Smarter lending leads to Business Agility


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This presentation was given during Impact 2012 in Mumbai by Mr. Mike McChesney, Global WebSphere Business Agility Tiger Team.

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  • IT analysts recognizes the need for BPM to be inclusive of a variety of capabilities and that BPM Suites must be sensitive to the type of business you have. Forrester recognizes three types of processes – Human Centric, Document Centric and Integration Centric. Recognizing IBM’s breadth of capability across all these areas, Forrester has rated IBM a leader in it’s most recent “Wave” evaluations for BPM vendors in each of these areas.
  • ECM – data capture, content analyticsODM – Rules, Events
  • i/OS App:Simple task forms and intelligent “coaches” guide user inputsAttach supporting documents and images to any process taskImprove productivity among business stakeholders through dynamic communication of activities – reduce ‘back channel” emails, messages, etc.Improve productivity among business stakeholders through dynamic communication of activities – reduce ‘back channel” emails, messages, etc.Attach supporting documents and images to any process taskSimple task forms and intelligent “coaches” guide user inputs
  • Smarter lending leads to Business Agility

    1. 1. Lending Business Agility Mike McChesney Global WebSphere Business Agility Tiger Team Smarter Lending© 2011 IBM Corporation
    2. 2. Agenda Lending Business Agility Mike McChesney  IBM POV- Dynamics in Banking/Lending Global WebSphere Business Agility Tiger Team  WHY BPM  IBM BPM in Lending  IBM Capabilities and Architecture Smarter Lending© 2011 IBM Corporation
    3. 3. Business Agility for Smarter LendingThere are dramatic forces of change across financial institutions… ECONOMY TRUST Weak conditions impact Rebuilding trust and investment decisions and confidence across the reduce need for financial system is critical to future services growth and stability COMPETITION REGULATION Intensified competition Radically increased with increased oversight ushering in a M&A, divestitures and new era of increased entrance of non-bank government intervention service providers CLIENTS CAPITALIZATION Rapidly evolving Mature markets and expectations for emerging markets alike offerings, service focus on rebuilding their unbiased advice, and capital reserves convenience © 2012 IBM Corporation Smarter Lending 3
    4. 4. Business Agility for Smarter Lending ….Impacting the world‘s most complex system. • A global system moves more than $74T of money each day • A financial supply chain that is Financial massively interconnected and institutions interdependent • Public and private partnerships Compliance Surveillance and monitoring are suboptimal cross-border Soundness Regulators Supervisors and within borders Stability • System requires 24/7 Laws and continuous flow of information rules Standards • Rapid increase in types of data Policy makers entering financial system from ―real economy‖ digitization • A criminal element that grows more sophisticated • In total the system intermediates the needs of billions of people in 190 countries in thousands of languages. An adaptive system evolving organically © 2012 IBM Corporation Smarter Lending 4
    5. 5. Business Agility for Smarter Lending The need and opportunity for progress are clear… 50% 93% 25 billion Percentage of of the 285 million Global trading systems customers who would electronic attacks are are under extreme give their bank only focused on the finance stress, handling billions two chances to fail sector, and well over of market data before considering half were detected by messages each day. a change in banks. third parties 90% $1M in fraud 21x reduction eliminated more > > in manual each month messages > > process Streamlined operations: Large US Retail Bank: Automated trading: Bank of New York Mellon Financial Crime TD Bank Financial Group The bank streamlined On the second day of IBM developed a first-of-a- operations to achieve a production, the new system kind system capable of 90% reduction in manual prevented $500k in a single consuming, analyzing and touch points in the check- transaction, a additional acting on real-time market clearing process—cutting $733k of activities in the first data while maintaining sub- processing errors and month and confirmed $1M on millisecond response times required remediation. a monthly basis. even under extreme data loads. © 2012 IBM Corporation Smarter Lending 5
