Increased shareholder value through IT outsourcing
The CIO at a global universal bank wanted to quantify the shareholder value impact of a proposed major IT outsourcing transaction. Our role was to compare the detailed bids presented by the potential outsourcing vendors and help the bank choose the most attractive deal. We looked at the level and timing of cost savings proposed by each vendor, and added in a quantification of the relative risk of their proposal. Our recommendations led to the transaction being partitioned into a number of smaller deals, with service bundles given to different vendors and some services remaining in-house. As a result of our work, the bank reconsidered using the lowest cost as a key criterion in vendor selection. The managing board of the bank has now adopted this approach as a standard for making all future IT outsourcing decisions.
Additional Strategic Information Technology and Operations Experience
Technology and risk management vision
This global investment bank needed to redefine its technology and risk management roadmap for its collateralized debt obligations (CDO) business. The bank engaged our CIB, Strategic IT and Operations, and Finance and Risk practices to scope IT applications, automate and upgrade key business processes, and rationalize and prioritize existing and future IT investments.
Our approach not only balanced risk, business impact and time-to-market considerations, but also led to over 30 percent of existing investments being reallocated. We then developed an implementation roadmap and managed the ongoing program, defined and documented emerging requirements, and coached the client's technology team to embrace an agile and iterative development process. As a result, the client was able to reduce delivery lead times by up to 70 percent, while significantly reducing development risks. Today, our client is able to process a significantly higher deal volume, manage financial risks more effectively and contain the risk of operating failures.
Technology-enabled growth strategy
The CEO wanted to benchmark the company's current business growth and efficiency, and was looking for help to guide the management team in developing new growth strategies. During the initial benchmarking phase, we examined their organic growth rates and identified a number of gaps in their business and technology portfolio. On the cost side, we looked at the relative efficiency and scalability of their trading technology and operations platforms. We specifically noted how successful they had been at integrating previous acquisitions. In association with the management team, we also developed a portfolio of seven organic and acquisition-based growth initiatives across cash and derivatives trading and market data. As a result, the client has increased its growth from parity with market to several percentage points faster than the market.
Risk technology strategy and blueprinting
A large North American pension fund was experiencing significant misalignment between its business ambition to pursue attractive sources of alpha by investing in sophisticated instruments and its ability to manage risk across those investments. The lack of an integrated, total portfolio risk technology platform presented numerous operational challenges around risk attribution and aggregation and reporting. We developed a structured approach to analyze the existing risk measurement and management framework and to define the business requirements for a portfolio risk measurement platform. Our team also fleshed out a multiyear implementation roadmap that emphasized incremental value add. To enhance the accuracy and efficiency of risk reporting for improved investment decision making, we designed and implemented an integrated target risk technology platform.
IT risk management
A large player in the secondary mortgage market sought to strengthen its operational risk management capabilities, in particular IT risk management. The enterprise's existing frameworks were insufficient for accurately categorizing IT events and their materiality and contribution to overall risk exposure. Moreover, the framework failed to address the causes of IT risk as well as the accountability for both risks and mitigation strategies. The COO hired Oliver Wyman to develop and implement a comprehensive IT risk management framework. Our team leveraged an industry standard framework (CoBIT) as a starting point and integrated it with a proprietary operational risk management model. The target model linked IT and operational events for a holistic view of enterprise risk.
Hub and spoke operating model
An international insurer based in Germany was entering a bancassurance agreement to supply and maintain several insurance products for its banking partner to distribute. We designed an insurance operations hub to service multiple countries through a utility technology platform. This allowed service and maintenance of the policy administration to be kept in a centralized function, effectively eliminating multiple administration platforms. Due to the reduction in application complexity and cost, market entry time was also reduced.
Client insurance technology investment prioritization
A health insurer's annual IT spend of $328M showed clear indications of a high-maintenance legacy environment. A root cause analysis indicated several causes of high-maintenance spend. These included maintenance-intensive legacy systems, inconsistent definitions and reporting of maintenance, and inconsistent management and servicing of maintenance queue. Other causes were inconsistent maintenance tracking and logs with varied levels of detail and accessibility, as well as limited or nonexistent prioritization of requests. The redesigned environment included recommendations to set a sunset plan for high-maintenance applications, prioritize queue against business needs and value, and enforce a spending cap to limit lower value requests. We also recommended that the client implement consistent definitions, processes and controls to manage maintenance spend; proactively monitor logs and redesign 'program' modules; and outsource/offshore selected maintenance. The results indicate 10–30 percent savings via a reduction in the number of maintenance requests and spend.
Credit process redesign
An emerging markets bank wanted to redesign the mortgage credit process in order to compete effectively in the rapidly changing global marketplace. Their current process not only was inefficient, but also was flawed in many areas. We were engaged across three phases of work. The first phase reviewed the current credit and underwriting process, identifying the key issues and developing a prioritized set of recommended actions. The second phase developed a vision for the new processes to deliver the business objectives. It mapped the current processes and systems in detail to identify the gaps, and then created a high-level target model for the credit process based on global best practices tailored to the local environment. This included a significant amount of consensus building among stakeholders across the business and credit departments. The final phase of our work designed and agreed upon the 'blueprint,' detailed the implementation options and developed the business case to support the investment required to achieve the redesign. We also established the required governance, organization, monitoring and change management structures required to successfully deliver the program of work. The client has seen growth in revenues through the increase in successful applications, a reduction in the number of applications referred in the processing units, as well as cost savings through the introduction of a 'fast track'- without an increase in expected loss.
Payments growth strategy
A global corporate service company wanted to redefine its growth strategy in the payments arena. It specifically wanted to address the need to support new innovative capabilities, significant volumes growth and fast time-to-market for new products. We initially focused on the strategic impact on the forthcoming dematerialization of the business. First, we highlighted differentiating opportunities across network access and control, issuer status and competency, and the processing platform. Then we consolidated these into a new strategy for the business and delivered a detailed IT strategy for the next-generation processing platform and for supporting the target operating model. We also designed a new shared services approach to support Business-IT alignment, envisioning a regional approach versus the current country/product-specific approach. On the back of this, we launched a major consolidation/integration program to reduce the number of local platforms in favor of a regional group-wide platform.
Front-to-back support cost alignment
Due to sustained pressure from some major shareholders, a global universal bank wanted to significantly reduce its global annual cost base. Oliver Wyman deployed a multi-disciplinary team for this engagement, with representatives from each of our practice areas heavily involved. In Strategic IT and Operations, we focused on identifying cost-saving opportunities from the IT and Operations functions, both embedded within individual business units and the existing central shared services utilities. We identified a mixture of short-term (the current year) and medium-term (years two and three) savings. This strategy was based on reducing overall headcount, shifting headcount to lower-cost locations, creating new and expanding existing shared services, technology infrastructure rationalization and investment prioritization. Bottom line: the client was able to deliver a significant improvement in profitability.
