Published : 13 years ago, on 22/12/2011

By Darren Cox

Unless they can access their most important business data easily, modern financial services firms are fighting a losing battle. After all, not only do they need this information to manage risk effectively, but also to control their costs and stay profitable. However, the best data in the world isn’t much use to anyone unless it’s used correctly.

Within the financial services sector, ‘gut feel’ still often plays a major role in decision-making, even though history has shown us that this approach often ends in disaster. Just look at the merger of Royal Bank of Scotland and ABN Amro: was that a good idea, in retrospect?

Royal Bank of Scotland took a gamble with its purchase of ABN Amro – but was dragged to the brink of collapse by poor management decisions and flawed regulation and supervision. The real problem in this case was that RBS decided to make this bid on the basis of insufficient data, and as a result, the bank came within hours of running out of cash (and was in fact only saved by a 45-billion pound taxpayer bailout).

Clearly, this was a terrible move for all concerned and driven by RBS’ single-minded desire to become the biggest bank in the world, rather than a focus on shareholder value. Worse still, all of the warning signs were actually there for RBS to see: an over-reliance on risky short-term wholesale funding, doubts about its underlying asset quality, substantial losses in credit trading activities, and more.

Problems arise, however, when it comes to interpreting this kind of complex data, since this information is often stored across many different management systems that are non-conversant and incompatible. As a result, it is often very difficult to produce useful analytics or to gain any meaningful insights, and thus to transform this ‘data’ into ‘business intelligence’.

In order to make this transformation, financial services firms are increasingly looking for new ways to enhance the visibility of their data so that they can make better-informed decisions, especially when it comes to spending reviews. Historically, the format in which this data is reported has often been a major stumbling block, however, which means that expense reports are often missing this vital information – and therefore provide an incomplete and misleading picture.

As well as appropriate due diligence on large M&A activity, the ability to keep a tight reign over operational direct and indirect expenses is clearly an essential part of controlling costs, but firms need to begin this process by understanding their expense patterns – past, present and future – in order to make the best and most effective decisions in this area. Identifying these patterns can be especially challenging for financial services firms, however, since smaller expenditure can often go unnoticed due to the disparity and magnitude of the different divisions within the organisation. As a result, trends in high-volume, low-cost spending have historically been very easy to miss.

In order to address issues like these, a focus on operational efficiency and value for money needs to form the foundation of any work being done in this area, yet firms will still need to have easy access to business intelligence that is easy to interpret. Already, financial services firms are seeing great improvements in this regard, since this type of information is now more accessible than ever before.

The most obvious example is the arrival of ‘mobile’ business intelligence, a flexible model that provides easy access to this vital business data on a smartphone or tablet just as easily as an office-based PC. In fact, it’s now even possible to interact with this type of information via the Project Brokers bespoke Xbox Kinect games console, which allows authorised users to review and interrogate expenses data simply by using their body movements.

Although developments like these may sound rather futuristic, these changes are happening now and occurring for a reason: to make sure that a firm’s spending ‘data’ can be turned into usable business intelligence that is both easy to access and easy to decipher. By providing this business-critical information in a format that can be interpreted both quickly and easily, this trend will help banks and other financial services organisations to manage risk and control costs, and ultimately boost the bottom line.

This way, banks and other financial services firms will be able to take a more holistic view of their expenses by identifying previously unseen trends, connections and relationships between their expenses data. As a result, banks and other financial services firms will be able to make spending decisions that are based on data that is not only accurate and up-to-date, but which is also accessible and easy to interpret.

This approach will enable financial services firms to become much more efficient, since they’ll be able to spend much less time gathering, checking and interpreting endless pages of detailed expense reports, and can spend more time on taking whatever action is needed to reduce any unnecessary spending instead. The end result will be a detailed overview of the firms’ expenses data, which managers can then use to pinpoint any employees that are spending excessively, to manage multiple vendors effectively, and/or to expose any anomalies or inaccuracies very quickly.

By turning data into business intelligence in this way, firms will be able to control costs much more strategically, rather than simply making sweeping cuts across the board. For example, although a new server may seem like an expensive investment, an analysis of monthly IT maintenance costs may reveal that the purchase of new equipment may actually provide a net savings in a very short amount of time.

In order to gain this enhanced level of insight, however, firms must be able to extract and consolidate their spending data from multiple vendors and sources, so that they can have a single view of this disparate information and therefore gain a comprehensive overview of the firm’s expenses. In other words, to make the right business decisions, firms will need to have easy access to the right information – and know how to use it.