    6. 6. Business Agility for Smarter LendingWith a unrelenting focus on the client the imperatives forfinancial services are threefold… CAPITAL AND LIQUIDITY COST AND COMPLEXITY RISK AND TRANSPARENCYCapital Cost base Risk exposures Raise capital through public and  Evaluate headcount &  Address risk private investment compensation models, scenarios, stress testing Reduce leverage  Rationalize recent mergers & and model input weaknesses acquisitions  Improve governance modelsLiquidity Strategic simplification Risk portfolio management Utilize government liquidity  IT Modernisation  Ensure comprehensive, accurate facilities Leverage alternative forms of  Outsource non-core components and timely data  Create a risk-based culture financing PartnershipsM&A  Reduce the IT/business Transparency > > disconnect  Analyze and report enterprise- > Jettison all but core assets / > restructure business model  Standardize vendors wide risk positions  Connect to new utilities  Proactively create transparency Reduce government ownership for regulators, shareholders and over time (if applicable) clients © 2012 IBM Corporation Smarter Lending 6
    7. 7. Business Agility for Smarter LendingTowerGroup Top 10 Technology Initiatives forConsumer Lending (2011) Business Drivers Strategic Responses •Unprecedented regulatory compliance change •Shift to nondiscretionary compliance IT projects •Regulators seeking standardized, transparent •Continue improving risk management processes and rationalized data •Delay new IT and core systems replacement •Weak economic recovery; sovereign debt crisis •Reexamine core processes and channel choice •Flat to declining loan demand and revenue, housing •Promote information transparency and clarity market dynamics •Focus on customer segmentation, evaluation, and •Asset-backed securities (ABS) investor information retention requirements/lawsuits •Ongoing FSI failures and consolidation •Burden of distressed asset management/lawsuit Top 10 Technology Initiatives for Consumer Lending (2011) New, maintenance, Integrated credit, Core lending systems Data management for Analytics and and replacement collateral, and fraud transformation business intelligence optimization for technology for risk management loan decisioning compliance Enterprise content Refined view of Redefining and Multichannel lending Mobile lending and and process customer relationship restructuring core and servicing servicing management and value processing IT and realignment operations Source: TowerGroup © 2012 IBM Corporation Smarter Lending 7
    8. 8. Business Agility for Smarter LendingMortgage Industry TrendsThe ugly, the bad, the goodThe ugly….. Loss Mitigation and Foreclosure The politics of housing and the future of the GSE‘s No private securitizationsThe bad… Changing regulatory environment QRM Origination cycle timesThe good….. New book is best ever with high quality loans and high borrower FICO scores Low rates keeping volumes up Survivors are poised to capture new opportunities in a consolidated market New business models © 2012 IBM Corporation Smarter Lending 8
    9. 9. Business Agility for Smarter Lending Customer Satisfaction Declines As Loan Application Timelines Increase (2008-2010)(Days From Mortgage Application To Loan Closing) 757 739 734 Customer Satisfaction Rating (1) 52.1 46.9 30 +16.9 +7.5 Source: JD Power, TowerGroup analysis (1) Customer satisfaction rating measured on a scale of 1 to 1000 © 2012 IBM Corporation Smarter Lending 9
    10. 10. Business Agility for Smarter Lending … But banks are bottlenecked by growing IT complexity and lack of capacity to meet the demands of the business The need for visible and flexible connections across the lending ecosystem (customers, vendors, partners) Proliferation of rigid packaged and "homegrown" loan applications Exploding volume of unstructured information Time to market to capture market opportunities Lending platforms vs. product silos 360 degree view of the customer Common rules across platforms and products Real time decisioning Process standardization and reuse Collaboration with business users IT organizations must deliver shared and Measured on business outcomes reusable solutions more quickly and at lower cost © 2012 IBM Corporation Smarter Lending 10
