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FINANCIAL SERVICES PERFORMANCE MANAGEMENT
 

FINANCIAL SERVICES PERFORMANCE MANAGEMENT

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    FINANCIAL SERVICES PERFORMANCE MANAGEMENT FINANCIAL SERVICES PERFORMANCE MANAGEMENT Document Transcript

    • FINANCIAL SERVICES PERFORMANCE MANAGEMENT IMPROVE CUSTOMER LOYALTY AND PROFITABILITY, STREAMLINE OPERATIONS, MANAGE RISK
    • While every attempt has been made to ensure that the information in this document is accurate and complete, some typographical errors or tech- nical inaccuracies may exist. Cognos does not accept responsibility for any kind of loss resulting from the use of information contained in this document. This page shows the publication date. The information contained in this document is subject to change without notice. This text contains proprietary information, which is protected by copyright. All rights are reserved. No part of this document may be photo- copied, reproduced, stored in a retrieval system, transmitted in any form or by any means, or translated into another language without the prior written consent of Cognos Incorporated. The incorporation of the product attributes discussed in these materials into any release or upgrade of any Cognos software product – as well as the timing of any such release or upgrade – is at the sole discretion of Cognos. U.S. Government Restricted Rights. The accompanying materials are provided with Restricted Rights. Use, duplication for disclosure by the Government is subject to the restrictions in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013, or subparagraphs (c) (1) and (2) of the Commercial Computer Software – Restricted Rights at 48CFR52.227-19, as applicable. The Contractor is Cognos Corporation, 67 South Bedford Street, Burlington, MA 01803-5164. This edition published February 2006 Copyright © 1989-2006 Cognos Incorporated.
    • TA B L E O F C O N T E N T S INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 WHY PERFORMANCE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Scorecarding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Reporting and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Planning and budgeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 YOUR PATH TO PERFORMANCE MANAGEMENT WITH COGNOS. . . . . . . . . . . . . . . 8 Starting point 1—the one thing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Starting point 2—the data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Starting point 3—the scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Starting point 4—the plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 DELIVERING ON PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ABOUT COGNOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
    • I N T RO D U C T I O N Multiple delivery channels. Market specialization. Beyond these system improvements, however, managing High-profile mergers and acquisitions. Onerous compli- performance is a broader, strategic imperative. ance requirements. Rising operational costs. For financial Performance management consists of a series of integrated services institutions worldwide, today’s business climate is steps where an organization defines key priorities, meas- increasingly high stakes and complex. ures progress towards these goals, and analyzes results. By linking strategy with execution in this way, they can more A recent Financial Insights performance management effectively monitor and improve performance. benchmarking study points to the dual demands faced by these businesses: “On the one hand, banks now need Indeed, most banking CEOs see performance manage- to develop a ‘retail mentality’ to focus on the customer ment as a top business priority, underscoring its impor- and improve product sales and distribution. On the tance in “the search for improved customer relationships, other hand, they need to develop a ‘factory mentality’ sales productivity, and store/branch performance.” 2 to focus on straight-through processing and seamless, But managing and measuring performance—metrics, end-to-end business processes.”1 plans and budgets, and detailed actual results—has been More than ever, financial services companies must lever- difficult because disparate tools, paper-based processes, age data and information in order to plan and manage information silos, and legacy IT systems provide limited operations, maintain the right products and services, visibility into the business. and stay on top of shifting market demands. Current realities have increased the requirement for Financial organizations have invested heavily in transac- timely and comprehensive management oversight. tion and financial systems, as well as supporting soft- Financial institutions need to see the big picture—the ware applications to improve their business. This relationships, connections, and direction—as well as the approach has centralized data storage and collection, details to make informed decisions and improve operat- and streamlined operations. ing performance. This is the promise of financial services performance management. 1 Bill Bradway. Performance Management Drives Improvement at European Banks. Study sponsored by Cognos. Financial Insights. June 2005. 2 Ibid. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 3
