Cash Management is an area ripe for improvement at many financial institutions. A variety of process analysis techniques, including Business Process Analysis (BPA) and Lean-Six Sigma, can help Improve operational effectiveness in financial institutions. Identification of quality and cost opportunities offer immediate return-on-investment and process automation implementation will often provide even greater returns.
At many financial institutions, Cash Management is handled by various business units that accept funds through various channels, disseminate through those and other channels, and transfer money between internal departments. Transactions can move across multiple business units – Treasury, Fed Funds, Wires, ACH, Loan Distribution – and can often involve other stakeholder departments such as Accounting, Asset/Liability Management, Deposits, etc.
Though these back office units are dependent on one another, ineffective communication and collaboration, coupled with a lack of process focus often leads to duplicative work (e.g. multiple people reconciling the same accounts). Redundant processes, partially fostered by a lack of trust and lack of clarity, can lead to high impact errors. Outdated processes and ineffective or inconsistent training also causes disparities across these groups.
In many institutions, these business units have operated without change for years. Back office units tend to be populated by seasoned, highly-expert individuals who place little emphasis on process, documentation, or training. Often, employees in this area excel because they are detail oriented and solely focused on the task at hand. This can lead to challenges identifying improvement opportunities, as success is not defined by generating new ideas, but by having debits equal credits, with the hope to leave by 5pm.
While financial institutions constantly invest in process effectiveness of high-volume, customer-touch areas such as retail sales and service, back-office areas continue operating with an emphasis on accuracy, not efficiency. Performers such as tellers and loan documentation specialists have received process attention for decades, but rarely does anyone work with the accounting clerk or wire transfer desk to improve their processes.
These support groups can benefit greatly from application of Lean-Six Sigma, and related process improvement strategies. Fresh explorations of cash management, asset/liability management, and treasury procedures will identify numerous improvement, and investment, opportunities. The technologies, best practices, security risks and regulatory requirements of money movement evolve rapidly. When these business units understand the overall process, redundancies will be eliminated and risk will be reduced.
To drive a change in mentality, a Process Center of Excellence (PCOE) can be created to provide governance, guidelines, support, and training. With support groups lacking a process and improvement focus, the PCOE can not only provide the training and skills, but can help prove the value of performing documentation and analysis of existing process. PCOEs can vary in size and scope as some span organizations and others are more focused and exist for a shorter duration.
It is time to raise the bar and change the status quo for these back office units. With increasing demand from corporate customers, regulatory attention, and fierce competition, financial institutions can no longer afford to ignore process effectiveness and quality of these back office business units. A Process Center of Excellence can bring the strategy, oversight, and support necessary to create sustainable improvements and a cultural shift towards process excellence.