financial services performance management

FINANCIAL SERVICESPERFORMANCE MANAGEMENT

IMPROVE CUSTOMER LOYALTY

AND PROFITABILITY,

STREAMLINE OPERATIONS,

MANAGE RISK

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This edition published February 2006Copyright © 1989-2006 Cognos Incorporated.

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

WHY PERFORMANCE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Scorecarding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Reporting and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Planning and budgeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

YOUR PATH TO PERFORMANCE MANAGEMENT WITH COGNOS. . . . . . . . . . . . . . . 8

Starting point 1—the one thing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Starting point 2—the data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Starting point 3—the scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Starting point 4—the plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

DELIVERING ON PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ABOUT COGNOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

TABLE OF CONTENTS

FINANCIAL SERVICES PERFORMANCE MANAGEMENT

3

INTRODUCTION

Multiple delivery channels. Market specialization.

High-profile mergers and acquisitions. Onerous compli-

ance requirements. Rising operational costs. For financial

services institutions worldwide, today’s business climate is

increasingly high stakes and complex.

A recent Financial Insights performance management

benchmarking study points to the dual demands faced

by these businesses: “On the one hand, banks now need

to develop a ‘retail mentality’ to focus on the customer

and improve product sales and distribution. On the

other hand, they need to develop a ‘factory mentality’

to focus on straight-through processing and seamless,

end-to-end business processes.”1

More than ever, financial services companies must lever-

age data and information in order to plan and manage

operations, maintain the right products and services,

and stay on top of shifting market demands.

Financial organizations have invested heavily in transac-

tion and financial systems, as well as supporting soft-

ware applications to improve their business. This

approach has centralized data storage and collection,

and streamlined operations.

Beyond these system improvements, however, managing

performance is a broader, strategic imperative.

Performance management consists of a series of integrated

steps where an organization defines key priorities, meas-

ures progress towards these goals, and analyzes results. By

linking strategy with execution in this way, they can more

effectively monitor and improve performance.

Indeed, most banking CEOs see performance manage-

ment as a top business priority, underscoring its impor-

tance in “the search for improved customer relationships,

sales productivity, and store/branch performance.” 2

But managing and measuring performance—metrics,

plans and budgets, and detailed actual results—has been

difficult because disparate tools, paper-based processes,

information silos, and legacy IT systems provide limited

visibility into the business.

Current realities have increased the requirement for

timely and comprehensive management oversight.

Financial institutions need to see the big picture—the

relationships, connections, and direction—as well as the

details to make informed decisions and improve operat-

ing performance. This is the promise of financial services

performance management.

1 Bill Bradway. Performance Management Drives Improvement at European

Banks. Study sponsored by Cognos. Financial Insights. June 2005.

2 Ibid.

WHY PERFORMANCE MANAGEMENT


4

Effective decision-making is key to meeting the ‘retail’

and ‘factory’ demands of the financial services organi-

zation. With performance management, you gain access

to the reliable, timely information that drives better

decisions. While you may have any number of decisions

to make, they depend on answers to these fundamental,

interrelated questions:

• How are we doing—A gauge of the most critical indi-

cators for your organization.

• Why—The ability to dig deeper into current issues,

successes, or problems in order to understand what

led to the results.

• What should we be doing—The facility to set plans,

allocate resources, monitor them, and adapt.

Cognos provides an integrated, best-practices platform

for financial services performance management. It inte-

grates and leverages your critical data, and delivers the

scorecarding, reporting and analysis, and planning tools

you need to manage and optimize performance.

With integrated plans, business intelligence, and

metrics, you can dramatically improve your under-

standing of the current state of your organization and

improve your ability to make timely, informed decisions

in all areas—operations; sales and marketing; risk man-

agement; customer service; finance.

Scorecarding

Cognos scorecarding communicates strategy and objec-

tives through a metrics-based method of management.

It answers “How are we doing” by providing people

with the information they need to take ownership of

their performance—visibility into strategy, understand-

ing the part they play in making the strategy succeed,

and the metrics to measure their success.