    11. 11. Business Agility for Smarter Lending Why IBM Business Agility & Smarter Lending? INSTRUMENTED INTERCONNECTED INTELLIGENT SMARTER LENDING + + = Financial products are A smart bank is built A smart bank enables A smart bank decomposed and on systems that the rapid, intelligent anticipates client managed at the advance processing to analysis of a vast mix needs and delivers atomic level, allowing better automate of structured and innovative products the participants to transactions with unstructured data to more quickly and measure, control, sen counterparties, partne improve insight, consistently than the se and respond rs and suppliers to enable informed competition. It can quickly and precisely enable innovation judgment and fight respond nimbly to based on a ―single across the value abuse. changes in market source of truth.‖ chain. conditions. © 2012 IBM Corporation Smarter Lending 11
    12. 12. Agenda Lending Business Agility Mike McChesney  IBM POV- Dynamics in Banking/Lending Global WebSphere Business Agility Tiger Team  WHY BPM  IBM BPM in Lending  IBM Capabilities and Architecture Smarter Lending© 2011 IBM Corporation
    13. 13. Business Agility for Smarter Lending McKinsey 2012 Survey: Process is King Even in their dreams, they put process above creating new products and services! McKinsey 2012 Technology Survey of 927 IT and non-IT Executives, December 201113 © 2012 IBM Corporation Smarter Lending 13
    14. 14. Business Agility for Smarter Lending IBM is the Undisputed Leader in All Things Process IBM #1 in BPM with 24.7% market share IBM #1 in Rules © 2012 IBM Corporation Smarter Lending 1414
    15. 15. Business Agility for Smarter LendingChallenges of Traditional Process Management Processes inside applications – Processes are rigid and costly to change – IT changes needed lag far behind – With passage of time, changes may no longer be relevant Processes that span applications and organizational boundaries – Any changes have implications across all applications – Inefficient and ineffective processes remain long after the need for change has been recognized Managed manual processes – No automation exists to enable on-the-fly process changes – No automation exists to trigger processes based on events or patterns Ad-hoc processes – Most systems are not equipped to capture ad-hoc work – Most ad-hoc processes often not tracked or monitored – Costs remain hidden and ad-hoc processes remain ad-hoc Opportunities for business optimization and business innovation are lost © 2012 IBM Corporation Smarter Lending 15
    16. 16. Business Agility for Smarter Lending Business Chaos Begs for Process Improvement Customer Service Finance 1. Informal tasks and Account Administration and Ops communication (e.g. Paper or email) Executive Management 2. Inefficient working environment spans systems 3. Inconsistent prioritization 4. Inconsistent decision making Invoice 5. Incomplete or inaccurate Reconciliation Teams data flow between systems 3‘rd 6. Lack of control over system Party and business events Services (exceptions) Passport 7. Poor visibility into process Oracle performance 8. Tribal Knowledge QA Customer Problems: • Cannot grow efficiently • Poor customer satisfaction • Limited visibility16 © 2012 IBM Corporation Smarter Lending 16
    17. 17. Business Agility for Smarter LendingProcess and Decision Management Bring Order to Chaos Finance 1. Automatically prioritize and and Ops route work Risk Management Teams Account Executive 2. Guide users through Administration Management decisions 3. Standardize resolution across geographies Customer Service 4. Leverage existing systems and data 5. Monitor for business events and initiates action 6. Real-time visibility and PROCESS process control 7. Automate decisions 8. Reduce errors and improve accuracy 9. Improve consistency across geography, channel, division … Customer Benefits: • Huge reduction in manual interactions • Faster Issue Resolution • More flexible, responsive systems © 2012 IBM Corporation Smarter Lending 17
    18. 18. Business Agility for Smarter Lending The Essential BPM Capabilities • Modeling Finance Customer Executive and Ops Service Management • Monitoring Account • Automation Administration Risk Management Teams • Governance • Optimization • Rules • Business Data • Documents • Events • Integration • Collaboration • Analytics © 2012 IBM Corporation Smarter Lending 18
    19. 19. Business Agility for Smarter LendingBPM Capabilities Agenda Process Discovery/Analysis/design Process orchestration and Active Content Decision Services-Rules and Events Process Visibility © 2012 IBM Corporation Smarter Lending 19
