Includes articles on the following: Innovation, Cost Reduction, Change

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Priorities for 2009
Pursue
strategy
Grow
business
Cut back
Cost
reduction
Regulation
Debt
management
Corporate &
Investment Banking
Retail
Insurance
Cards
Priorities for 2009
Pursue
strategy
Grow
business
Cut back
Cost
reduction
Regulation
Debt
management
Corporate&
InvestmentBanking
Retail
Insurance
Cards
In this issue:
Quarterly Review
The
Issue one 2009
Which way for
2009?
It’s 14 months since Northern Rock customers queued
for their money,2 months since HBOS confirmed its talks with Lloyds TSB and
one month since the government applied the jump leads to the banking system. How
much more intervention will be needed, and how long before the recovery kicks in?
What you’ve told us
We asked our banking and insurance colleagues about their organisations’ change plans for
2009. There was a reassuring consistency in some of what they said: “We will focus on cost”,
“Quality not quantity of projects will be the measure”, “There will be no nice-to-haves”, and
“There will be fewer initiatives, and for those that do go ahead the bar will be set higher”.
All identified regulation as a key loading on their change capacity, including the expectation of
the new regulation arising from the financial crisis.
But the responses also showed the divisive effects of the crisis. Within insurance the protection
market appears buoyant and pensions resilient, as falls in fund performance can be passed on
to customers via market value adjustments and reduced bonuses.
Some lenders have been less touched by those toxic loan portfolios, possibly due to their
corporate stance, inspired management foresight or just good fortune. These organisations
will be freer to realise their strategies in 2009, whether driving global shared processing or
developing new propositions to support their customers’ new priorities and concerns in the
new uncertain world. And the herd behaviour of consumers has meant that some institutions
have seen massive inflows of deposits at the expense of others.
Some businesses believe they will struggle in 2009. For them, 2009 means:“refocus all our efforts
on the key priorities”,“focus on risk and impairment”, in other words, all hands to the pumps.
The strings attached to the government’s intervention will inevitably impact the 2009 agenda
for some institutions, who will need to prioritise UK retail at the expense of corporate and
global development priorities. Will this give the others a competitive advantage?
There is no doubt that the UK economy needs a strong financial sector. In
2009 we will see the consequences of the crucial decisions our leading fi-
.sevlesmehtroftesevahyehtshtapehtdnanekatevahsnoitutitsnilaicnan
The next 12 months will be interesting times indeed.
4 Key factors that drive
change
2-3 Now is the time to
reduce costs
2 Time to Innovate
JulianThompson
For more information please contact Julian Thompson
Julian.Thompson@Chaucerconsulting.com
Financialrecoverygraphs

2. Improved individual stepsXX
Zero process lossesXX
Short lead timeXX
Low work in progressXX
High speedXX
2
Now is the time
Time to Innovate
(TCO), rationalising the SOx processes, regula-
tory fulfilment and continuity services? Who
is radicalising the supply chain – and regain-
ing control. Who? Well if not you, then maybe
your direct competitors.
Incremental may have been acceptable,
but in the current climate‘Radical’is‘in’.
The key is the approach and the small expert
teams that bring this about; the leading fi-
nancial process engineers, systems leaders
and radical thinkers who know the underly-
ing systems, the underlying processes and
controls, how they are currently carried out,
what is needed and what is not, for today and
tomorrow. Those who built the past along
with those who can envisage the future and
radically rework your Strategy into Action:
The images are fading; traumatised
banks emptying out their staff, carry-
ing away their possessions in card-
board boxes. Yet the fall-out contin-
ues, as many firms shed cost, plans
and people in knee-jerk reactions to
balance their books and absorb the
impacts.
The wider economy is now being affected by
the secondary consumer confidence multi-
plier, talking us towards recession. But not all
is doom and gloom, not all are battening
down the hatches. Some are quietly planning
their future with skill, imagination and a de-
gree of radical inventiveness.
You may have seen the recent obituary of the
innovative engineer HaroldWaterman, whose
reaction to the ravages of the commercial
property crunch of the 1970’s was to develop
radically cheaper construction techniques
that made large scale development viable in
more straitened times, halving the average
build time, leading to brilliant innovative re-
development schemes such as No1. Canada
Square and Hays Galleria. He forged a world-
wide engineering design company – world
leaders in innovation.
So who is doing the same in banking
and insurance?