    • WHY PERFORMANCE MANAGEMENT Effective decision-making is key to meeting the ‘retail’ Scorecarding and ‘factory’ demands of the financial services organi- Cognos scorecarding communicates strategy and objec- zation. With performance management, you gain access tives through a metrics-based method of management. to the reliable, timely information that drives better It answers “How are we doing” by providing people decisions. While you may have any number of decisions with the information they need to take ownership of to make, they depend on answers to these fundamental, their performance—visibility into strategy, understand- interrelated questions: ing the part they play in making the strategy succeed, and the metrics to measure their success. • How are we doing—A gauge of the most critical indi- cators for your organization. By enabling the strategic alignment of program objectives against financial, customer, and business process metrics, • Why—The ability to dig deeper into current issues, you can answer at any time the central question: Are we successes, or problems in order to understand what making progress on the things that must be done? led to the results. Use Cognos scorecarding to: • What should we be doing—The facility to set plans, allocate resources, monitor them, and adapt. • Improve efficiency of front, middle, and back-end functions by setting targets and scorecarding the Cognos provides an integrated, best-practices platform processes. for financial services performance management. It inte- grates and leverages your critical data, and delivers the • Monitor sales and margin performance by channel, scorecarding, reporting and analysis, and planning tools product line, region, or division. you need to manage and optimize performance. • Track financial goals in terms of growth, profitability, With integrated plans, business intelligence, and and key controllable expenses. metrics, you can dramatically improve your under- • Develop financial metrics to track costs, losses, and standing of the current state of your organization and risk-based returns; or customer loyalty and margin improve your ability to make timely, informed decisions metrics (products sold, revenue, customer risk). in all areas—operations; sales and marketing; risk man- agement; customer service; finance. • Monitor Straight-through Processing initiatives to gain timely, in-context views of operational efficiency. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 4
    • EXAMPLES OF BI TOOLS DEPLOYMENT The Problem: Disparate reports, requiring lots of human capital and dollars to maintain, inflexible, and not linked to specific business initiatives. The cycle time to get the right information to the right Reporting and analysis people severely dilutes the impact the information Financial organizations amass large amounts of data had to begin with, since its value is diluted over time. that reside in many systems—product and customer The Solution: Deploy Web-based reporting from a databases, core processing, ERP, finance, HR, plan- database that represents a single version of the truth. ning—often across multiple businesses and locations. Ensure that the report tool can be integrated into Consolidating this information is a huge challenge. It is dashboards or scorecards and is both flexible and especially difficult given that there can be as many tools easy to use. used to analyze and report on the data. The Problem: How to analyze tons of data. Reports As well, in many cases, managers have to request analy- have to be customized, executed, modified and sis data from central planning teams, IT departments, rerun. Queries by the technical people must be or other business units. This process inevitably leads to created every time someone needs an answer. longer lead times, poor quality analysis, and informa- tion inconsistencies. The Solution: A data cube or power cube works wonders. Business users can get quick answers to Cognos reporting and analysis consolidates and lever- simple questions, view trends, and even display the ages your critical data and turns it into real-time, mean- breakdown of items on a customer statement. ingful information relevant to your organization’s Ensure that the tool is Web-based, that it is fed by a mission. You can spot broader issues and drill down to single validated database, and that it can be inte- discover underlying causes and details. grated with other BI tools. The secure, self-service Web-based reporting and analy- Source: “Smarter Approach to Business Intelligence Tools.” sis environment means everyone can access timely, con- Bank Technology News, August 2005. sistent information delivered in the right way—across all roles and locations. No more dealing with weekly or monthly batch reports. With standardized reporting and analysis, you can accurately assess the “Why” behind performance. This provides the necessary context against which deci- sions can be made. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 5
