While the focus on transactional systems and process optimisation in the
financial sector remains relevant, a general failure on the part of IT to
deliver on new business optimisation and performance management requirements
is cause for a rethink among business managers and IT
Greater co-operation, better understanding of business drivers and more user
friendly technologies all play a role in righting this imbalance.
Explains David McWilliam, MD of Cognos SA, an IBM company: "In the finance
sector IT has, until now, met business requirements by gathering and storing
data in huge repositories, then adding slice and dice software to deliver
"Initially designed to enhance, automate and drive down costs associated
with transactional systems, growing volumes of data and reports are leading
to analysis paralysis. In a changing regulatory, and increasingly
competitive business environment, financial organisations quite literally
need to refocus their efforts to improve data management in order to improve
"This not only means creating 'overlay' systems such as master data
management systems and data quality management systems to get a single,
centralised view of the business based on accurate information, but a review
of business management approaches and practices to ensure that what is
reported on delivers value to the business – i.e., information that will
drive performance management and business optimisation.
"As Jack Welch put it in Straight from the Gut, 'What you measure is what
you get'; and as Lou Gerstner said in Who Says Elephants Can't Dance,
'People don't do what you expect but what you inspect'. It's the same
message – the identification of the right measurements (key performance
indicators linked to strategic goals) and clear accountability and
responsibility for the achievement of those measures, drive business
The recognition of the need for Business Optimisation (BO) and financial
performance management (FPM) have necessitated a change in the way financial
institutions are managed.
Says McWilliam: "Previously the board would constitute a strategy and it
would be hidden in the chief executives desk drawer with only vague missives
(e.g., budget for 10% growth, employ more people in customer relations)
making their way to line of business managers via, say, the financial
"However, for FPM to succeed, strategy must be minutely linked to a planning
process that is pushed right down into the organisation. This means old
top-down management approaches need to be replaced by a dynamic
driver-driven system where employees buy into and own the strategy."
For example, he explains, the manager who wants to employ seven more people
needs to know what outputs can be attained from additional staff and what
growth needs to be achieved to justify the cost of employment. Similarly,
budgets can no longer be based on a hazy, imprecise annual forecast.
Says McWilliam: "For FPM to take effect, internal and external business
drivers need to be clearly defined in the strategic planning process, linked
to execution and measured and monitored.
"This must be backed by business intelligence (BI), analytics and reporting
to understand not only the 'what' of business performance but the 'why', and
what to do about it. Business results can then be investigated and the
resulting information fed back into planning.
"In essence, there is no longer a place for the discontinuity created by IT
building a data repository and saying to business 'there it [the data] is,
come and get it' and business saying to IT 'we want better data'. The tools
are now in the hands of business."
Adds McWilliam: "IT can report on events and analyse events, it cannot
identify exceptions. The banks have already spent millions of rands putting
transactional data into repositories. FPM provides a way to intelligently
leverage that data to optimise business. However, the FPM process needs to
be driven by business – the planning process must be linked to strategy,
monitoring must be linked to KPIs and drill down must be enabled by putting
the right technology tools into the hands of business users."
Garner notes that organisations that have implemented FPM are two and a half
times more effective than those that have not. The researcher also notes
that by 2015 all successful businesses will have a FPM system.
"When it comes to banking," McWilliam concludes, "a customer may well
forgive the bank that sends him four different statements for each of his
accounts. It costs the bank more than it should in terms of postage and
administrative effort, but imagine what it is costing in terms of gaining an
understanding of that client's needs and his value to the bank.
"In fact, consider the impact of this data inefficiency in terms of
understanding the bank's client base mix and how to optimise it to minimise
risk and enhance profitability.
"Forward thinking business leaders do understand the value of proper
information management for business optimisation, an approach that is
becoming ever more vital in the financial sector to meet the demands of
Basel II, which requires the review and redesign of existing systems,
processes and data stores, and the refinement of credit risk management and
operational risk models.
"The evolution in business management practices has already begun. How
successfully change is communicated and put into practice – by IT as well as
the business – will determine the organisation's ongoing success."