Analytical Diaries

The pendulum usually swings in close relation to the economic phase – while de-central strategies usually boom in expanding growth markets most down-turns bring along a re-discovery of centralization strategies. So what effects are to be observed in the post crisis era the financial services find themselves in currently?

Many of our European clients still recover from the shock and are quite focussed on cost- and headcount management. This usually correlates closely with centralization strategies. Funny enough however many large banks have experienced large and expensive consolidation projects in the years gone by and have never actually achieved the intended synergies. Either because the business models changed faster than the administration was able to synchronize processes, data and systems or because internal politics never got over the departmental kingdoms. As a result of these failed consolidation attempts many clients now aim at achieving de-central approaches to a central policy. What sounds confusing or even paradox at first can be achieved with a clever performance management framwork and some up-to-date integration technology.

Let us look at two examples we have supported during the past months:

• Client Management – a globally operating European universal bank has suffered from redundant and inconsistent client data processing accross its functional and geographic borders. Instead of mobilizing a multi-million Swiss-Franc initiative the firm achieved a common and central policy and spread its implementation accross many different systems. We have managed to hook up the operational CRM and client master systems to a centralized master data management hub that applies de-central (localized) rules to syncronize the local repository with its global counterpart. Applying a multi-level data stewardship concept and a stringent data-quality management the consistency has clearly improved and the implementation didn’t have to follow any big-bang risks but was able to integrate each department and country on a case by case basis. And while the results can be used and measured centrally (thanks to the central integration hub) the operational handling and ownership can remain locally.

• Financial Instruments – Another European client was used to an out-dated financial instruments master data repository and  accepted change cycles of 18 to 24 months whenever business users requested new information. That this time and information gap can result in serious compliance issues became obvious during the initial Lehman Brothers impact analysis. More than 20 people had to manually consolidate different reositories and the resulting portfolios. After implementing a business rules based classification system, the divers requirements of Portfolio Managers, Sales Managers and Risk Managers could be integrated into single classification system. And instead of changing all the operational systems in an investment intensive, time-consuming program the centralized infrastructure combined central policy with de-central execution.

These two examples cleary illustrate, that de-central centralization no longer is an oxymoron. For more use-cases or a deeper dive in the examples listed, just add your thoughts and your own experience…