By enabling the strategic alignment of program objectives

against financial, customer, and business process metrics,

you can answer at any time the central question: Are we

making progress on the things that must be done?

Use Cognos scorecarding to:

• Improve efficiency of front, middle, and back-end

functions by setting targets and scorecarding the

processes.

• Monitor sales and margin performance by channel,

product line, region, or division.

• Track financial goals in terms of growth, profitability,

and key controllable expenses.

• Develop financial metrics to track costs, losses, and

risk-based returns; or customer loyalty and margin

metrics (products sold, revenue, customer risk).

• Monitor Straight-through Processing initiatives to

gain timely, in-context views of operational efficiency.

EXAMPLES OF BI TOOLS DEPLOYMENT

The Problem: Disparate reports, requiring lots of

human capital and dollars to maintain, inflexible,

and not linked to specific business initiatives. The

cycle time to get the right information to the right

people severely dilutes the impact the information

had to begin with, since its value is diluted over time.

The Solution: Deploy Web-based reporting from a

database that represents a single version of the truth.

Ensure that the report tool can be integrated into

dashboards or scorecards and is both flexible and

easy to use.

The Problem: How to analyze tons of data. Reports

have to be customized, executed, modified and

rerun. Queries by the technical people must be

created every time someone needs an answer.

The Solution: A data cube or power cube works

wonders. Business users can get quick answers to

simple questions, view trends, and even display the

breakdown of items on a customer statement.

Ensure that the tool is Web-based, that it is fed by a

single validated database, and that it can be inte-

grated with other BI tools.

Source: “Smarter Approach to Business Intelligence Tools.”

Bank Technology News, August 2005.


5

Reporting and analysis

Financial organizations amass large amounts of data

that reside in many systems—product and customer

databases, core processing, ERP, finance, HR, plan-

ning—often across multiple businesses and locations.

Consolidating this information is a huge challenge. It is

especially difficult given that there can be as many tools

used to analyze and report on the data.

As well, in many cases, managers have to request analy-

sis data from central planning teams, IT departments,

or other business units. This process inevitably leads to

longer lead times, poor quality analysis, and informa-

tion inconsistencies.

Cognos reporting and analysis consolidates and lever-

ages your critical data and turns it into real-time, mean-

ingful information relevant to your organization’s

mission. You can spot broader issues and drill down to

discover underlying causes and details.

The secure, self-service Web-based reporting and analy-

sis environment means everyone can access timely, con-

sistent information delivered in the right way—across

all roles and locations. No more dealing with weekly or

monthly batch reports.

With standardized reporting and analysis, you can

accurately assess the “Why” behind performance.

This provides the necessary context against which deci-

sions can be made.

Sarbanes-Oxley. Basel II. IFRS. The Patriot Act. MIFID.

Accounting bodies, rating agencies, industry trade

organizations, and regulators have issued a broad array

of rules and regulations to defend the interest of stake-

holders. As many as 40 regulatory changes exist or are

in the pipeline, each requiring its own set of disclosures,

reports, and process improvements.

Making a performance management investment within

the context of compliance can deliver greater return to

your company. It can help you tackle regulatory chal-

lenges by providing the necessary transparency into

operations and systems. As well, it can address funda-

mental inefficiencies that impact both compliance and

operational performance—including error-prone

spreadsheet-based planning and budgeting, paper-based

or disparate systems, and data inconsistencies.

Planning

Effective planning drives higher levels of predictable

financial and operational performance. In terms of

compliance, predictability results in fewer regulatory

and investor surprises.

Cognos planning links operational plans to financial

plans, allowing you to see in real time the effects of

operational changes on the financial bottom line. It lets

you leverage your aggregate, clean data to make plans

and forecasts that stakeholders can trust.

Reporting and analysis

Cognos analysis leverages your information assets,

giving you insight into financial and business opera-

tions. This visibility provides greater transparency,

allowing you to drill-through to the root cause of errors

and events. Addressing cause and effect ensures

accountability and improves business performance.

