Knowledge management in banking sector india - Abhishek nagre


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Relevance of Knowledge management in Banking sector

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Knowledge management in banking sector india - Abhishek nagre

  2. 2. KNOWLEDGE MANAGEMENT IN BANKING SECTOR Scope and relevance The banking sector is always targeted to improve their customer satisfaction that will result in revenue increasing. The process of Knowledge creation, storage and dispersion becomes essential and banks assign specialized personnel to watch over and manage these critical processes. The most common fields of knowledge management applications in a bank are risk management, marketing management, customer relationship management and performance measurement especially for the benefit of its stakeholders. Usually, in major banks investments in Knowledge Management systems such as Decision Support Systems, Data Warehouses and Data Mining are rapidly growing. These days’ bank managers use computerized support system as a personal support in decisions making. Knowledge Management System in banks ensures better and more efficient results in decision making. Banks and financial institutions rely on gathering, processing, analyzing and providing information in order to meet the needs of their customers. Banks were among the early adopters of Information and Communication Technologies. The visible benefits of ICT in day-to-day banking in India are quite visible One of the key success factors of financial institutions (FIs) is the effective and efficient application and deployment of information and knowledge systems in the areas of operations, management, accounting and marketing. However, organizations must compete for their survival through continuous improvement and innovation to gain competitive advantage. The monetary value of such investments makes it critical for the FI’s to use the right information system and knowledge management system. Throughout the world, FI’s are becoming more dependent on information system and technology. Information system has dramatically changed the core of operations of business especially the banking institutions. The growth of the knowledge management infrastructure has increased the competition among the banks which has led to strategies for customer satisfaction and human resource management improving organizational performance. Implementation of Core Banking Solution, ATM, Internet Banking, Mobile Banking, RTGS (Real-time Gross Settlement), NEFT (National Electronic Fund Transfer) etc. have enabled Indian Banks to manage increased transaction volume with large customer base in a very efficient, accurate manner leading to high level of customer satisfaction.
  3. 3. Fast-changing technology, rising customers’ expectations and tough completion from private & foreign players have led Banks in India to grow up in every aspects, including knowledge management, during the last decade. Banks are trying their best to attract and retain the best talents in the industry. Just attracting & retaining the best talents is not enough. Banks are implementing strategies to utilize these talents in the very interest of the organization. For doing so, banks have implemented State-of-the-art Infrastructures in their Banks. Banks have re-engineered/optimized various business processes. Banks also try to effectively share/spread the knowledge throughout the Bank. KNOWLEDGE ACQUISITION & CHALLENGES Knowledge can be classified into three main categories  Explicit knowledge  Implicit knowledge  Tacit knowledge Explicit knowledge can be transferred easily through books and reports so it’s a tangible form of knowledge. In banks this knowledge. In banking sector this plays a major role due to the importance given to publishing of reports and journals in order to maintain free flow of information and the transparency every year many banks publish reports on the current trends and their future plans in order to let the customers and investors know about their future plans to foster the relationship they share with them. Implicit knowledge is not explicitly captured, but can be simply reported explicitly in to papers such as the working experience. These day banks are trying hard to make banking a pleasant, hassle free, easy and customized offering in order to tap new markets and increase customer base. Banks no longer feel that their service to limited to the regular cash deposition and other simple ones – banks have entered ingot various part of the customer’s life through service innovations to help and make customer feel more engaged and happy with its services.Banbking has become an experience more than mere service due to the competition and the need to attract customers through new service innovations to be able to become customer friendly. Tacit knowledge is an intangible form of knowledge such as values and beliefs. For the organization the tacit knowledge is the most important type so it is rarely recorded and transferred.
