COVID-19 continues to impact every aspect of our society and business. Financial services institutions are at the center of the crisis providing — the much-needed financial stability that is critical to revitalizing our economy.
While the current imperative is operational resiliency, customer and employee satisfaction, and preserving the balance sheet, we expect an increased focus on profitability and margin improvement in the medium to long term. Financial institutions should prepare for the new normal and ensure capital is allocated strategically with limited resources amid extraordinary stresses.
Institutions that adopt a strategic and cost disciplined approach — leveraging emerging technologies, adjusting for continuously evolving work, workforce and workplace dynamics, and customers’ needs and expectations — will emerge as winners. Strategic Cost Management (SCM) provides an integrated end-to-end approach to optimize cost structure, while maintaining focus on the growth journey.
Financial institutions are at various stages in their quest for efficiency, with many having attempted cost reduction initiatives. However, our research indicates that many cost reduction programs fail to meet their objectives.
The lack of a strategic mindset and disciplined execution can result in suboptimal and unsustainable results.
Financial institutions should adopt a methodical approach founded on principles of customer focus, intelligent risk-taking, clear accountability, and open communication. Further, breaking the cost program down into logical milestones and using opportunities to create near-term wins to fund the longer-term strategic objectives will help establish a solid foundation for sustainable change.
Tactically, foundational principles of SCM can be realized by mobilizing and executing a program that continuously demonstrates value and sequential progression toward the set objectives. Broadly, such a program can be organized in three phases which are all supported by rigorous project and change management principles, methodologies and tools.
Guidehouse’s SCM methodology has been developed by partnering with many global financial institutions and has continuously evolved to incorporate industry trends and capabilities. We continue to actively leverage this methodology to identify and implement sustainable and actionable cost optimization opportunities across a variety of functions (Front-to-Back), at the corporate and business-unit level.