Ranjith Reddy, Author at Everest Group

Can Your Shared Services Group Manage Enterprise Risk? | Blog

By | Blog, Shared Services/Global In-house Centers

The financial crisis of the late 2000s, increasingly stringent regulatory requirements, growing competitive pressures, and a host of other factors have vaulted the risk management function to new heights of strategic importance for banking, financial services, and insurance (BFSI) companies.

Our ongoing research in the sector shows that most enterprises handle risk management out of their onshore headquarters locations, rather than giving ownership of the function to their offshore shared services centers, or what we call Global in-house Centers (GIC).

When we asked BFSI companies why they were keeping risk management on their home turf, they cited several reasons:

  • Because they’re still trying to streamline their risk management frameworks, structures, and processes, they’re unclear what to keep onshore and what to offshore to GICs
  • As risk management is becoming an increasingly critical component of the overall enterprise strategy, they view offshoring the function as a risky move
  • They’re concerned that the offshore talent lacks the needed business acumen and understanding of sourcing geography’s regulations
  • They feel constant interaction and frequent coordination with multiple business units and teams is the first line of defense for reducing risk at the origin

What’s the common thread behind all these rationales? They’re all perceptions, rather than reality.

In fact, our research shows that GICs are particularly well-suited to deliver the risk management function. Why?

  • Many shared services organizations are the driving force behind their enterprise’s digital, automation, and analytics initiatives, and their deep knowledge in these specialized capabilities can be highly useful in the risk management function. And there are synergies in areas such as risk modeling, forecasting, scenario analysis, and reporting. For example, a leading bank’s GIC has successfully automated local regulatory reporting, and is transitioning to be a centralized reporting team
  • There is a dearth of risk talent globally, but offshore GIC locations, such as India and Poland, have strong, solid pools of talent with deep risk management knowledge. This talent is coming from their domestic market (e.g., local banks) and existing GICs that, over time, have scaled their risk management function
  • To deliver real risk management value to the business, the GIC and the group risk team must be integrated; shared services groups have already cracked this operating model way back in areas such as investment research (e.g., sell-side and buy-side) and actuaries (e.g., pricing and valuation).

How can your shared services organization assume responsibility for your enterprise’s risk management function? Like most GICs, yours was probably established to handle scale-oriented transactional work. But risk is about value, not scale. So, you need to change your parent company’s mindset about your group’s capabilities by proactively identifying, proposing, and demonstrating how you can add value and be a strategic partner in managing risk.

Here are a couple of examples that may help get your creative juices flowing:

  • One GIC parlayed its experience with machine learning algorithms to build “Challenger Models” that significantly increase the precision of dataset validation for its company’s credit analysis
  • Another shared services group championed creation of its company’s “Operational Risk Center of Excellence” through process enhancements, global transformation projects, continuous process review and improvement mechanisms. This helped streamline and simplify various processes and risk frameworks.

Our two cents to enterprises: you stand to lose a lot if your risk management capability isn’t up to snuff. Your best solution may be right in front of you, even if not geographically right next to you.

What Analytics Hot Spot Is Right For Your BFSI Business? | Blog

By | Banking, Financial Services & Insurance, Blog

Enterprises that operate in the BFSI industry are the biggest consumers of analytics services. They realized earlier than companies in other sectors how powerful analytics can be in offering targeted and customer-centric solutions, exploiting the massive amount of available data, meeting dynamic customer demands with their expectation for real-time solutions, and helping them adapt to changing business environments.

There are four different regions around the world that provide analytics services to BFSI companies: India, Asia-Pacific (APAC,) nearshore Europe, and Latin America. Each has its own unique capabilities, characteristics, and value proposition.

To help BFSI firms select the right delivery location for their specific needs, we recently completed a “Locations Insider Report” named Global Hotspots – Analytics in BFSI.

Following is a look at the findings. To add context to them, we classify analytics solutions into four types based on their sophistication and business impact, as you see here.

What Analytics Hot Spot is Right for Your BFSI Business?