Who is challenging convention? Who is radi-
cally rethinking all your operations? Not just
accelerating the outsourcing of existing tired
models, but fully reviewing ‘Strategy into Ac-
tion’. Then proving benefits by building a
challenge operation to work alongside the
current one and eventually replace it? Who is
radically re-engineering the customer propo-
sition for the next 10-15 years, the new end-
to-end service model, the new service fulfil-
ment processes including people and IT?
Who is reworking theTotal Cost of Ownership
During periods of expansion and
plenty it is easy to become distract-
ed from the need to manage costs
down to an optimum level.
As a result, when a downturn approaches,
thoughts turn to ways to minimise expendi-
ture without sacrificing service levels or
quality.
It is at times like these that techniques like
Lean processing become central.
Lean processing is about ensuring that your
processes flow smoothly and simply, and that
all waste is eliminated.
The first thing to emphasise is that you don’t
just hire a consultant to ‘do lean to you’. It is
absolutely vital that your team leaders and
staff are actively involved in improving their
own processes alongside the consultant.
To‘Lean’the process is to eliminate waste, and
develop high speed flows, short lead times
and cost reductions.
There are a number of tools and techniques
available to assist in doing this.
The first step is to work together to develop a
value stream map of the process.This sets out
the steps in the process (just as in basic flow-
charting), and then collects data and popu-
lates the map for each step as follows:
Process TimeXX
Time per unit spent adding value
Queuing TimeXX
How long do items wait to be proc-
essed?
Challenging convention
The new competitor market model; whatXX
matters and what does not?
The new customer propositions; whatXX
stays, what goes and what’s new?
The new end-to-end service model –XX
the key to global re-engineering
The new service fulfilment engines –XX
global, regional, local matrix
People, organisationZZ
BusinessZZ
ITZZ
Reworking the TCOXX
Radicalising the SOx processesXX
Integrating Regulatory fulfilmentXX
Ensuring continuity of servicesXX
Radicalising the supply chain – andXX
regaining control
RogerBaker
For more information
please contact
Roger Baker
Roger.Baker@Chaucerconsulting.com

3. 6.9
0
9
3
to reduce costs
Takt TimeXX
Takt Time has been likened to a drum-
beat, with each beat representing the
completion of another unit. What is
the frequency of the drum beat?
Change-Over timeXX
How long does it take to switch from
one task to another, including setting
up and getting up to full speed?
UptimeXX
Time actually spent in production – i.e.
working time less interruptions and
rest periods
Defects and ReworkXX
Time and cost of repairing defective
output
DemandXX
The volume of work arriving to be
completed
Work in Progress levelsXX
Howmanyitemssitbetweenprocesses
waiting for the next stage of process-
ing to be completed?
Effectiveness ratesXX
Effectiveness is defined as ‘Uptime x
Speed x Quality’
Staffing levelsXX
How many FTE are employed on each
activity?
CapacitiesXX
How many units could be produced
with existing resources working at full
strength?
Value adding and Non-value add-XX
ing activities
Does the activity add value or not?
In this context Value added means:
activities that transform or shape a
product or service towards that which
is sold to the customer. Non-value
added means activities that take time,
resources or space, but do not add to
the value of the product or service
itself.
Lines of communicationsXX
Show all the contacts between players
in the process
Once we have collected all this information about the way the process currently works,
we can begin to make improvements and to make our process lean, firstly by
eliminating waste.
Chaucer
Confidence
Index: 6.9
We asked our colleagues in
the industry what, on a
scale of 0-9, was their level
of confidence that they
would successfully realise
their change agenda over
the next 12 months.
This relatively high figure
may be due to the fact that
we are at the start of a new
change cycle, with many
institutions still to finalise
their 2009 budgets and
portfolios.
We will continue to sample
opinions on subsequent
issues, and highlight the
factors which have led the
index to move up or down.
For more information on Lean Processing techniques contact Steve Crawley
Overproduction
This is the creation of high
levels of work in progress
which occurs when one step
produces output at a rate
which exceeds the
capacity of the next
step in the process
Transportation
Occurs with the movement of
paperwork around offices and
between locations
Inventory
For example, piles of forms
awaiting processing
Defects
Getting it wrong e.g. incorrect
records or documents
Over-processing
A process which is not
efficient i.e. excessive and
unnecessary steps in the
process
Motion
Excessive, time-and-energy-
consuming movement. A
good example of this is too
many keystrokes to complete
a record
Waiting
Time spent‘on hold’- the
inability to progress until
information from a previous
process becomes available
Work on reducing these sources of waste and you will
go a long way toward producing leaner and lower
cost processes.
