It's Time to Upgrade the Way Banks Plan

What if your institution could significantly improve the quality and efficiency of planning and budgeting. Well, that’s the idea behind Continuous Integrated Planning (CIP).

Your planning cycle is reduced from weeks to days and becomes a continuous activity rather than a cumbersome and static annual effort. Analytics are accessible from a single online platform that replaces offline models. Planning teams distribute forecasting efforts and yet retain transparency into the underlying drivers of business performance and constraints under which the bank operates. And ultimately, information is provided to management that is more timely, accurate, and insightful, yielding better decisions and outcomes for the organization.

For institutions combating resource intensive, and often disconnected manual planning processes, implementing Continuous Integrated Planning can save considerable time and money

At Oliver Wyman, we have been helping clients re-examine their end-to-end strategic planning efforts—spanning people, processes, capabilities and infrastructure. Our paper talks about our lessons learned and perspectives on how banks can modernize their strategic planning and budgeting capabilities. We highlight the challenges facing the planning functions at most banks, provide the “must haves” when upgrading to CIP, and offer perspectives on the organizational and technological transformation needed to help your institution successfully get there.

WHY CONTINUOUS INTEGRATED PLANNING?

For those institutions already beginning to upgrade their capabilities, CIP can be used to accelerate the transformation of the planning function, eliminating large swaths of low value activities and introducing more modern forecasting practices aligned with the bank’s broader digital strategy. Regardless of starting position, once implemented, CIP provides management with the necessary information to more confidently manage scarce financial resources and ultimately improves enterprise profitability. Banks that have invested in these capabilities will have a significant competitive advantage over those that still rely on disconnected and largely manual capabilities.

The CIP rewards are substantial. We estimate with changes to both infrastructure and processes, annual planning aggregation times can be reduced from the typical 8–12 weeks to approximately 5–10 business days at most institutions, and ROE can be improved by 2–3 percent through improved decision making, active management of the business portfolio, and ultimately better financial resource management

1THE CHALLENGES

The strategic planning and budgeting processes at many financial institutions have not kept up with the times, even as these processes have taken on increased importance given market headwinds and tighter regulatory requirements. Existing processes consume substantial resources and often depend on a host of disconnected analytics and manual efforts that obscure transparency and reduce nimbleness. The results of these efforts are often static, accounting-oriented, and rely on assumptions that may no longer hold by the time planning efforts wrap up.
2THE TRANSFORMATION—WHAT BANKS CAN DO TODAY

Oliver Wyman believes that Continuous Integrated Planning (CIP) is a better way to plan. At its highest level, migrating to CIP entails two fundamental shifts in the way banks plan. First, it requires a shift from a linear, static planning process to a continuous planning process—where forecasts are “always on” and refreshed with limited manual intervention. Second, it requires a shift from disconnected to integrated planning. Here all forecasting models and calculations are brought online and are connected to the planning infrastructure— enabling nearly autonomous forecasting, insight generation based on drivers of business performance, ‘what if’ analyses, and real-time transparency into the impact of actions on enterprise profitability measures and regulatory constraints.
3THE REWARDS—EFFICIENCY AND COST SAVINGS

Modernizing the planning function is not a trivial undertaking, but the rewards are substantial. We estimate with changes to both infrastructure and processes, annual planning aggregation times can be reduced from the typical 8–12 weeks to approximately 5–10 business days at most institutions, and monthly updates and sensitivity analysis can be completed over 2–3 business days.
4THE REWARDS—IMPROVED PROFITABILITY

Operational efficiency gains, while sizeable, are only a small part of the equation. The integration of forecasting activities on a common platform across treasury, tax, capital, risk, business, and support functions can lead to better decisions being made that improve the enterprise’s return on equity (ROE). We conservatively estimate that it is possible with the help of CIP to improve ROE by 2–3 percent through improved decision making, active management of the business portfolio, and ultimately better financial resource management. Additionally, we estimate incremental ROE improvements of approximately 0.5–1 percent due to enhanced transparency into cost drivers and initiative performance.
5THE REWARDS—UPGRADING THE FINANCE FUNCTION

Beyond enabling better decision making, upgrading the planning function to CIP shifts the activities of the finance function from lower value tasks such as data collection, reconciliation and manual ad hoc analysis, to higher value activities related to forecast improvement and insight generation. Ultimately, efforts to upgrade the planning process can be used by CFOs to both pilot and accelerate the needed transitioning and upgrading of employee skills within the finance function.

PLANNING "MUST HAVES"

Below we highlight several of the key conceptual underpinnings that warrant specific attention and that are common needs across most banks. The seven core elements represent a subset of the capabilities we believe to be important to Continuous Integrated Planning (CIP) and common across bank implementation efforts.

Continuous Integrated Planning (CIP) is ambitious and requires a long-term vision as well as the leadership and institutional commitment needed to implement the infrastructure over several years.

At its core, achieving CIP involves a fundamental change in the way banks plan from end-to-end. Accordingly, such a transformation requires improvements that are both technological and organizational in nature.

GET STARTED. THE MOST IMPORTANT STEP IS TO BEGIN

There are several areas where we have helped clients jump start their journey and achieve rapid progress in the transformation of the planning function. These include the build-out of higher-level strategic enterprise what-if capabilities, the introduction of driver-based planning, redesign of capital, cost, and liquidity attribution methodologies, and development of constraint and stress capital calculators, amongst other capabilities.

Failing to start is perhaps the biggest risk, and we encourage institutions to start modestly with thoughtful and focused pilots rather than embark on a risky “big bang” transformation.

Large, complex banking institutions that do not have the luxury to wait have already begun the multi-year journeys required to upgrade their capabilities, placing several of these institutions at a competitive and strategic advantage. For those institutions that are not underway or have not yet crystalized their vision for planning, the time to begin is now.

READ OUR REPORT