Forecasting the future of the financial industry

As the corporate benefits of open-book management spreads, so do the enhanced benefits of business intelligence (BI), particularly in the financial services industry.

By Paul Barter

It is no wonder. Open-book management and BI are pillars of the democratization of data: knowledge is power and more knowledge workers in the organization with the power to make data-driven decisions means greater profits and efficiencies.

Open-book management is based on the idea  that employees at all levels in the corporate hierarchy require relevant information about the company in order to make the most accurate decisions possible at all times. This ensures employees at all levels become more knowledgeable about how their position fits into the financial plan of the company.

In the early days of business intelligence (two or three decades ago), the high cost of technology and the hierarchal nature of corporate culture restricted the knowledge and power of BI to a select few at the top. But things have changed due to the plummeting cost of technology and the flattening out of corporate organizations.

Think about it: in a hierarchal top-down organization, it is not essential for a plant floor worker to make data driven decisions, or even a teller at the bank window handling simple deposits and withdrawals. What is expected and needed is for that worker to do his or her job of installing and inspecting gadgets or taking in or issuing relatively small amounts of cash. Now, think of a bank or other financial institution with operations in five or ten time zones with a worker deciding whether to lend, move or buy money all over the world. It is imperative that worker have the best, real-time data available.

Changing to meet demands

Businesses have clearly evolved, particularly in the Canadian economy, and today the corporate focus on cost savings has in many cases been re-prioritized towards growth and innovation and the resources, people and data that enable that growth. Top-line growth can be enabled through better understanding a customer’s needs by reaching out and sharing data through BI applications.

With the spread of data through an organization, the roles of CEOs, CFOs and other senior executives have also changed. Today these senior-level decision makers operate more with a “coach” mentality, guiding and inspiring employees by clearly defining metrics and striving to make information accessible and transparent to employees at all levels. To help them become effective coaches, executives are looking to new technology.

Banking, finance, and investment companies operate in an industry that is perhaps more diverse and unpredictable than any other. With these industry demands comes the need for new and more sophisticated integrated tools that support everyday work. BI technologies help companies obtain a complete perspective of business performance across the organization and, at the same time, integrate information across different operating systems and business functions.

This approach to information sharing provides employees with a more strategic and forward-looking view on business objectives.

A new wave of technology

Until recently, the adoption of BI solutions was limited by its complexity and the need for solutions to span multiple information stores in order to produce relevant results. But this has changed. According to research firm IDC, 2007 saw the beginning of a new wave of investment in BI applications by Canadian organizations. IDC also predicts that over the next 12 months Canadian businesses will devote nearly $200 million towards the deployment of BI software to harness structured and unstructured data.

Traditional BI has focused on information delivery in the form of dashboards or reports, where the solution itself has been a non-critical component. However, IDC’s research indicates that the market is shifting toward operational BI, where the solution is deployed to support collaboration across the business. Today’s BI tools such as Microsoft Performance Point Server 2007 facilitate an open-book style. They’re designed to touch everyone involved in an organization, at all levels, taking advantage of software like Microsoft Office Excel. These BI tools can help organizations realize their full potential through three key capabilities:

Monitoring/Scorecarding: Scorecarding helps financial professionals determine what kinds of data are being measured and how to map them back to the organization’s growth.  This is a macro view offering many people access.

Analyzing: The process of financial reporting and analysis is all about digging deeper. For example, the preparation of financial reports requires access to a broad set of information which is sometimes buried deep in various documents and systems.  To use data locked in a document or spreadsheet, it historically would have been manually entered, copied, and may have required recalculation.

By integrating a BI solution, financial organizations can ask the critical questions around performance projections and forecasted results.  With the right solution, what may have originally taken weeks to pull together can be done much faster while being consistent and accurate.

Planning: To maintain profitability in the face of escalating risks, financial firms need to manage conflicting priorities, tackle compliance issues quickly, maximize operational efficiency, growth, and product offerings, and serve customers more effectively than the competition. 

BI can facilitate tremendous improvements in the way a company plans, budgets and forecasts by accelerating these functions and helping the organization better align with critical resources. With the correct tools for planning and budget analysts, companies are then able to centrally manage the planning process, making information not only more accessible but more standardized.

Financial service organizations need to adapt and harness the advanced BI tools available in the marketplace to meet the growing business demands. Senior executives have learned to adapt the business structure and processes for information sharing.

The question remains: are businesses taking full advantage of technology to support its evolution, demands and objectives?

Paul Barter (paul.barter@T4G.com) is vice-president, strategy, T4G. Paul also teaches technology strategy and online marketing at York University’s Schulich School of Business. 

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