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The first quarter of 2009 finds many organizations inside and outside of the financial services industry reeling from the shocks of 2008, re-evaluating their strategic plans and realigning their annual forecasts and budgets. Banks are struggling to shore up capital losses and rebuild consumer confidence—and, in many cases, simply keep their doors open.
In this issue of On Financial Services, we discuss the impact of the current market turmoil on banks’ strategic planning processes and managing the profitability of their commercial loan portfolios. We also share findings from our 2008 Study of Consumer Payment Preferences, as featured on the cover of Banking Strategies Magazine, and provide advice for achieving service delivery excellence (as well as profitability).
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On Banking
Strategic Planning in Times of Turmoil
How Banks Should Be Re-Thinking Their Planning Process in Today’s Environment
By John Hansen
There is no doubt that these are times of turmoil, particularly for banks and other financial services organizations. As banks scurry to adjust strategies and priorities for today’s changing market, it is important to recognize that the strategic planning exercises used in the past may be inadequate for—or simply misaligned with—today’s tumultuous market.
Thinking about strategic planning in the context of the current economic crisis raises three questions:
1. Is there—or should there be—a difference in the strategic planning process in times of economic turmoil? (Yes).
2. Should there be a difference in the content of a strategic plan in times of economic turmoil? (Yes).
3. If yes, what should those differences be?
This article seeks to answer this third question and share our point of view as to how banks should prepare to embark on their strategic planning process in today’s environment and what they should be focusing on. To read the full article, click here.
New Urgency for Credit Checkups
Five Factors that Can Affect the Profitability of the Commercial Loan Portfolio
By Jim Neckopulos
The current economic and credit environment is the most challenging we’ve seen in decades. While much of the attention is still focused on the subprime loan crisis and the residential real estate market, small business and commercial areas of lending may present the next set of widespread financial problems. The subprime crisis showed the importance of looking for ways to identify early warning signals and of acting decisively when risks are identified. Therefore, banks should proactively evaluate five areas to understand their potential effects on earnings:
• Credit scoring model rules and assumptions
• Secondary sources of repayment
• Allowance for loan-loss reserves
• Entity documentation
• Insurance coverage
This article, originally published in the January/February issue of Commercial Lending Review, focuses on these five key areas and what financial institutions need to do to address them. To read the full article, click here.
This article is reprinted with the permission of CCH incorporated.
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On Payments
World of Choice
Consumer Payment Preferences
By Chris Allen, Melissa Fox, Dan Hough (BAI), and Mark Riddle (BAI)
The inevitable and ongoing march from paper to electronic retail payments has become a full-on run, according to a recent consumer payment study conducted by BAI and Hitachi Consulting. Consumers are using debit cards more aggressively, particularly PIN debit, instead of cash or checks, even for small-value purchases in stores, while increasingly using electronic bill pay for recurring payments. This rise in the use of plastic and automated payment vehicles is putting greater pressure on banks to find new ways to reward and retain customers for their electronic payments. Bankers also need to find an appropriate balance managing cash and checks, as those become a smaller part of the payments mix.
Featured as the cover story of the January/February issue of Banking Strategies Magazine, this article discusses the decisive shift in consumer payment preferences from paper and cash to electronics and the implications of those changes for banks and the broader payments industry. To read the full article, click here.
This article is reprinted with the permission of BAI Banking Strategies Magazine.
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On Wealth Management
Achieving Service Delivery Excellence Profitably
By Jim Neckopulos
The current structural changes taking place in the financial services industry require the strategic analysis of both cost reduction and revenue enhancement to optimize service delivery. Service excellence can no longer be measured simply in terms of customer satisfaction. Customer satisfaction and customer profitability must become a unified concept.
This article provides a framework for banks and other financial service providers to achieve service delivery excellence profitably by focusing on technology, process, and what we believe to be the five key imperatives related to service delivery. To read the full article, click here.
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Hitachi Consulting is a recognized leader in delivering proven business and IT strategies and solutions. From business strategy development through application deployment, we leverage decades of business process, vertical industry, and technology experience to understand each company's unique needs and to achieve sustainable ROI. Inspiring your
next success!®
Our national Financial Services team is the result of significant investments the firm has made in this space over the past few years. In August 2005, we acquired Dove Consulting, a Boston-based strategy and organization consulting firm specializing in payments strategy and research. In March 2008, we acquired JMN Associates, a leading provider of consulting services to the financial services, real estate and insurance industries based in San Francisco. Together, our team brings valuable expertise and practical, proven solutions to clients in the areas of business and technology strategy, process improvement, market research, project management, and industry and regulatory compliance.
Visit us at: http://www.hitachiconsulting.com, or send feedback to: onfinancialservices@hitachiconsulting.com.
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© Copyright 2009 Hitachi Consulting. Contents in this newsletter may be reprinted with proper attribution to Hitachi Consulting. |
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