Bluerock Supplement : July 2002

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BR Supplement - July 2002 (167k)
USP's of CRM in Wholesale Banking.
Keywords: CRM, customer relationship management, strategy, wholesale banks, regulatory


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USPs (Unique Sticking Points) of CRM in Wholesale Banking Customer Relationship Management (CRM) remains a topic of interest and focus of activity within the wholesale banking sector despite a mixed press. This article discusses the issues peculiar to that industry and what can be done to overcome them. There is no doubt that successful implementation of CRM is more problematic in this sector than for other types of enterprise such as those in the retail banking and insurance sectors. The difficulties for CRM in the wholesale banking environment stem from the nature of the products and particular business characteristics that are unique to that environment. Absence of a wholesale banking model Variation in the definition of CRM strategies, and hence the business case for CRM implementation, is bound to occur between organizations. Nevertheless, in some sectors a commonality of vision and collective understanding of the rationale and working of CRM is apparent. Not so in wholesale banking. Canvassing within and across departments such as the front office, finance, and risk management for their definition of CRM is likely to result in a wide range of views. SOLUTION: Agree the CRM vision and understand why business processes need to be more client centric, then ask what is required to deliver this - make sure that the goals are clear and that everyone understands how improvement will be measured. An example of measurement might be an increase in business volumes with the more profitable segments of the client base. Resist the temptation to use a CRM programme as a vehicle to deliver everyone's dreams for improving profitability because it will fail. Complexity of client relationships Wholesale banking clients are complex, global and hierarchical entities. This complexity may be difficult to understand, agree and capture. This also makes responsibilities for business relationships hard to define and ownership of client data is always a bone of contention. A client's legal and economic hierarchies can be complex, volatile and deep. Clients' interrelationships will be further complicated by the differing levels of security and guarantees between related entities within a hierarchy. Wholesale bank management and staff will require information about any entity in a hierarchy in aggregate or in detail. This information provides more opportunity for cross selling and relationship building with a fragmented entity. SOLUTION: Agree simple rules to manage data, the most important thing is to capture it. Avoid contentious terminology in process definition and system functionality e.g. instead of 'deal owner' or 'relationship manager' you could use 'deal administrator' and 'relationship coordinator'. Don't implement a solution unless you can support aggregation & drilldown. Senior management will want the big picture, other users will want detail. When you implement client hierarchies for CRM these need to be consistent with any existing in-house structures, for example those used by risk management. Complexity of products Wholesale banks deal in products with bespoke characteristics such as duration, rate, event schedules etc. that make common features of a CRM strategy such as enterprise wide pipeline tracking difficult to manage. Similarly, comparison of anticipated P&L with actual P&L, which might be an attractive goal for a CRM programme, is very difficult to accomplish. All staff need to be aware of and understand potential limitations of any data that the CRM strategy provides - at best it may be indicative due to human or system failings. SOLUTION: Do the best you can but accept that CRM is not a substitute for good financial and risk management reporting. A good goal might be to achieve timely MI delivery. Contact initiation The scale and complexity of transactions and the relatively small client base make it far more likely that staff in a wholesale bank will initiate interactions with clients than the other way round as in the retail sector. This means that CRM strategies in wholesale banking need to differ substantially from those in other sectors. This is reflected in the functionality of CRM packages which are clearly orientated to managing customer-initiated transactions. SOLUTION: Develop the CRM strategy based on a thorough understanding of how customer interactions actually happen. Identify what processes and tools can be implemented that will really help. Implementation of a process or function based on an inappropriate CRM mantra can only be enforced by coercion and will fail sooner rather than later. Nature and ownership of client relationships Bankers and traders value their personal contacts. The business they conduct is frequently dependent on the rapport they have with their counterparts in other organisations. CRM requires that a bank knows its clients at a corporate level and that requires the pooling of contact information. This need is resisted by people who see their relationships as one of their major professional assets. SOLUTION: Strong and sensitive change management is key. Incentivisation and measurement of compliance with new standards is essential. Pipeline management will reveal who is really doing the business; it is essential that CRM is embraced by those staff who make the greatest contribution. Complexity of internal structures Wholesale banks are normally composed of complex networks based on products, functions, geography and culture (almost certainly affected by previous mergers and acquisitions). This makes for complicated reporting and data security. Large organizations also tend to suffer from cross-departmental homonyms (a homonym is a single word that means different things to different people - for example, would a front office trader draw up a list of products that would be the same as an accountant in finance or a credit risk analyst in risk management? - unlikely). SOLUTION: Much of the value of CRM comes from widespread and consistent use. Get clear definition of the structures that have to be serviced by CRM. Don't over-engineer a solution to any requirement - we all know that the one certainty in any commercial environment is reorganisation. When defining a CRM strategy don't assume all terminology means the same thing. Agree exhaustive and clearly defined lists of products, industries, sectors and any other business specific values used for classification purposes - otherwise information obtained will not be consistent with other sources of data. Regulatory requirements Wholesale banks are subject to stringent regulatory regulations that differ in each operating location. Two principle requirements are Chinese walls - the need for secrecy between departments such as equities and M&A, and local data security laws. SOLUTION: Define and agree a security model. Consult compliance and involve internal audit early since extra work up front can save a lot of subsequent effort in reengineering or even prevent complete failure. CONCLUSION This article has identified some specific areas of difficulty (and suggested solutions) in implementing a CRM strategy in a wholesale banking environment based on real life experience. The guiding principles are: - Be clear where you are now and where you want to go before you embark on the journey. - Identify specific difficulties you need to resolve under each of the major headings above and agree a solution. Don't hope to solve things on the way. - CRM is more of a business challenge than a technology challenge so it is essential to enlist a critical mass of support within the enterprise. In balance it must be remembered that there are some really significant business benefits to an effective CRM strategy that have not been explored here. Just some you might consider are: - The opportunity to develop, monitor and refine a profitable client targeting strategy. - Consistent pipeline management to identify who is really delivering in your organization. - Closer rapport with your clients by demonstrating greater knowledge understanding of your relationship at all levels. - Opportunities to cross sell and identify where loss-leading deals might contribute to a successful business relationship. The breadth of potential CRM strategies within wholesale banking gives these organizations the freedom to develop their own successful strategy. CRM is a big opportunity; there is everything to play for!