KPMG’s 2017 comparison of bank finance operating models reveals best practices by banks to juggle competing finance cost, control and quality goals.
While bank finance departments have pursued ambitious, and often highly-targeted transformation projects over the past decade, they have struggled to keep up with ever-shifting demands. But best practices revealed in the KPMG Banking Finance Operating Model 2017 – A Comparative Analysis, suggest that a combination of complementary strategies can shape flexible finance operating models, enabled by emerging technologies that help finance balance its governance, value preservation and value creation obligations.
A 2014 KPMG survey of top CEOs globally across all sectors revealed how senior leaders increasingly expect their CFOs and finance teams to help create a competitive advantage for their organisations, leveraging data and analytics to deliver value-added insights, beyond traditional finance deliverables.
This is certainly the reality facing bank CFOs and finance departments that have shifted from their traditional federated operating models to create more standardisation across the business units that finance serviced. KPMG's 2017 survey revealed that leading banks continue to target efficiency and productivity gains through several main approaches:
We also see a new focus on building a more flexible and agile operating model that can meet local demands without losing the benefits of global integration.
Many finance functions have embraced automation as the tonic to their challenges. While there has been considerable push and hype to introduce robotics process automation, front-runners in this space have consistently failed to deliver their desired outcomes, particularly in terms of achieving real cost savings.
Unfortunately, most projects have concentrated on automating micro-processes and eliminating piece-meal individual tasks, rather than addressing the end-to-end finance process using a combination of technologies rather than just robotics.
In finance, we see the benefits of introducing intelligent Business Process Management (BPM) solutions to orchestrate and standardise the process before it is robotised, acting as a digital platform where different types of automation can be introduced to the process seamlessly and performance of the process can be monitored and managed end to end.
Our survey shows that the banks that achieved the greatest efficiency gains have made sustainable and transformative 'lifestyle changes' to their finance operations including technology investments and automation as well as process re-design, work-load balancing, report consolidation and organisational restructuring, among other tactics.
New regulatory requirements and accounting changes, from stress testing to IFRS 9, are pushing the integration of finance and risk functions within banking. We see tangible efforts at a number of leading banks to consolidate finance and risk processes and data. They are creating centrally-led networks, with concentrated strategy and governance and distributed operations, with joint accountability held by finance and risk, and through the use of common data elements, such as common data and common process utilities under a common governance framework.
While many CFOs are pivoting their established finance teams to perform more value-added work, this is no easy challenge since they must also pursue aggressive efficiency targets.
This suggests that a sequenced, multi-phase approach must be taken to bolster finance value creation over time. For example, technology investments may be required to eliminate lower-value workload, to shift transactional work to finance shared services units or add more self-service and automated reporting functionality. The corresponding cost savings could be redirected to investments in training to upskill finance professionals for advisory roles and sharpen their technology, communications and stakeholder management skills.
While the goal of simultaneously bolstering control, cost and quality seemed impossible just a decade ago, recently arrived technology means that the three points on the finance delivery triangle are no longer mutually exclusive.
Today, cloud-based technologies can be implemented much faster than traditional on premise installations and the cloud has lowered the total cost of ownership by addressing fundamental areas of the infrastructural cost of finance systems.
Although these efforts must be prioritised or carefully sequenced, balanced investments in people, data and information – under the umbrella of a flexible finance operating model – can enable a bank to advance each point on the finance triangle without compromising the others.