Shared services and finance outsourcing can deliver cost efficiencies for banks and financial institutions’ back- and middle-office operations. However, too many organizations look only at labor rate arbitrage in examining shared service options. New approaches can, we believe, provide better and more strategic benefits to their users.
At some institutions, the focus on cost savings has decreased efficiency and reduced the quality of processes. When banks and financial institutions focus exclusively on cost reduction – and not on structural change – it can lead to a less efficient organization, with process breaks and unnecessary handoff points between retained and shared service activities. This can also make it hard to attract and retain the right level of talent.
Transformation can lead to a stronger financial services operating model.
Sourcing decisions play a pivotal role in supporting banks and their finance functions in meeting their strategic objectives.
Through sourcing, financial services institutions can address the following strategic objectives:
Efficiency – implement shared services as a lever to release costs through economies of scale and labor arbitrage.
Effectiveness – Simplify transactional activities, allowing a focus on value-added activities such as business partnering.
Risk Management -- Spread operations across locations to maintain business continuity and help reduce dependency on specific economies.
Agility – Gain access to standardized, scalable and specialized solutions to reduce time to market for new services.
Service Quality – Gain access to specific talent and processes to establish domain specialization.
Capital Efficiency – Release capital through efficient and effective sourcing.
When implementing shared services initiatives, financial institutions should focus on the following:
Defining the vision. Firms should define and agree on overall objectives and a shared strategy.
Establishing the scope. Current capabilities should be assessed and mapped against capabilities required.
Managing change. Financial institutions should determine whether capabilities needed are available in-house; if not, they should identify partners with the right skills and know-how.
Determining needed capabilities. Banks should determine whether capabilities needed are available in-house; if not, they will need to identify partners with the right skills and know-how.
Creating a road map. A detailed road map and clear business case can help deliver the strategy and establish a framework for measuring performance.
Our experience with shared services indicates that these factors – including program ownership by senior management – can help financial services institutions capture more value from their shared services initiatives.
Read the full report to learn more about the benefits and the key elements of a strategic approach to bank shared services.