Consulting Playbook: Overcoming Today’s Challenges in the Banking and Financial Services Sector
The Consulting Playbook, Edition #7
We all are aware that the Banking industry went through a lot of major changes and serious challenges in the past eight years. Banks are no longer perceived as the safest or most reliable organizations even though we can’t imagine economic activity without their ubiquitous presence. In today’s fast paced environment, the banks can be left inadequately weak in dealing with the changes.
Uniting Bank Leaders on Core Principles in Reorganization
The case below describes a leading European Investment Banking institution, created from a Co-Op group of companies that experienced disappointing financial results. The newly appointed CEO was given the task of repairing the situation. He also had to align the Financials, Asset Management, Insurance and Specialized services, on a new common strategy and improve collaboration among them. Often the general policies could not apply or benefit the entire organization. And that was the real challenge. The Executive Committee could not agree on a common vision and a future strategy.
3- Year Performance Boost by Incentives for Management –
The desired transformation was developed in a few steps:
- The new CEO received support in the strategic realignment of all Leaders: Executive team, Management team (Directors for Core functions) and the Top 100 (N-1, N-2)
- A variety of initiatives were implemented towards the new strategic plan with ownership from the Executive team (N-1) downward. The timeline was set at 1 to 3 years, to encourage both individual and collective performance and secure short term results without endangering the midterm transformation.
- Each member of the Executive team designed implementation plans for strategic actions per the functions and the priorities, tied to individual performance for their N-1 and N-2
- Various Committees and each of their members had been assigned objectives and targets aligned with their pay and Incentives plan for the Top 100.
Greater Performance and Profitability Achieved –
The impact of working with a Consultant achieved remarkable results. It contributed to aligning performance, new behavior, and created a favorable context where new links took place. The new Strategic Plan and its implementation aligned the CEO’s and the Top Team’s priorities. All the teams across the whole organization were mobilized and engaged for timely strategic plan deployment. Great financial and commercial results were reached during the first year of the strategic plan deployment. Improved cooperation among management, and empowered CEO in his role, with a strong grip on cost control and overall efficiency, achieved as well. Pay and incentives alignment were implemented for the Top Management Team and Top 100 Leaders.
Top 3 Concerns Banks and Financial Institutions are facing today and how they are being addressed:
1. Regulatory Pressure
After the economic crisis of 2008/2009 the government has put a great pressure on the financial services sector with increased Regulatory requirements, to prevent another such crisis. And banks have no choice but to comply and to continue to do so. This particular task can put a serious toll on budgets and staff training. Banking, risk management, and the responsibilities associated with that, stretch beyond limiting credit risk and procedures to monitor that risk. Reliance on new technologies bring new challenges as well.
2. Retail Banking and Customer’s Satisfaction
After the 2008 Financial Crisis, the Consumer Financial Protection Bureau (CFPB) was created to educate customers about irresponsible banking practices. Banks are now a lot more accountable if making misrepresentations about products and bank services, and can easily be sued and sanctioned. And If you’ve waited in line at a local branch, you know how important fast and efficient service is. But in many banks, that service is below the customers’ standard, and banks are trying to step up their offerings and clients’ service. With the advantage in modern technology and internet service, new and dynamic Financial Services are being offered, traditional banks are having difficulties in retaining their lead. Let’s hope retail customers are the beneficiaries of service improvements.
Or commonly known as hacking, is one of the biggest security threats today. The extended digital exposure of the financial organizations, and the always evolving methods of cybercrime, increase the sector’s vulnerability, and is a top priority of concern. Any data breach can make the news, and result in tarnished reputation as well as loss of huge number of customers and revenue. Banks continue to fight cybercrime but unfortunately not very successfully.
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About The Consulting Playbook
The Consulting Playbook is a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.