How to Enhance Your Strategic Decision-Making Process
Banks are bursting at the seams with data. Data is captured at multiple levels with each transaction, from the customer master file to the deposit file. Understanding the flow of your data is important for reporting purposes. Equally as important is knowing your data will help with ongoing strategic planning initiatives.
Design and Understand Measurable Key Performance Indicators
Setting strategic goals is a significant part of achieving growth. One way to measure progress towards achieving these goals is to use key performance indicators (KPIs). Goals such as customer and employee satisfaction, efficiency of operational processes, and asset size are all important characteristics for a successful financial institution. They are also KPIs and a necessary measurement for any organization aiming for success. The steps to implement KPIs are simple:
Step 1: Data
Having data doesn’t necessarily mean that it is complete or accurate, so dive into the integrity of your data and make sure it is in good shape – complete, accurate and consistent – before you begin to use it for goal setting.
Step 2: Goals
Consider using the S.M.A.R.T approach for goal setting to provide a more comprehensive definition of goals. This makes Step 3 and Step 4 much more meaningful.
Step 3: Critical Success Factors
Establish critical success factors for each goal.
Step 4: KPIs
Establish well defined and quantifiable key performance indicators (KPIs) from the critical success factors.
The more difficult part is how to measure and collect data to determine if KPIs are being achieved and how to build useful metrics out of the data collected.
This is an area where data analytics and business intelligence tools are becoming more significant in the goal setting process. Data analytics allows users to scrub data for accuracy and completeness and provide a clear and accurate picture of the data being used to measure KPIs based on reliable information.
Once data analytics and measurements are in order, the next steps in the KPI process are:
Step 5: Communication
Communicate KPIs throughout the organization, and explain them clearly.
Step 6: Analysis
Obtain, analyze and measure KPI related data.
Step 7: Continuous Evaluation
Evaluate and re-evaluate KPI results frequently – going back to steps 1 – 3.
Learn from Audits
While the constant flow of audits can be daunting and disruptive at times for an organization, an audit can provide valuable insights and feedback on the organizational structure, the organization’s services and products, as well as potential risks.
For example, BSA/AML has been a significant regulatory focus area over the past few years, requiring financial institutions to dig deeper into their systems and data, ultimately requiring institutions to better understand results, accuracy of assumptions, and completeness of data. This can be a challenging task when simultaneously faced with understanding how new payment methods and related transactions increase BSA/AML compliance risk. Reviewing the results of audits and validation procedures can assist in understanding data errors, show patterns in new payment methods and transactions, and identify compliance risks related to BSA/AML.
Financial statement audits, while required, have focused more and more on business issues over the past few years. These audits provide meaningful insights into the accounting and finance processes and their efficiencies and operations.
And then there are internal audits. Data analytics and business intelligence have transformed the internal audit function in recent years, resulting in high quality audits that provide deeper insights into the organization and can help to proactively address issues.
When it comes to strategic decisions, make sure to stay ahead of changes that the financial institution industry will have to tackle in 2018:
- Increased industry consolidation and additional competition from non-traditional banking and investment companies
- More changes in regulations and shifts in regulators’ focus areas
- New payment methods that increase compliance and fraud risk
- Increased risk of customer identify theft
Subscribing to trade journals, blogs, forums and magazines has become an essential part of keeping informed and up to date on changes and trends that can impact your business strategy. Make sure to also listen to your customers and employees - they may notice organizational changes before you do.
For more information on 2018 risk concerns for bank executives, check out our infographic.