Natural disasters and the need for a single source of truth

A changing climate suggests natural disasters are happening more frequently. Fortunately, sophisticated technology such as tsunami sensors embedded on the ocean bed can analyze conditions and predict what lies ahead with greater accuracy. When the alarm bells ring, emergency responders are alerted immediately and supplied with reliable, consistent, information – a single view of the truth. Without it, the consequences can be devastating.

The same scenario applies to companies. By plotting weather patterns in advance of Hurricane Katrina, Wal-Mart knew which stores would be affected, and it organized its response proactively. In an article published by the Washington Post , staff writers Michael Barbaro and Justin Gillis wrote:

“Wal-Mart is being held up as a model for logistical efficiency and nimble disaster planning, which have allowed it to quickly deliver staples such as water, fuel and toilet paper to thousands of evacuees.”

Banks have a lot to learn from this story. Whether operating in normal or disaster conditions, having a single view of the truth enables strong decision making and better strategies. Without it, they tend to focus on products instead of relationships.

• They can’t determine how much revenue and profit each customer is generating.
• It’s hard to improve performance.

Here’s a common disaster cycle that occurs within banks. Customers complain about bills and statements. They’re charged different times of the month, so they can’t do their reconciliation and budgeting. They either migrate some business to other relationship banks, or they stop using the bank altogether. They may even spread the word about their bad experience, thus damaging the reputation of the bank. The flip side of that is the customer is undercharged, and the bank continues to leak revenue left, right and centre.

Then, 25% of an account manager’s time is spent handling billing issues, and they’re constantly reimbursing customers for overcharges. Instead of cross-selling and up-selling, salespeople waste their time on administration.

Next, the operations team starts complaining about reduced margins, so the product team is pulled in to review the pricing and figure out how to increase profitability. Much of this work is time consuming because it’s being done on Excel spreadsheets, and the result may be unreliable anyway because they don’t have access to complete and consistent data.

EPM from ArcOne provides banks with a single view of the truth, but make no mistake: this is not a quick fix. Using typical market provider propositions, these activities are typically done one product suite or geography at a time over a period of 15 months to two years, but this needs to be much quicker.  There’s a strong business case for senior management to allocate the capital investment as part of the bank’s strategic roadmap to:

• Manage the portfolio proactively to increase the number of relationships, revenue, profit margin and productivity
• Reduce headcount;
• Reduce or eliminate manual processes leading to operational efficiency;
• Improve customer satisfaction and bolster the bank’s reputation; and
• Lower the total cost of ownership by having fewer IT systems to maintain manage.

Banks can potentially earn millions in revenue through cross-selling and upselling opportunities and differentiate themselves from their competitors. Additionally, they can consolidate information on transactional behaviors and obtain early alerts on unusual transaction flows, making it easier to comply with know your customer mandates. Generally, pay-back is in three to six months or less.

It’s proactive and nimble. It’s efficient. It’s like having a sensor embedded in desktops that alerts the bank to a disaster on the horizon.