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Achieving Cost Efficiency in a Complex World

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Banking Industry Report: How Predictive Analytics Help Drive Strategic Cost Efficiency Gains

by Dr. Nabil Abu el Ata and Dr. Maurice J. Perks

EXCERPT: “With visibility into the factors that influence cost base across the entire business, it becomes easier for executives to identify opportunities to improve efficiency through short-term tactical cost decreases in balance with longer-term strategic cost management initiatives that ultimately help the bank ‘do more for less’—such as streamlining processes or outsourcing noncore functions.”

ABSTRACT: Under ongoing pressure to grow the bottom line, aggressive cost-reduction initiatives continue to be a key board-room imperative for banks. To be successful in this endeavor banks must raise the cost efficiency bar—by gaining visibility into the dynamically complex factors that drive cost base and exposing more strategic and sustainable options for long-term cost management. If not understood and measured, the growing problem of what we call ‘Dynamic Complexity’ threatens the viability of current cost management practices by diminishing promised returns and introducing unacceptable levels of risk.

For bank CEOs, CFOs, CIOs and COOs in particular, this paper provides valuable insight into why more strategic cost efficiency programs—guided by forward-looking, fact-based decisions—are needed to meet the needs of the modern business era. It goes beyond the usage of spreadsheets and traditional project plans into a new generation of management analytics and control. Additionally, it presents new requirements for identifying the dynamic factors that increasingly threaten cost efficiencies, as well as, advanced approaches to predictive analytics which can be relied upon to predict the future behavior of banking systems that have now become too complex and dynamic to be understood using previous methods of statistical analysis. With better visibility into the dynamic factors that destabilize cost management programs, and the ability to anticipate new, never encountered before behaviors, banks are able to drive smarter, forward-looking cost management decisions and achieve sustainable financial results despite the growing complexity of today’s business environment.