Navigating Regulatory demands - Industrialization, a win- win approach.

The word “Industrialization” brings to mind manufacturing Industry, particularly automobile Industry. It was the 1950s, faced with unprecedent change, automobile industry took to Industrialization that spelt a paradigm shift which impacted both their business and operating models.

Banks are going through a similar phase of not just unprecedent change but unprecedented velocity of change. Challenged by reduction/ loss of revenue streams, multifarious regulatory demands, nimble competitors (Fintech and other non-traditional players offering financial services) and other market pressures, they are forced to look at cost savings and enhance process efficiencies on an ongoing basis while being innovative both on products & services offered as well as medium through which those products and services are offered  to increase stakeholder’s return on investment. Note I have said Stakeholder and not shareholder.

The landscape sets a strong case for banks to consider an “Industrialized” approach to some of its critical operations/ functions to start with. In this blog and the next one I will explore this approach in Financial Services Industry with “Industrialization of Regulatory Hub” as the use case to make the conversation specific and real.  “Regulatory Hub, as I am using it here, encompasses the regulatory processes, the analytical platform and the data constructs which together form a coherent whole that deliver on the regulatory demands.

Let me start with describing Industrialization. Simply put Industrialization is about standardization, automation, elimination of redundancies by leveraging technology and adopting lean operating models with coherence and enhanced operational efficiencies at the core, to compete and thrive in the financial market.

The objective of Industrialization is to drive innovation and efficiency by reengineering the value chain to add measurable value. This initiative is not to be mistaken with a short-term cost saving exercise but seen and executed as a strategic intervention to future proof the organization. Banks that seek competitive advantage and market leadership will lead the industrialization wave through a well-designed factory like construct, agile and efficient, stitching together relevant processes and technology with in- built intuitive Process Orchestration and Governance models. Technology is at the core of Industrialization.

 A high-level flow for drawing up a blueprint can be

• Selecting the use case that meets the criteria (detailed in the next section) to become an eligible candidate for Industrialization.
• Acknowledging upfront core challenges that need to be addressed.
• Identifying irrelevant, inefficient and repetitive/ duplicate processes
• Defining the leanest possible operating model to achieve the desired objective.
• Marking processes/ sub processes that lend themselves to automation that reduce manual interventions which are error and risk prone in addition to being high on maintenance costs. Identifying Commonality and Reuse is the mantra here.
• Planning execution by aligning with appropriate technology

Use Case selection

A process, to qualify as a relevant use case for Industrialization should answer the following questions in the affirmative

• Does it have a critical mass in terms of Volumes?
• Is the current process resource intensive?
• Are there manual interventions at multiple points?
• Is there a sizeable opportunity to reduce cost or increase revenue if the process is streamlined and automated?
• Is it a critical process for the organization?
• Can it be automated?

Processes involved for meeting regulatory demands qualify under all the above counts, hence my choice of “Regulatory Hub” as the representative use case of a critical process that will immensely benefit from Industrialization.  In my next blog, I will detail the themes and the representative process flow to bring home the fact that it lends itself elegantly to the Industrialization exercise.