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Operating Models
By taking a utility approach to service delivery, banks can increase
their cost-control initiatives across geographies and business
divisions, advance new growth opportunities, standardize operations
and improve the client experience.
Executive Summary
Industrialization
1
helps banks cut operational
costs, protect eroding margins and build a leaner,
more standardized operating model for lower-
ing risk and supporting revenue growth. While
industrialization in the banking industry is not
a new concept, it remains in the early stages.
Yet the complexities arising from multiple, frag-
mented and redundant processes often manu-
ally controlled underscore the need for banks to
focus on transforming their operating framework.
Industrialization impacts all areas of banking,
including business development, regulatory
compliance and operations. By nature, business
operations are the most amenable to industri-
alization, followed by regulatory controls (when
based on a robust operational foundation) and
select client services activities. Back-offce
processes including post-trade securities pro-
cessing, cards processing, mortgages and trade
fnance are also affected by industrialization.
One way to industrialize a bank is through the
creation of a utility or shared services model
that can be employed internally, or externally to
support multiple banks. The utility approach helps
ensure the most effcient use of resources, and
helps keep costs under control. However, setting
up this type of environment requires executive
commitment at the highest level, combined with
a strategy backed by a strong operating model
and effective program governance. In this white
paper, we will examine key considerations that a
bank needs to address when setting up internal
and external utilities.
Banking on Industrialization
Before we can understand the fundamentals
of industrialization, it is important to know the
forces that have led to its emergence in the bank-
ing industry. Although the industry has survived
the fnancial meltdown, growth has been stymied
by structural change, driven by risk management-
related regulations.
Historically, the banking industry evolved primar-
ily by piggybacking on rapid growth an approach
that often led to fragmented operating models. To
address customer needs, banks regularly offered
cognizant 20-20 insights | april 2014
Data confdentiality.
http://www.cognizant.com/InsightsWhitepapers/Reference-Data-Management-The-Case-for-a-
Utility-Model.pdf.
http://www.cognizant.com/insightswhitepapers/Trade-Management-Systems.pdf.
https://capco.com/sites/all/fles/restricted/T1132%20Industrialization%20US%20fnal3_r3%20
for%20web.pdf.
http://www.cognizant.com/InsightsWhitepapers/Reconciliation-Utility-An-Idea-Whose-Time-
Has-Come.pdf.
http://www.capco.com/insights/research-thoughts/change-at-what-cost.