The operating principle of processing intelligence and anticipation involves the automated and constant collection, analysis and trending of transaction processing. The idea is that banking transactions are constantly monitored to identify any factors or trends that would lead to a potential processing problem or create an exception.
For example, identifying a short trade, involves anticipating that there will be insufficient securities to cover it by settlement date and triggering a buy-in request in order to prevent settlement failure. This is essentially an extended form of business management information (MI) reporting with systems alerting and anticipated operational actions built on top.
Another example is where exceptions relating to a particular transaction type or resolver are taking significantly longer to process than other exceptions. This type of measure will provide operations managers with more operational transparency and give them the opportunity to investigate and improve efficiency before any impact is experienced.
The implementation of processing intelligence and operational anticipation also requires a well-designed mix of MI reporting technology, process workflow and systems performance tuning utilities. All of these technologies are available at a reasonably mature level today. The challenge lies in integrating them into a purposeful solution, but there is no reason why this challenge should not be addressable.
And finally….No compromise!
The principle of processing intelligence and anticipation, while vital, is entirely ineffective on its own. This six-part series, ‘A transformation is coming’, on the evolution of the banking process, has also identified the key principles of: Push-based exception step processing, Process engineering and continuous process automation, Client self-servicing, Client-centred processing and Globalisation and simplification. All principles though must be used in coercion for their potential to transform the banks to be realised.
A new transformational operations vision for investment banking is clearly though emerging. The operating principles outlined in the series are real and genuinely available to those who are strategically thinking of taking on ambitious change. The catch, if there is one, is that partial adoption of these principles is unlikely to be enough. Full realisable value of true transformation is only achievable if all the operating concepts are adopted – anything else would be a compromise with only limited lasting benefit.
There is also the challenge of making it happen. Almost all banks who are contemplating this vision are only at the earliest stage of strategic thinking. In the current climate, many are understandably uncomfortable with the idea of seeking funds for this scale of initiative, which could span 3 to 7 years and require a programme spend of $100m to $150m. True transformation does not come quickly or cheaply. However, there is no reason why this can’t be addressed by shaping the change into manageable right-sized programmes.
On the plus side, we seem to be at the birthplace of an evolutionary banking operations best practice. It is possible that in less than 10 years’ time almost all major investment banking operations will have embraced these new working ways. If this is true, then any banks that do not move this way could be exposing themselves to an out of line cost base that could eventually threaten their relative position alongside their peers.
The vision is out there. What happens next is up to you.
This blog appeared on Finextra. Click here to see the entry on the Finextra website