  4. 4. The processes of knowledge management in various Banks in India are almost similar. Most Banks adopt some or all of the following measures for managing knowledge in their organization:  Orientation/Induction Training for new recruits- Banks conduct Orientation Programme or Induction Programme for all the new recruits to apprise them of the history, culture, strengths etc. of the Bank.  Training- Banks provide training to their Employees through Bank’s own Staff Training Colleges (STCs), as well as through external training provided by premiere banking institutes like Institutes for Research and Development in Banking Technology(IDRBT), Hyderabad, National Institute of Bank Management (NIBM), Pune, Bankers’ Training College(BTC), Mumbai etc. Mentoring-One senior executive (normally Chief Manager & above) acts as a mentor to a new recruit for a specific period (normally one year). The mentor trains/grooms the new employee on technical/business/functional knowledge/skills.  Brain storming session- Banks conduct brain-storming sessions on specific topics related to various banking/business/customer service etc. among staff members from different departments to generate new/innovative ideas to improve existing processes.  Review Meetings- Periodic Review Meetings (Quarterly/Monthly) are held in every departments/branches/offices to review the business position/progress of the branch/department. The minutes of the important Meetings are circulated to various employee groups of select departments/executives.  Quality Circles/Professional Circles-Voluntary groups of 3 or 4 Employees form a Quality Circle/Professional Circle & give Presentations to other Employees/Executives on a specific topic normally to improve a process/quality or provide a new idea or concept.  Intranet/eLearning/Knowledge Portals- Banks implement Intranet/eLearning/Knowledge Portals, which contain Bank’s internal circulars, policy documents, manuals etc.  Internal Magazines/News Letters-Banks publish (quarterly/monthly) magazines (usually on Banking, IT, Risk management, Economic Research etc.) where respective department contributes articles for the benefit of all employees. Knowledge management is becoming very important in almost all Banks since it simplifies the delivery of timely and effective information that are used in all the organization's processes from planning, controlling, decision making and evaluation. It helps managers in formulating strategic, tactical and operational activities in a best ways in order to achieve the organization's desired objectives.
  5. 5. Knowledge acquisition is captured by seven factor in banking sector  Valuing employees attitudes and opinions & Encouraging employees to up-skill, having a  Well-developed financial reporting system  Being market focused by actively obtaining Customer and industry information,  Being sensitive to information about changes in the Marketplace,  Employing and retaining a large number of people trained various fields  Working in partnership with international customers  Information from market surveys & researches KNOWLEDGE MANAGEMENT PROCESS The knowledge management processes are in the literature mentioned as the knowledge management practices. KM practices are defined here as observable organizational activities that are related to knowledge management. It is an interrelated set of various business processes developed in an organization to create, store, transfer, and apply the knowledge. Knowledge management practices the first stage is knowledge acquisition, knowledge creation, knowledge storage, knowledge distribution, knowledge use, and knowledge maintaining In modem banks there is no debate about the value of Knowledge Management as a business practice. Banks, insurance companies and all other players in the competitive financial service sector have recognized that knowledge is power. But the question is, how they leverage that knowledge more effectively. The knowledge, in this sense, covers the range from the bank organization’s own internal
  6. 6. intellectual capital, to the wealth of data heel on any customer's transaction. However, the overall aim of the banking sector is to enhance their customer satisfaction and increase revenue as a result. One would have thought that this form of Knowledge Management was something that financial services companies were skilled in because of the service-based nature of their business. But this does not appear to be the case. Few banks or brokerages take knowledge management seriously, while greater number of industrial companies do. Cross and Weller (2001) say that insurers have been more receptive to the benefits of knowledge management than the banking sector. The survey, conducted among top two hundred banks and one hundred insurance companies across Europe, found that while thirty percent of the overall respondents were not considering implementing a knowledge management programme- their number included only one insurer. Despite this, they warned that two thirds of European Banks are failing to exploit their intellectual capital effectively by not having a knowledge management strategy in Place. In fact, skill at knowledge management has become a critical competency for banking sector survival in the 2lst centaury. Whether or not a bank has formally recognized the importance of knowledge management by creating their internal environment. The fact is that every organization needs a person or persons to watch over and manage the creation, storage and dispersion of knowledge CHALLENGES AND PRACTICES How can banks achieve good knowledge management practices? Usually, information builds on data and knowledge, knowledge builds on both data and information and Knowledge Management includes all these three elements. It does not focus only on databases or information technology, although it may use both. Its concern is with managing its knowledge assets: creating, storing, and protecting, disseminating and using mission-critical knowledge. When people need knowledge, is it the right knowledge and is it timely and easy to locate and access is the question needed to be answered. A study has suggested applications of the Knowledge management model made by Michael Earl. She argues that the approach introduced by Earl can be useful to represent knowledge management components such as Knowledge systems, Networks, Knowledge workers and Learning organizations in the banking sector. She pointed out that a bank as a whole have must of these four key components, but each, institution highlights a different combination of them.
