27 November 2014

Jeremy Taylor

Jeremy Taylor - Rule Financial

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A transformation is coming

18 July 2014  |  1075 views  |  0

A tsunami of regulation continues to hit the investment banks, making them appear relatively unattractive to their own investors, and ultimately leading to a stagnation of their share price. To rectify this, and to enable them to progress, their fundamental business models must transform.

To remain competitive and to achieve the required improvements, investment banks must aim high, and make bold, dramatic changes. Anything less is likely to result in a partial success, and a continued and extended period of stagnation. Only by fundamentally reviewing their structures and operating models will they achieve the substantial improvements required.
Now is the time for investment banks to finally overcome their historic structural and cultural issues and adopt the principles that can guide them to renewed levels of success.

In a series of six blogs, Rule Financial specialists will assess and analyse just where investment banks need to improve their operations and the principles they should adopt to go about it. In this first blog, we propose that push-based exception step processing could be the way for banks to re-energize their workforce, reduce costs and begin to transform their business.

 

The 'exception' in the principles of transformation


As investment banks continue to explore ways to save costs and perform business more efficiently, some banks are now exploring radical and transformational visions in order to achieve their goals. A new way of assessing the future of the banking operations function is emerging, and now is the time to demonstrate conviction, investment and bravery. This includes being able to adopt a ‘production-line’ style working practice, in order to make substantial productivity improvements.

Everyone in investment banking operations is familiar with the processing of exceptions and it is a principle that should be encouraged and its practices grasped. Such exceptions are simply straight-through-processing (STP) breaks, that are delivered to a queue on a staff member’s and require some kind of human action in order to progress and / or resolve.

Push-based exception step processing is both a different and an extended form of this. Under this new principle, all manual work is treated as an exception (i.e. an exception to automated processing). Exceptions are broken down into activity steps and these steps are routed (pushed) to the resolver with all the supporting information needed to perform the task. This is to reduce the complexity and time associated with the often separate activity for data look-ups and investigation.

As a departure from current practice, resolvers are pushed to tackle one activity step at a time. Only once a step has been cleared will the next step be presented for action (and this could be to another staff member). This ‘production-line’ processing removes from the individual the need to know everything about an exception and also removes the power of choice over which items are to be dealt with next.

Historically it has been natural for workers to prioritise the items they are most able to deal with first, and that may not always be in line with the client priority or overall operational efficiency. When an exception is experienced that is not yet defined by n activity step, it is pushed to a new Process Engineer role to be processed and automated. Achieving a further step-up rate of STP through advanced operating practices should consequentially reduce the amount of manual work that needs to be performed. The lower the amount of manual work, the lower staff levels should be, meaning lower costs.

Unquestionably push-based exception processing does require a universal acceptance of a ‘production-line’ working practice, which requires the workforce to use less personal knowledge and to work under request or instruction. At a personal level, many existing operations staff will find this way of working less fulfilling, so this will mean a natural evolutionary re-profiling of the workforce which may take some time.

Is a reshaped workforce working with a workflow toolset really achievable? With conviction, investment and bravery, why not?

TagsRisk & regulationInnovation

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Jeremy Taylor

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Operational Processing and Derivatives

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Rule Financial

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