With reporting and analysis, you can integrate data

about market, credit, and operational risk exposures,

and link the information to your financial applications

to capture and analyze the indicators of operational

risk. Analyze and report on controls for better manage-

ment—determine what controls are on track for audit,

are performing well, or poorly.

Cognos also provides compliance reporting in conjunc-

tion with other financial services reporting across the

enterprise—leading to the transparency, accuracy, disclo-

sure, and speed that regulators and shareholders demand.

Scorecarding

Cognos scorecarding lets you create compliance score-

cards to define and monitor elements such as operational

risk exposures, risk KPIs, and financial statement meas-

ures. With increased transparency and accountability,

you can clarify the status of key metrics for employees,

boards, regulatory bodies, and other stakeholders.

Simply meeting compliance requirements does not offer

any competitive advantage, but greater transparency

and performance management do. Performance man-

agement can help you tap the potential of rich and

varied data sources, ensure seamless operations,

enhance customer relations, reduce the burden on IT,

and build shareholder value.

THE OTHER SIDE: REGULATORY COMPLIANCE AND RISK MANAGEMENT

“Increasing investment of 10-15% in a Basel II

program by focusing on business change is expected

to increase profitability by 10 basis points of assets.”

Source: The Banker, December 2004.


6

Use Cognos reporting and analysis to:

• Identify, report on, and analyze costs of trade, staff

performance, risk management, branch profitability,

loan performance, and customer profitability.

• Create a customer-centric view that incorporates the

full scope of a customer’s relationship, including retail

accounts, cash management or investment accounts,

life insurance policies, loans, and leases.

• Integrate demographic or customer data into internal

sales data to analyze and flag marketing, up-sell, and

cross-sell opportunities.

• Conduct litigation, subrogation, and salvage analysis.

• Report on performance by product, channel, division,

or region.

• Extend extranet capabilities to customers, partners,

brokers, and suppliers.

Planning and budgeting

Many organizations still use spreadsheets as their

primary vehicle for planning and budgeting.

Spreadsheet-based systems create islands of financial

and planning data, where everyone works independ-

ently. This disconnected approach does little to support

management goals, cross-functional collaboration, or

the dynamic planning cycles needed to address changing

conditions or requirements.

What’s needed is a solution that replaces a fragmented

process with continuous, collaborative planning that

delivers up-to-date insight into performance. Cognos

planning helps you build a foundation for higher per-

formance by connecting strategy to plans, targets, and

operational objectives.

Cognos planning addresses “What should we be doing”

by allowing you to define goals, and turn them into dis-

crete plans and budgets for the entire organization.

Plans can be built to maximize operational effective-

ness, and they can be realigned as conditions change.

Use Cognos planning to:

• Develop long-range, financial, cost center, and head-

count plans, forecasts, and budgets across the enterprise.

• Increase accountability by allowing all levels of the

organization to contribute to the planning process.

• Conduct what-if scenarios for different revenue pro-

jections or changes in business lines.

• Develop client retention plans—objectives, key per-

formance factors in retaining clients, and KPIs and

metrics that measure loyalty.

• Project underwriting margins to gain a more accurate

picture of future earnings per share.

• Create branch profitability models to capture loan

and deposit volumes and spreads, net interest income,

staffing decisions, and compensation expenses.


7

Cognos business intelligence and planning solutions have

been tried, proven, and established in thousands of finan-

cial services organizations, including nine of the top 10

banks in the US and Europe, the top 10 investment banks

worldwide, six of the top 10 insurance companies globally,

as well as eight of the top US asset managers.

These customers recognize Cognos for its innovation,

vision, ability to execute, and technology leadership in per-

formance management.

Completeness of vision

Cognos has built a holistic, integrated technology frame-

work. In addition to planning, analysis, and scorecarding,

we provide common user portals, common data defini-

tions, and standards-based technologies to simplify your

business and IT environment.