  7. 7. The hard indicators such as IT infrastructure, databases, and software applications are usually well developed because banks are heavily dependent on IT and cannot survive without it. On the other hand, the soft ones i.e., human resource development, promotion of cross-functional learning culture, cultivation of skills are often scattered or lacking. In addition she has pointed out that in banks there is no debate about the value of Knowledge Management as a business practice. Nevertheless, the current situation shows the banks are beginning to recognize the relevance of knowledge Management as a competitive differentiator and professional core Competencies. The most common fields of knowledge management applications in a Bank are  Risk management  Marketing management,  Customer relationship management  Performance measurement Especially for the benefit of its stakeholders. Usually, in major banks investments in Knowledge Management systems such as Decision Support Systems, Data Warehouses and Data Mining Are rapidly growing. It is a first attempt to capture and share information (even if this knowledge is closer to the explicit kind than the tacit), creating an environment, which promotes the transfer of knowledge. Also Bank’s core competencies are beginning to be considered a valuable asset. In the banking sector, it is especially emphasized that Customer Relationship Management (CRM), which includes marketing and Presentation components is essentially about Knowledge Management (In order to sort out and track relationships overtime and through transactions, it is necessary to focus on two things. Banks have great deal of knowledge about their customers but they have a great difficulty in putting that knowledge to Practical use in all encounters with an individual customer In Knowledge Management systems, the large amount of instructed Information that exists in banks may be useful when put into specific Contexts. Neural Network Technology can be used to identic patterns in Consumer behavior that can help banks to exploit cross-selling to other Needed services additionally, this type of technology in Knowledge Management systems will allow for tacit knowledge of employees to become explicit so faster decisions can be made, and more innovative products and services can reach markets more quickly. Although there are many Knowledge Management activities in the banking sector, the Knowledge Management Magazine (2001) says
  8. 8. " You cannot use Knowledge Management techniques to improve customer service and boost the bottom line until you can share that knowledge effectively and efficiently ". In Accounting and Finance, knowledge can be categorized as an intangible asset but organizations downplay the importance of their intangible assets. Highly competitive business organizations have found out that many types of sources (tangible and intangible), are needed to gain a competitive edge in order to maintain competition and superiority in the marketplace. This is shown by an increasing number of firms which give more emphasis to their intangible assets. Managing this type of asset (knowledge) through organizing, creating, sharing, and acquisition between employees, such an organization will enhance its existence in the marketplace and probably maintain progress in its banking operations. Therefore for this paper KM supports the creation of knowledge as an essential basis for a quality of operations in the banking industry. No universal definition for KM or knowledge exists. For the purpose of understanding the following definition of KM is appropriate: Knowledge management is the planning, organizing, motivating and controlling of people, processes and systematic in the organization to ensure that its knowledge-related assets are continuously improved and effectively employed. What is important in this definition is that KM involves knowledge creation, refinement, sharing, acquisition, and utilization. Thus the KM function is the organization that facilitates these processes, and the development of a system that motives employees to participate CODIFICATION IN BANKS Banks experience in Knowledge management Maryam have studied the KM practices and experiences of Indian and Iran banks. Their study shows that informal training is the main source of communication for sharing knowledge. Working on the other aspects such as IT systems, for the ease of strong and sharing experiences or lesson learned are useful. The study elaborates on capturing knowledge from industrial resources in three investigated banks, such as industrial associations, competitors, clients and suppliers. It showed that banks adopt themselves with the changing environment and can be more proactive than reactive .Today competitive benefits of strategic attempts along with knowledge management have relatively been recognized among all industries across the world. Research results give firm evidences and documents about this point that organizational culture has a positive relation with knowledge management and organizational benefits
