Proactive operating models enable agility in market volatility

Manage technology and talent effectively to drive growth

There’s never been a better time for banks to reimagine their operating models in response to current market conditions.

The banking industry has experienced dynamic market challenges over the past few weeks, and the economic environment is highly uncertain and volatile. Loan demand has slowed, fintechs and non-traditional players continue to present competition, and labor shortages have aggravated challenges with talent acquisition and retention.

It is essential that banks embrace a proactive mindset and operating model in response to market changes and risk and regulatory mandates. Emerging market conditions can be addressed by enhancing business support functions, using data analytics, and implementing robust talent diversification.

Enhance middle- and back-office support functions

Traditional sources of profitability are under pressure. The potential for deposit runoffs is squeezing balance sheets while shareholder expectations on profitability persist. Resilient organizations must commit to building and sustaining operating models that rely on digital innovation, technology enhancements, and automation that support the business. These steps promise to provide the scale and agility required to meet changing needs.

Historically, operational support functions provide the bank with a structured framework for supporting foundational business needs, responding to internal audit concerns, and addressing regulator-driven mandates. The bank of the future will require improved coordination across these support functions with a renewed focus on cost reduction and operational efficiency.

These support functions should be transformed to power growth and serve as value-add to the business and the bottom line. Now is the time to re-evaluate legacy workflows and operating models to identify where new technology and digital innovation would best serve the bank and, ultimately, its customers. Organizations already have operational support functions in place: however, these structures are often static in nature and provide limited oversight into a “real-time” view of the changing regulatory requirements and in-inflight transformation initiatives. Future business support functions should analyze opportunities to create value and develop achievable solutions that use both technology and talent to deliver sustained results.

Use digital technology to optimize process execution

In recent years, many banks have elevated their technology investments and embraced digital and innovative solutions to drive operational efficiency. What has lagged for some, though, is the adoption of necessary process changes to use the technology investment to optimize throughput and infuse the organization with a data-centric mindset and operating model. The result is a hybrid model with some obsolescent functions and a lack of tactical planning to use existing-yet-undiscovered data and automation opportunities.

When considering how to best use digital innovation and available data, banks should promote agile functionality to enable real-time feedback to key stakeholders. An action plan should allow for visibility into inherent risks and the controls necessary to mitigate them. A plan also should provide a tailored roadmap of initiatives to address top business priorities.

Operational support teams that build such a plan to use data, technology, and human talent will be equipped to add value and inform key strategic business decisions. Banks that focus on these solutions will see reduced effort, cost savings, and increased efficiency. They also will be better positioned to assign activities that add value and support growth.

Develop a multi-talented workforce

It is no secret that attracting and retaining a talented workforce is paramount in today’s economy, and every leader agrees that the right mix of talent can be a distinct competitive advantage. To ensure continued relevance, banks should focus on building talent pools that balance institutional and industry knowledge with cutting-edge skills and capabilities. Digital transformation in the industry and the aftermath of COVID-19 profoundly affected how we work in today’s business environment.   

Hiring professionals from a broad range of professional backgrounds with transferable skills and technology expertise can add a new perspective to the organization and create opportunities for innovation and creativity. Talent management priorities should address the global nature of today’s workforce where culture, education, and industry background are relevant. Banks should also make an effort to hire people from industries outside of banking, including technology experts, who may provide different perspectives and skills.

The banking workforce is changing. Leaders should develop a staffing model that supports legacy front-office operations while meeting consumer demands driven by technology. Leaders also need to build a cohesive environment that combines the deep banking experience of current employees with the different skills and perspectives provided by new employees who may come from outside of banking.

Develop a proactive model

As the banking industry continues to evolve, developing a proactive operating model for quickly adapting to consistent market changes is critical. To achieve forward-thinking goals and meaningful transformation, organizations should enhance their business support functions, use data to optimize operations, and build a diverse talent pool to meet the demands of today’s changing work landscape. Attention to these details creates an opportunity to control costs and improve efficiency ratios while positioning the organization to generate growth.  

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