    • THE OTHER SIDE: REGULATORY COMPLIANCE AND RISK MANAGEMENT Sarbanes-Oxley. Basel II. IFRS. The Patriot Act. MIFID. to capture and analyze the indicators of operational Accounting bodies, rating agencies, industry trade risk. Analyze and report on controls for better manage- organizations, and regulators have issued a broad array ment—determine what controls are on track for audit, of rules and regulations to defend the interest of stake- are performing well, or poorly. holders. As many as 40 regulatory changes exist or are Cognos also provides compliance reporting in conjunc- in the pipeline, each requiring its own set of disclosures, tion with other financial services reporting across the reports, and process improvements. enterprise—leading to the transparency, accuracy, disclo- Making a performance management investment within sure, and speed that regulators and shareholders demand. the context of compliance can deliver greater return to your company. It can help you tackle regulatory chal- Scorecarding lenges by providing the necessary transparency into Cognos scorecarding lets you create compliance score- operations and systems. As well, it can address funda- cards to define and monitor elements such as operational mental inefficiencies that impact both compliance and risk exposures, risk KPIs, and financial statement meas- operational performance—including error-prone ures. With increased transparency and accountability, spreadsheet-based planning and budgeting, paper-based you can clarify the status of key metrics for employees, or disparate systems, and data inconsistencies. boards, regulatory bodies, and other stakeholders. Simply meeting compliance requirements does not offer Planning any competitive advantage, but greater transparency Effective planning drives higher levels of predictable and performance management do. Performance man- financial and operational performance. In terms of agement can help you tap the potential of rich and compliance, predictability results in fewer regulatory varied data sources, ensure seamless operations, and investor surprises. enhance customer relations, reduce the burden on IT, Cognos planning links operational plans to financial and build shareholder value. plans, allowing you to see in real time the effects of operational changes on the financial bottom line. It lets “Increasing investment of 10-15% in a Basel II you leverage your aggregate, clean data to make plans program by focusing on business change is expected and forecasts that stakeholders can trust. to increase profitability by 10 basis points of assets.” Reporting and analysis Source: The Banker, December 2004. Cognos analysis leverages your information assets, giving you insight into financial and business opera- tions. This visibility provides greater transparency, allowing you to drill-through to the root cause of errors and events. Addressing cause and effect ensures accountability and improves business performance. With reporting and analysis, you can integrate data about market, credit, and operational risk exposures, and link the information to your financial applications FINANCIAL SERVICES PERFORMANCE MANAGEMENT 6
    • Use Cognos reporting and analysis to: What’s needed is a solution that replaces a fragmented process with continuous, collaborative planning that • Identify, report on, and analyze costs of trade, staff delivers up-to-date insight into performance. Cognos performance, risk management, branch profitability, planning helps you build a foundation for higher per- loan performance, and customer profitability. formance by connecting strategy to plans, targets, and • Create a customer-centric view that incorporates the operational objectives. full scope of a customer’s relationship, including retail Cognos planning addresses “What should we be doing” accounts, cash management or investment accounts, by allowing you to define goals, and turn them into dis- life insurance policies, loans, and leases. crete plans and budgets for the entire organization. • Integrate demographic or customer data into internal Plans can be built to maximize operational effective- sales data to analyze and flag marketing, up-sell, and ness, and they can be realigned as conditions change. cross-sell opportunities. Use Cognos planning to: • Conduct litigation, subrogation, and salvage analysis. • Develop long-range, financial, cost center, and head- • Report on performance by product, channel, division, count plans, forecasts, and budgets across the enterprise. or region. • Increase accountability by allowing all levels of the • Extend extranet capabilities to customers, partners, organization to contribute to the planning process. brokers, and suppliers. • Conduct what-if scenarios for different revenue pro- Planning and budgeting jections or changes in business lines. Many organizations still use spreadsheets as their • Develop client retention plans—objectives, key per- primary vehicle for planning and budgeting. formance factors in retaining clients, and KPIs and Spreadsheet-based systems create islands of financial metrics that measure loyalty. and planning data, where everyone works independ- • Project underwriting margins to gain a more accurate ently. This disconnected approach does little to support picture of future earnings per share. management goals, cross-functional collaboration, or the dynamic planning cycles needed to address changing • Create branch profitability models to capture loan conditions or requirements. and deposit volumes and spreads, net interest income, staffing decisions, and compensation expenses. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 7