  9. 9. programs Dr.chatdzigol Proposed an approach for integrating a system that utilizes decision support and KM to enhance the quality of the support provided to decision makers in a bank’s loan department is presented. Some of the benefits of this new system include enhanced quality of support provided to bank managers in real time decision-making and KM functions Furthermore, banking technologies contribute great benefits not only to banks themselves but also to their customers (e.g., convenience, security, improvements, better access to information, and an alternative to cash). Thus, new models which include all the factors mentioned in the above statements will provide more benefits and conveniences to banks and their customers. The value of knowledge on bank’s customers and products can erode over time. Since knowledge can get stale fast, the content in a knowledge management programme should be constantly updated, amended and deleted using results from regular survey of customers and Customer Satisfaction Index. Therefore, there is no endpoint to a knowledge management program. Like product development, knowledge management is a constantly evolving business practice which reflects the needs of banks’ customers. True enterprise-wide KM solution cannot exist without a BI-based meta-data repository. In fact, a metadata repository is the backbone of a KM solution. That is, the BI meta-data repository implements a technical solution that gathers, retains, analyses, and disseminates corporate ‘‘knowledge’’ to generate a competitive advantage in the market, the intellectual capital (data, information and knowledge) is both technical and business-related. Techniques of knowledge discovery such as on line analytical processing and data mining, though they support the management of explicit knowledge, help in mastering the hidden knowledge of the individual in the decision making process. The decision making system can be observed as decision making based on rules and decision making based on skills and knowledge INTEGRATION OF BI AND KM Studies show that IT executives believe business managers do not understand what data they need and business managers reflect their belief that IT executives lack the business acumen to make meaningful data available. There is no easy solution to this problem; the beginning of the solution is for business managers and IT managers to pledge to work together on this question(Davenport and Harris, 2007).One of the factors for BI success is team work and business-IT alignment, and is necessary to support adoption and use of BI. Second involves implementation success outcomes when democratization or universal user adoption of BI has been achieved. In past studies measuring BI success, only a small portion of users had access to BI capabilities, successful outcomes can be realized while extending BI benefits to all users. BI/MIS converts data into information, and then into knowledge that finally meets the needs of users of the system.
  10. 10. ICICI BANK AS AN EXAMPLE In India, ICICI Bank's data warehousing capability is powered by Sybase IQ's unique column-based architecture, developed specifically for analytics and business intelligence. The foundation for ICICI Bank’s wide-ranging CRM programs is a Sybase IQ-based data warehouse (The Bank initially used Teradata as its data warehouse platform and migrated to Sybase IQ a year ago.). The first iteration of the warehouse in 2000 generated a wealth of insights that enabled the bank to build customer intimacy, reduce churn, and offer cross-sell and up sell promotions. ICICI Bank deployed Power Center in 2003 as it embarked on the next phase of its warehouse, which would add data from five new sources, in addition to the initial three sources of retail banking, credit cards, and securities information. Power Center’s easy-to-use drag-and-drop interface, native connectivity to a wide range of data sources, and standards-based architecture have helped ICICI Bank’s internal IT personnel rapidly develop expertise in Informatics-based data integration .KM portal named ‘Wiseguy’ at ICICI India began on an experimental basis and carried on expanding and exploring, widening its ambit of operations. To develop ‘WiseGuy’, a team was put together encompassing KM, HR, technology and research with a brief to ‘just do it’. Indeed they did and a beta version was ready within just three months. The requirement of relatively young age group of employees to achieve an understanding of the working culture and support provided by the top management had led to the progress of the concept of Knowledge Management To a large extent, it is seen that the benefits of implementing ‘Wiseguy’ fulfils the needs of the technical and professional workforce by giving them a platform for airing their views, contributing as well as upgrading their expertise. It has also achieved in being a learning organization. KM at ICICI Bank was started in a non-dictatorial manner and its use is voluntary, but a programme of this nature cannot be expected to continue on momentum