There are many other techniques within the Lean
armoury that can be used.
There are seven kinds of waste
SteveCrawley
Steve.Crawley@Chaucerconsulting.com

4. 4 www.chaucerconsulting.com
Key factors that drive change Upcoming
events
It is a truism but winners always emerge
out of recessions stronger then when
they went in.
It’s a result of paying heed to the SAS motto‘Who dares wins’. This doesn’t
mean taking unnecessary risks, but is rather about continuing to pro-
actively manage your business in response to its market and the wider
operating environment. It is about being bold and taking advantage of
the opportunities that do arise, and not adopting a bunker mentality.
Below is a list of 6 areas where we believe an organisation should change to take advantage
of those opportunities and emerge from the recession stronger than its competitors.
1 Strategy and planning – It’s imperative that the Board or Executive Team take time out
to develop a strategy and plan to help the organisation through hard times. Simply meas-
uring negative variances against old plans is meaningless. Now is the time to adapt to the
circumstances around you, and develop a plan to help manage the organisation’s route.
Without a map and plan you’re hopelessly lost.
2 Innovation – Innovation reflects energy within an organisation. Simply churning out the
same old products and services reflects introspection and a lack of ideas. It indicates an
organisation that’s not responsive to its marketplace. Continue to develop and market
new propositions – don’t be afraid if these take you in new directions you weren’t antici-
pating.
3 Talent acquisition – Most organisations – particularly those where HR acts as the lead
cost cutting agent rather than a business partner – look to retrench and cut head count.
Winning organisations see the tough times as an opportunity to strengthen their team
through the targeted acquisition of strong hires. Build the organisation which will let you
accelerate away faster than the competition when the recovery appears.
4 Variable costs – Businesses with a variable cost model are much better placed to adapt
to tougher environments than those with a high level of fixed costs. Organisations which
have sought to lock in talent through expensive bonus guarantees will suffer the double
whammy of a high fixed cost base in conjunction with a team of people who have no
incentive to grow the business – their money is already guaranteed. Review your cost
base and look to turn as many of your fixed costs as possible into variable ones.
5 Lean organisation - Operational efficiency and effectiveness is a key attribute of win-
ning organisations. They look to cut out any fat which has accumulated during more
prosperous times. Operational and financial metrics (such as those used in Lean Six Sigma)
will highlight those areas which are inefficient or ineffective and where action needs to be
taken, and will also chart progress as it is made.
6 Culture – As the external environment changes, the ability to adapt and re-organise in-
ternally becomes key. Companies must embrace change, and the culture must reflect this
from the top down. A leadership team which is paralysed and incapable of demonstrat-
ing clear leadership is destined for failure, and the rest of business can only stagnate.
CharlesAsher
Chaucer Breakfast
Briefing, Central
London, 11th December
Chaucer will be holding a Breakfast Briefing
for senior executives on Thursday 11th
December at 8am at the Institute of
Directors, in Central London. The theme for
the briefing will be ‘The Financial
Crisis – whatever next?’
We are lucky to have three leading repre-
sentatives from the Financial Services in-
dustry, to provide us with very different
perspectives:
Mike Bussey – CEO, Arbuthnot Latham Pri-
vate Bank. Mike has significant experience
of leading private banking organisations
and was previously CEO of Rothschild Pri-
vate Bank and Trust and before that held a
number of senior management positions
internationally with HSBC.
Ruth Lea – Economic Adviser and Group
Non-Executive Director at Arbuthnot
Latham Group. Ruth is also a member of
the shadow MPC, ex-Head of the Policy
Unit at the IoD, and ex-Chief UK economist
at Lehman Brothers.
Quentin Thom – Director, Amber Partners.
Quentin is an expert in Operational Risk
Management and has implemented risk
frameworks inTier 1 banking and brokerage
organisations as well as in hedge funds
through his current role.
If you would be interested in attending or
have any comments about this newsletter
please contact Charles Asher (editor) on
07834 265572 or e-mail him at
Charles.Asher@Chaucerconsulting.com
For more information please contact David Powell.
David.Powell@Chaucerconsulting.com
DavidPowell
67-68 Preston Street • Faversham • Kent • ME13 8PB • UK Tel: +44 (0)1795 542500 Fax: +44 (0)1795 542510