Zero-footprint

Cognos’ zero-footprint, Web-based platform lets users

access information with just a browser. It simplifies your

environment, while improving user adoption. No plug-ins

to install and no end-user complexity translates into a

lower cost of ownership and higher customer satisfaction.

Leverage existing investments

Cognos software works with your data and your IT environ-

ment, allowing you to leverage your existing infrastructure

and applications to increase the value of your investments.

Enterprise scale

Cognos built its technology to handle the data volumes, level

of activity, and complex business and IT environments of the

Fortune 1000 and other large enterprises. Our technical

capabilities streamline administration, support, security, and

validation requirements, which reduces costs and risk.

Award-winning support

Cognos supports its integrated performance management

capabilities with award-winning Global Customer

Services. We consistently top the list for best software

support and services innovation with customers and

support professionals. Our consultants can design and

implement a solution that grows as your organization

grows to deliver value for years to come.

Where organizations begin on the path to performance

management will differ, and how quickly they imple-

ment the platform will vary. The bottom line is that you

can take an incremental approach, starting with one per-

formance management component and building from

there. Every time you address one element in the system,

you strengthen your decision-making and performance.

Starting point 1—the one thing

If you were to do one thing to improve your organiza-

tion’s performance, what would it be? For some, it is

moving from a product-centric to a customer-centric

business model. For others, it is increasing cross-sell

opportunities. For others still, it is improving financial

control. Cognos technology lets you understand the

information to do the one important thing, and then

grow from there.

YOUR PATH TO PERFORMANCE

MANAGEMENT WITH COGNOS


8

FINANCIAL SERVICES CUSTOMERS IMPROVE THEIR PERFORMANCE WITH COGNOS

In the face of volatile markets, waning investor confi-

dence, and a competitive landscape characterized by

emerging players and newly merged financial service

giants, your organization needs to shore up business,

information, and IT strategies as never before.

More than ever, you need to make better decisions and

respond quickly, to have an impact when and where it

matters most. Effective management oversight depends

on having access to accurate, current information you

can act on—you need to know how you are doing, why,

and what you should be doing.

A performance management system can address these

demands—by integrating data from operational, trans-

actional, and financial sources and presenting informa-

tion that provides performance views from key

perspectives (customer, product, channel, process,

financial controls), highlights issues clearly, and pro-

vides actionable answers.

Whether your goal is customer retention, better cross-

sell opportunities, or operating efficiency, Cognos finan-

cial services performance management delivers the deep

insight you need. Our decision-making platform can

help you leverage your data and resources—to better

serve the customer, while maximizing value and return.

DELIVERING ON PERFORMANCE


9

Starting point 2—the data

Leverage your existing data resources. You may have data

locked away in a variety of databases and systems, with no

effective way to report against them. Access and integrate

this data, and then let everyone generate their own timely,

meaningful reports. With a firm grasp on the “Why”

behind performance, you are ready to move forward.

Starting point 3—the scorecard

Take advantage of a scorecard or other method to drive

your performance or compliance agenda. Monitor the

key metrics that map to your business strategy. Leverage

your existing data resources to deliver this information

into a scorecard that shows you status, relationships,

and interdependencies and gives you the ability to drill

through to the BI layer for more information.

Starting point 4—the plan

Change your budget into a rolling, responsive forecast.

Go beyond the unwieldy spreadsheet-based system. Use

technology to engage all cost centers in preparing real-

istic forecasts that take into account your organization’s

overall strategy. Save time and resources usually com-

mitted to this process, and turn them into better analy-

sis and forward-looking thinking.

Cognos is the world leader in business intelligence and

enterprise planning software. Our solutions for corpo-

rate performance management let organizations drive

performance with planning, budgeting and consolida-

tion, monitor it with scorecarding, and understand it

with business intelligence reporting and analysis.

Cognos is the only vendor to support all of these key

management activities in a complete, integrated solu-

tion. Founded in 1969, Cognos now serves more than

23,000 customers in over 135 countries.

ABOUT COGNOS


10

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