While they succeeded in reducing costs, seven years later neither efficiency ratios nor returns have shown much lasting improvement, and the economics remain significantly less attractive than they were before the crisis.
As financial institutions look forward to resuming revenue growth, they remain saddled with the challenge of how to support growth while simultaneously wringing greater efficiency from their business models. With the more obvious cost reduction opportunities already realized, we expect that realizing the next level of efficiency improvement will require more fundamental – and difficult to implement – changes in operating models. While our paper focuses mostly on banks, many of the observations in the banking sector carry over into the insurance sector or other FS sectors and in fact one of our case studies is from a commercial insurer.
These themes are explored in our whitepaper, Are You Done With Cost and Ready to Focus on Growth. The paper describes new approaches to achieving operational excellence, including value-driven productivity management of operations functions, front-to-back reengineering methods, and more radical use of utility/shared service models. We also provide case studies showing how these approaches have been used in practice to create sustainable efficiency gains.