    20. 20. Business Agility for Smarter LendingThe BPM Lifecycle Empowers Business and IT to Collaborate andContinuously Optimize Processes Deploy, Execute, and Change  Automate processes to improve operational efficiency and profitability  Adapt and collaboratively respond to changeProcess Discovery Continuously Optimize Monitor, Analyze, and Modeling Predict and Act Sales Operations Partners Finance Assess, capture, and  Monitor implemented analyze core processes process performance Align business strategy End-to-End Processes  Track metrics to and IT execution measure and optimize business operations  Guided optimization Governance and Compliance Manage and reuse shared services to streamline development and deployment Maintain business and IT consistency as well as organizational and regulatory policy © 2012 IBM Corporation Smarter Lending 20
    21. 21. Business Agility for Smarter Lending Process Analytics and Social Collaboration in Real Time 4 1 3 Performance Data Warehouse 1. Single BPMN model drives monitoring as well as execution 2. Data analysis performed 2 continuously on-the-fly 3 Real-time visibility. to tasks, SLAs in jeopardy Process Server 4. Visualize ―hot spots‖ on diagram BPMN Rules Monitoring BPEL ESB and drill down for insights and optimization Out-of-box Configurable Optional Process Portal Business Space Microsoft Add-ons © 2012 IBM Corporation Smarter Lending 21
    22. 22. Business Agility for Smarter LendingRules and Events Enable Optimized BPM Solutions Automate, manage and govern operational decisions Event Management: Implements Action: Upsell to otherEvent: Customer Loan Request pattern detection based on an event products/services history – as data set evolves, what of interest is transpiring? Business Event Processing Automated Evaluate and Automated Detect Events: Detect Create Actions: Enrichment Enrichment PatternsCall out for a decision How can we ‗personalize‘ the offer based on client behavior? What terms and conditions should we offer the client? Rules Processing Business Rules Management: Rule Flow Implements a decision model - Business Rules given a snapshot view of Decision Tables data, provides decision services representing best course of action © 2012 IBM Corporation Smarter Lending 22
    23. 23. Business Agility for Smarter LendingExtend Visibility with Business Activity Monitoring Understand up-to- minute business Identify performance by trends, forecast monitoring KPIs events, make smart choices Detect, respon d rapidly to change Continuously improve key Customize business dashboards processes easily Rebalance human workload on the fly Leverage mobile devices © 2012 IBM Corporation Smarter Lending 23
    24. 24. Business Agility for Smarter LendingInstrument “Shadow Processes” IBM Business Monitor Oracle BPM Third Party Decision Anything! Solutions Connections Services © 2012 IBM Corporation Smarter Lending 24
    25. 25. Business Agility for Smarter LendingBPM Projects from Inception to Production in ~90 Days • BPM Analysts (1) • Engagement Manager (1) • Infrastructure Specialists (1) • Add BPM Developers (2) • Add Technical Architect (1) • + Infrastructure Specialists (1) Weeks Week Week 1 Weeks 2-3 Weeks 4 to 10 11 to 12 13 Detailed Discovery Iterative Development with frequent Playbacks Test Go Live Requirements Agreement on Agreement on Agreement that Technical Agreement on Data,Checkpoints Project Scope & Process Flow and Process Meets Validation and User UI, and Integrations Goals Routing Business Goals Acceptance PLAYBACK 0 “Define the Process” • As-Is and To-Be Process Maps • User Stories • Problems and Pain Points • KPIs/Metrics/SLAs PLAYBACK 1 Series PLAYBACK 2 Series PLAYBACK 3 Series • Opportunities for “Build the Process” “Connect into the “Refine the Delivery” Improvement Infrastructure” • Process Triage • Author the Business Process • Model Corner Cases • Process Charter and ROI Model • Data Flow Through • Expanded Search Capabilities • Define the Roles / Participants • Other Systems of Record • Build Metrics and Performance Reports • Define the Data Elements / • SMTP (Tuning and Measurement) Variables • Data Warehouse • Other types of Processing Automation • Configure the Screens • LDAP / SSO • Feedback from Playbacks • Model the Rules across the • EAI Screens and Model Playbacks = Running the process for an audience of 1+. The main playbacks are for sign-offs of the whole Business+IT team. There are more frequent playbacks, daily/weekly etc., for smaller audiences throughout the project. © 2012 IBM Corporation Smarter Lending 25
    26. 26. Business Agility for Smarter LendingAgenda IBM POV- Dynamics in Banking IBM BPM IBM BPM in Lending IBM BPM Capabilities and Architecture © 2012 IBM Corporation Smarter Lending 26