Pressure on banks to manage costs and be more agile is felt particularly keenly by the chief financial officer (CFO). Efficiently provided financial data are key to enabling executives to operate effectively, seek operational efficiencies and increase compliance. A panel of five CFOs assembled by the ABBL discussed how they work towards this, particularly regarding their use of IT and outsourcing.
“You have to think simple before thinking complex, because the data is overwhelming,” Steeves Oster, Finance Director Europe at PayPal Luxembourg told the ABBL CFO roundtable on operational efficiency. With banks serving increasing numbers of business segments and dealing with the growth of regulation, CFOs must manage growing amounts of detailed data to close their books each month. Producing validated and audited figures more quickly and accurately increases the ability of business to become more agile.
Skills and hardware
Thoughts turn to automation, particularly artificial intelligence/machine learning as a solution for the challenge of extracting and processing the key data. Although high performance tools give enhanced ability to react, Oster is wary of taking short cuts with outsourcing. “If that skill set is outside your team you lose agility, hence why it’s very important to have this expertise inside,” he said.
As well, banks need to ensure high-end hardware capacity to avoid technical bottlenecks. Oster advocates using the cloud as the way to scale quickly. This adds further to the organisation’s agility rather than having to focus on building capacity and maintaining that resource in house.
Also strong procedures
While accepting the need for technology to take much of the strain, Matti Niinikoski, CFO of Citi Bank Netherlands, believes effective rules and guidelines around the closing process are also a critical factor. “Business have to know which activities happen, when and where. We also need to understand thresholds so we are not chasing cents at the end of the process,” he noted, adding that well-designed procedures lead to clear audit trails and control frameworks. Also, why wait until the end of the month to close the books he asked? “If you spread the workload, you actually start your month-end close before month end.”
“We have created a centre of expertise where we can group standardised processes that we can apply across different entities in the same country, but also across different countries,” said Guillaume Rosset, head of finance at HSBC Luxembourg. Having these skills internally allows teams to use outsourcing in a measured, intelligent fashion.
Control outsourcing arrangements
“We have dedicated outsourcing managers,” said David Fellowes-Freeman, CFO at JPM Bank Luxembourg, who noted the key importance of compliance in these relationships. For example, in his team he has a person responsible for monitoring agreed KPIs “because we know local regulators are very focused on what you may outsource or how you leverage a partner. You still need to have central expertise around that process.” For example, they assemble information on an ongoing basis about the outsourcing relationship, including factors such as partners’ resilience and business practices.
Rosset noted that it is often necessary to explain to partners within one’s own group that the CSSF makes no distinction between in-group outsourcing and working with a third party. “Sometimes our colleagues ask us why we need so much detail when we are part of the same group, and we have to explain that the regulator wants the Luxembourg entity to have the same level of decision-making control, regardless of the type of relationship,” he said.