Atif Unaldi

Most Automation Efforts Result in Faster Processes, Lower Headcount and Fewer Control Errors, Say Bank Executives

Financial processes are the essence of banking, so automating these processes is a key goal for banks struggling to increase both efficiency and data integrity, according to Mastering banking risk through embedded governance, risk and compliance, a survey and paper from the Economist Intelligence Unit, sponsored by SAP. However, most banks still focus mainly on restraining costs and avoiding regulatory sanctions rather than developing an enterprise view of risk. This conservative approach has ironically increased risk exposure at the enterprise level even as it contributes to stronger risk management practices within functions and business lines.

Bank executives rank the proliferation of manual processes as the greatest problem with current financial processes. They see fewer errors as the biggest benefit of automation. And they believe that the high-level of investment required is the single largest obstacle. Eighty-two percent of bank respondents have attempted to automate at least some of their processes; such banks had experienced the following tangible improvements:

• Faster processing speed claimed by 74 percent of respondents.

• Sixty-five percent of respondents cite fewer control errors.

• A decrease in headcount according to 52 percent of respondents.

• From the respondents, 49 percent claimed a reduction in the number of poor quality decisions.

“Process automation used to be purely cost-driven – a matter of squeezing out the inefficiencies left over from legacy paper-based processes,” said Dan Armstrong, senior editor at the Economist Intelligence Unit and manager of the research. “Now it’s more about providing managers with quick access to accurate enterprise-wide data, and using it to inform the bank’s risk and reward decisions.”

The findings were based on the responses of 71 bank executives across the world who took part in larger financial process automation survey in the fourth quarter of 2008. Key findings include:

• Biggest Problems with Current Financial Processes. Bank executives that participated in the survey paint a rather negative picture of their financial processes. Half say there are too many manual processes in their organizations; 38 percent say methodologies are inconsistent and the remainder point to poor visibility and accountability, overly restrictive and redundant controls, incompatible applications and the need to massage data to make it comparable.

• Benefits to Automate Financial Processes. The majority of bankers surveyed claimed that the biggest benefit of financial process automation is the elimination of errors due to manual processes and data integrity. Cost reduction was a distant third at 31 percent, which indicates that many banks have progressed beyond efficiency as the primary rationale for automation.

• Barriers to Financial Process Automation. However, the upfront costs of financial process automation continue to represent a significant barrier to automate a banks financial process, according to survey respondents. Six in ten bankers cite upfront costs as one of the top two obstacles. No other impediment was cited by more than 30 percent of the respondents. However, only 8 percent of executives say that processes are already sufficiently fast, accurate and efficient, and need no further improvement.

“SAP has found the survey results revealing, as they will enable us to work even closer with our customers in helping them address the immediate issues they have today in managing credit, market and operational risk,” said Martin Schroter, vice president, Solution Management, Banking, SAP AG. “SAP delivers governance, risk and compliance solutions with integrated business insight to support a bank’s end-to-end cross-enterprise business processes and access controls to improve business process management and automation for detecting, remedying, mitigating and preventing access and authorization risk across the enterprise.”