsh term, a project will have failed if it doesn't deliver the expected benefits, delivers late or overruns its budget - we have all seem examples of this. The challenge therefore is to identify as early as possible those projects where the risk of failure is deemed to be high or where the signs of failure are already starting to show. Being in a position to take steps to minimise the risk of project failure means that you must first have an understanding of exactly where the current issues are. This need not be a lengthy or expensive exercise however, as the last thing an 'at risk' project needs is to be delayed even further by a review which costs more to perform than it can possibly provide in benefits. The Approach We have developed a proven, pragmatic FastTrack approach for identifying and controlling the issues which commonly arise on projects. The approach is based around asking the right questions to the right people, probing, challenging and verifying. To add structure to the review, the individual elements of a project are categorised into four core components. These are project management, people, business process and technology; the objectives being to gather and extract valuable information that forms a picture of the components. In addition, as this is not a time consuming nor expensive exercise many Sponsors commission this type of review on a regular basis, firstly as a means to track progress and secondly to identify further issues and risk as the project progresses through the stages of its lifecycle. The Deliverables At end of the review and typically within a week of it commencing, FastTrack approach will deliver a presentation style report which; - Highlights the project hotspots - your top issues - Analyses all the findings within a detailed traffic light report, using colours to attract attention to the critical issues - Provides high level action plans, with defined responsibilities and target dates for issue resolution And therefore allows senior management to respond as swiftly as possible. It is generally understood that project risk can never be completely eliminated. However, rapid identification and management of the risks and potential issues involved through a regular review process, such as the one we have identified, is proven to dramatically increase the changes of successful project delivery. If you require any further information please contact: Julian Sawyer [email protected] Helga Mepham [email protected] Bluerock Consulting Limited Alderman's House Alderman's walk London EC2M 3XR Tel: 020 7743 6780 About Bluerock Consulting Bluerock Consulting specialises in providing consulting services to the financial services sector. Our senior consultants have typically worked for financial services institutions and for one of the large consulting firms. Consequently, each Bluerock consultant brings to assignments in-depth business knowledge and a proven track record. Bluerock's approach to assignments is to work with our clients and focus on the success that they want to accomplish and not to prolong our assignment. We have many blue-chip financial services institutions that will testify to this success and economy of our approach.