Financial Services: it’s not about the money...
The financial services sector might have thought the worst was over by the start of 2012. Blamed for the global economic meltdown that was entering its fifth year, and made pariah in the court of public opinion, bankers in particular must have been hoping the worst was over.
So a record £312m in FSA fines for the year – including a £160m hit for UBS over LIBOR fixing – might have seemed like a blow upon a bruise. In the US, it was a hammer blow, with $10.7bn in fines levied on banks during the year. (Bear in mind, many of the fines related to LIBOR fixing hadn’t been settled by New Year).
At the same time, financial services businesses across the board have been rationalizing their workforces, wrestling with remuneration and having to cope with new and onerous regulations in most jurisdictions. Basel III might have been watered down – a symptom of the precarious state of the industry, perhaps. But compliance officers and back office teams are still working overtime to deal with that and other regulations in an expanding rule-book.
Against the backdrop of such pressures, it’s easy to assume that taking a long hard look at the money financial institutions are spending with third-party suppliers might be tinkering at the edges. What’s a couple of million in better supply chain management or procurement when the balance sheet is light a few billion?
Answer? It’s not about the money.
Actually, it is true that every little helps. In retail banking, for example, where wafer-thin margins make the prospect of ring-fencing investment banking activity seem calamitous, delivering real and sustained savings in the share of operating revenues going to suppliers could make a big difference to the business model.
But it’s worth bearing in mind that financial services has long been at the forefront of outsourcing back office and customer service functions. So smarter management of those suppliers, right now, can not only deliver straight to the bottom line – it can also ensure the business’s supply chain make-up continues to match its strategy.
With the industry in flux, the needs of every financial services business are changing. Whether it’s lower headcount, shifting global priorities or a need to develop new lines of business, taking a long look at the way the entire value chain and support infrastructure works is an essential adjunct to change elsewhere in the organization.