    • YO U R PAT H TO P E R F O R M A N C E MANAGEMENT WITH COGNOS Where organizations begin on the path to performance Starting point 1—the one thing management will differ, and how quickly they imple- If you were to do one thing to improve your organiza- ment the platform will vary. The bottom line is that you tion’s performance, what would it be? For some, it is can take an incremental approach, starting with one per- moving from a product-centric to a customer-centric formance management component and building from business model. For others, it is increasing cross-sell there. Every time you address one element in the system, opportunities. For others still, it is improving financial you strengthen your decision-making and performance. control. Cognos technology lets you understand the information to do the one important thing, and then grow from there. FINANCIAL SERVICES CUSTOMERS IMPROVE THEIR PERFORMANCE WITH COGNOS Cognos business intelligence and planning solutions have lower cost of ownership and higher customer satisfaction. been tried, proven, and established in thousands of finan- cial services organizations, including nine of the top 10 Leverage existing investments banks in the US and Europe, the top 10 investment banks Cognos software works with your data and your IT environ- worldwide, six of the top 10 insurance companies globally, ment, allowing you to leverage your existing infrastructure as well as eight of the top US asset managers. and applications to increase the value of your investments. These customers recognize Cognos for its innovation, Enterprise scale vision, ability to execute, and technology leadership in per- Cognos built its technology to handle the data volumes, level formance management. of activity, and complex business and IT environments of the Fortune 1000 and other large enterprises. Our technical Completeness of vision capabilities streamline administration, support, security, and Cognos has built a holistic, integrated technology frame- validation requirements, which reduces costs and risk. work. In addition to planning, analysis, and scorecarding, we provide common user portals, common data defini- Award-winning support tions, and standards-based technologies to simplify your Cognos supports its integrated performance management business and IT environment. capabilities with award-winning Global Customer Services. We consistently top the list for best software Zero-footprint support and services innovation with customers and Cognos’ zero-footprint, Web-based platform lets users support professionals. Our consultants can design and access information with just a browser. It simplifies your implement a solution that grows as your organization environment, while improving user adoption. No plug-ins grows to deliver value for years to come. to install and no end-user complexity translates into a FINANCIAL SERVICES PERFORMANCE MANAGEMENT 8
    • Starting point 2—the data into a scorecard that shows you status, relationships, Leverage your existing data resources. You may have data and interdependencies and gives you the ability to drill locked away in a variety of databases and systems, with no through to the BI layer for more information. effective way to report against them. Access and integrate this data, and then let everyone generate their own timely, Starting point 4—the plan meaningful reports. With a firm grasp on the “Why” Change your budget into a rolling, responsive forecast. behind performance, you are ready to move forward. Go beyond the unwieldy spreadsheet-based system. Use technology to engage all cost centers in preparing real- Starting point 3—the scorecard istic forecasts that take into account your organization’s Take advantage of a scorecard or other method to drive overall strategy. Save time and resources usually com- your performance or compliance agenda. Monitor the mitted to this process, and turn them into better analy- key metrics that map to your business strategy. Leverage sis and forward-looking thinking. your existing data resources to deliver this information DELIVERING ON PERFORMANCE In the face of volatile markets, waning investor confi- A performance management system can address these dence, and a competitive landscape characterized by demands—by integrating data from operational, trans- emerging players and newly merged financial service actional, and financial sources and presenting informa- giants, your organization needs to shore up business, tion that provides performance views from key information, and IT strategies as never before. perspectives (customer, product, channel, process, financial controls), highlights issues clearly, and pro- More than ever, you need to make better decisions and vides actionable answers. respond quickly, to have an impact when and where it matters most. Effective management oversight depends Whether your goal is customer retention, better cross- on having access to accurate, current information you sell opportunities, or operating efficiency, Cognos finan- can act on—you need to know how you are doing, why, cial services performance management delivers the deep and what you should be doing. insight you need. Our decision-making platform can help you leverage your data and resources—to better serve the customer, while maximizing value and return. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 9
    • ABOUT COGNOS Cognos is the world leader in business intelligence and enterprise planning software. Our solutions for corpo- rate performance management let organizations drive performance with planning, budgeting and consolida- tion, monitor it with scorecarding, and understand it with business intelligence reporting and analysis. Cognos is the only vendor to support all of these key management activities in a complete, integrated solu- tion. Founded in 1969, Cognos now serves more than 23,000 customers in over 135 countries. FINANCIAL SERVICES PERFORMANCE MANAGEMENT 10
    • WWW.COGNOS.COM