  11. 11. In order to be successful in today’s dynamic business environment, ICICI has to continually improve and upgrade its BI system. Employees require information at all levels of the organization for ongoing decision making processes. Integration of BI and KM (Figure) increases the usage of the knowledge generated through BI system. This allows top management to understand the end-users perception and make further changes in BI system, if required. Though KM was started with the initiative taken by young age group employees with top management support, later the middle level employees also realized the benefits of KM and started using it. It may face problems in future as it is not getting upgraded in strategic manner. They need to have a meta-data repository, which supports to maintain KM repository in a systematic way and helps users to find the required information in an effective manner. TECHNOLOGY SRTATEGY FOR KM The Bank’s products and services are becoming more information intensive. In addition, the Bank generates wealth of knowledge every year through its operations across the continent. However, this is not systematically captured, codified, or disseminated. Nor is it sufficiently valued and consumed by the Bank for its own operations. This ITS aims to leverage web technology to consolidate data, information and knowledge resources on a platform that will enable the Bank to synthesize the research and knowledge into policy and advice for the RMCs. The creation of web portals and implementation of collaboration tools will enhance information sharing and team productivity. Banks can use technology to improve their performance and they can get the sustainable competitive advantage. According to our study, we can conclude that proper integration of BI & KM can help bank to get wide benefits. It includes historical context, not just a shallow examination of what is apparent and easily accessible. Instead of nuggets or pockets of information from corporate databases, it provides a true 360º view of attitudes and behaviors’, combines structured and unstructured data, meshes solicited and unsolicited feedback, and keeps a real-time pulse on business.Banks will be able to manage explicit information and thereby transform the information to knowledge which in turn can help bank in making better decisions and lead them to be in a better position in contemporary business competitive environment. This integration will not only facilitate the capturing and coding of knowledge but also enhances the retrieval and sharing of knowledge across the bank to gain strategic advantage and sustain in competitive market.
  12. 12. KM enabling technologies The leading Banks are focusing on connecting people to reusable codified knowledge, while the others with more of a personalization strategy are less dependent on IT. In fact 50% of the banks use both Database Management System and Information Retrieval Engines while the Grade A banks are the only ones to use such technologies as Management Information System, Decision Support System, Data Warehousing and Expert System. None of the banks used Desktop Video Conferencing E- mails, telephones and Intranet were among the most commonly used technologies to connect people. 50% or fewer respondents used mobiles phones, laptops and Extranet but these facilities were mainly provided to the top management team. It was the three leading banks that largely provided these facilities. In addition, there was no on-line forum or groupware where the employees could share views and opinions. Therefore, it can be inferred that, apart from the leading banks, IT is not supporting socialization for knowledge creation purposes. It is only the leading bank that used a company portal to facilitate access and availability of information to all employees. It was mainly the leading banks that could easily encode the information they possess to determine its relationship with rules and conditions. Thus, they are well ahead on using IT for contextualization purposes. So it can be inferred that the Grade banks are the ones using IT to fulfill the three main functions of connect, create and collaborate, and contextualize in support of KM Some tools used are … ETL Process: ETL packages extract data from internal and external sources, eliminate data error and redundancies, and provide tailor data for access and analysis and load to DW. An important part of this process is data cleansing where variations in data schemas and data values from disparate transactional systems are resolved. Data Mining: Data mining tools for determining patterns, generalizations, regularities and rules in data resources DW (Data warehouse): Collects relevant data into a repository, where it is organized and validated so it can serve decision-making objectives. The various stores of the business data are extracted, transformed and loaded from the transactional systems into the data warehouse. OLAP (online analytical process): Depending on the organizations requirement one or more data cubes will be created. Each OLAP database contains specific number of cubes and dimensions. OLAP is a
  13. 13. multidimensional model can then be created which supports flexible drill down and roll-up analyses (rollup analyses create progressively higher-level subtotals, moving from right to left through the list of grouping columns. Finally, it creates a grand total).