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Back-office processes in banks

When dividing the bank into process owners and their contractors, we must not forget that they operate within the organizational structure and competences assigned to positions/areas and tasks, resulting, among others, from strategic goals, KPIs or quality requirements etc. Due to its importance, each process can be carried out by one or more units or internal structures operating within a department or office. Joint arrangements and defining what is the beginning and end of the process are key to identify the responsibility and set SLAs. In the context of the arrangements that affect all structures in the bank, in particular some of the back office, servicing or, simply, operations/support processes, this division is extremely important.

What operational processes are and what they are responsible for

Operational processes affect every activity and one can say that they concern all structures within the company, from sales, through risk, to debt collection and human resources. But what really are operational processes, and how to distinguish between those that are a cost to the organization and those that bring profit? Are operations always costly?

Well, not always, because an employee/system who charges a fee for issuing a certificate to a client brings a measurable profit to the bank. Therefore, let’s consider how to separate operational processes from sales processes, in which an operations employee has to prepare a batch for a customer advisor, or conduct an inspection of the project before making the limit available.

The solution is to prepare a map of the processes actually performed by the teams, the relationships between them, both on the scale of the external and internal customer, define who is the supplier and who is the recipient of the work, and to present the organizational cells in which these processes are located. We can use the existing map of the bank’s processes or make a new one, considering all the processes we handle, showing which cells they go through, who they involve and what effects they generate. The list of operational processes can be a dictionary of competences or even descriptions of specialist positions, where the task matrix will define what is an operational process, and what is a sales, control, management or support process, and most importantly, it will show us how the operational processes support the cortical ones for the bank. Or we can go even further and estimate how much they cost, what the risk of a failure is, and how it will affect the organization or outcome.

Valuation of operation

How much does an operational activity cost? It depends on who performs it, how many times in one cycle and how long is the lifecycle of the product or the process performing the operation.

Can operations be a system/robot? Of course, and it is happening more and more often. Let’s assume that we have a matrix of operational processes with given input and output, activities and results of our work along with the cost of the process. E.g., we determined the cost of a legal opinion for trial X at 10 EFT per month times average earnings in this department or team = PLN 10,000, which gives us PLN 100,000 per month to handle this process. I omit here the costs for the employer, holidays, sick leaves, etc. It has been determined that such process is of high importance and there is no financial justification for the robotization/replacement of activities performed by employees with a system. The profit that employees bring was assessed in relation to the level of risk mitigation, number of court cases won, time needed for legal opinion to sales processes, etc. and amounted to 1/20. We have a justification for the valuation of operations on each side, so – from the organizational point of view – we get a green light in the process matrix.

Another example is the cost of monitoring card transactions issued to minors, which we determined as 5 EFT * PLN 10,000 = PLN 50,000 per month. However, we have another parameter that we take into account, i.e. these 5 EFTs as the total monthly time to perform this activity, to which all employees in a department of 100 people have access. It takes 5 minutes for each of them several times a day. It is difficult to optimize distributed activities that affect many employees, because their work can be performed differently and rely on many “additional” improvements, e.g. when employees combine excel files with HD, someone does the mail merge, someone doesn’t, and many, many other possibilities that have been developed over the years – some better, some worse, but still… To properly map the process and assess its value, we must determine what it looks like in its desired formula and how we can (if we can and want to) improve it.

Operations – the bank’s treasure

The operations employee is a treasure of the bank’s organizational structure, to whom countless projects, improvements, calculations and implementations of robotization systems come with questions such as: “And what are you doing here? How? What for? Can you do better?” Without this knowledge, the continuity of the bank’s operations would be disrupted. The valuation of positions does not always follow the formula that we suggest in this article, which is a pity. It is important for decision-makers to see how many “seemingly simple” activities are carried out and how. Someone said that the ability of hitting a specific place with a hammer is highly valued because someone knows where to hit exactly.

The operations employee is the treasure that – as the richest source of operational knowledge, including history – should be appreciated and we write it from the standpoint of a technology company that implements systems cross-sectionally to organizations, very often asking the above questions. 😊

After 16 years of creating processes in financial institutions, the time has come for changes and Kuba transferred himself to the IT industry, where the passion for sailing, testing games (mainly from the Battlefield series) and rowing still remains - the ergometer is useful in the garage like never before these days.

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