India

India is the leading delivery destination for analytics services in the BFSI industry. It has a large talent pool (more than 65 percent of the global sourcing FTEs in nearshore/offshore locations,) and offers high cost arbitrage. Because of these factors, a large number of BFSI companies have chosen to set up analytics Centers of Excellence (CoE) in key tier-1 locations such as Bangalore, Delhi NCR, and Mumbai. While both tier-1 and tier-2 locations support traditional analytics services delivery, and largely support customer, fraud, and finance risk analytics functions, advanced analytics services delivery is concentrated in tier-1 cities.

India is also seeing an uptick in start-up activity in analytics services delivery across multiple functions including customer, credit, fraud, and risk. Because these service provider start-ups can provide accelerated access to skilled resources either through partnerships or acquisitions, BFSI companies may want to factor this into their location selection strategy. In the PEAK Matrix evaluation included in our report, Bengaluru and Delhi emerged as “Leaders” because of their high cost arbitrage and significant talent availability. We identified Mumbai as a “Major Contender” due to its healthy mix of cost arbitrage and talent availability, and high maturity in traditional analytics services delivery.

APAC (excluding India)

Manila and Shanghai are the top locations in the APAC region. While services delivery is dominated by service providers offering traditional analytics services, a few locations also have a sizable shared services – or global in-house center – presence. The geography primarily supports finance and fraud risk management functions, and some companies are setting up analytics CoEs.

Nearshore Europe

In nearshore Europe, the top analytics services delivery locations are Budapest, Edinburgh, Prague, and Warsaw. While companies leverage the geography for both traditional and advanced analytics, advanced analytics services delivery for fraud and finance risk management is gaining traction, primarily due to region’s availability of high-quality talent and the ability to support work in many European languages. Certain nearshore locations, such as Belfast and Edinburgh, support high-end predictive and prescriptive analytics, not only because a highly qualified workforce is available, but also because of the need for advanced processes to be in proximity with business customers. Just like India, Poland is experiencing an uptick in start-up analytics service providers.

Latin America

Latin America is an emerging destination for analytics services. One of its key advantages is its ability to provide real-time monitoring and data analysis to the North American market due to its similar time zone. BFSI companies primarily leverage key locations in the region, such as Mexico City and Sao Paulo, for traditional analytics services across risk management functions such as credit and fraud.

Because of all that’s at stake, BFSI companies need to carefully evaluate locations for analytics services delivery against their specific business requirements. To learn more about the global analytics services landscape – availability of both entry-level and employed talent pool, market maturity, cost of operations across top locations, and implications for stakeholders including service providers, GICs, BFSI companies, country associations, and industry bodies – please read our recently released report, “Global Hotspots – Analytics in BFSI.”

Have RPA Vendors been MARVELous? | Sherpas in Blue Shirts

By | Automation/RPA/AI, Blog

The relationship between RPA vendors and their clients isn’t so different from the relationship between Marvel Studios and its fans.

Since the movie Iron Man hit the big screen in 2008, fans’ expectations of superhero films have skyrocketed. Despite the rising and evolving expectations, Marvel has satisfied its audience and has made a little pocket change in the process.

In a similar way, RPA buyers are expecting increasingly more from their RPA vendors. So, have RPA technology vendors been MARVELous in their customers’ eyes?

The Drivers

Our recent research study among 50 enterprise RPA buyers makes it clear that vendors have excelled in addressing their primary drivers, which are cost reduction and process optimization.

However, vendors didn’t score as high on secondary drivers such as improved customer experience, governance, and top-line growth. With increasing awareness about the potential impact of RPA beyond immediate cost and efficiency benefits, enterprises have started to view RPA as a primary contributor to their digital strategy, rather than a tactical measure.

Consequently, technology vendors should focus on continuously evolving their RPA solutions with a host of capabilities to help enterprise buyers achieve their strategic business outcomes.

The Capabilities

As to be expected, the buyers in our research study found their RPA vendors excelled in certain areas and had work to do in others.

The key strengths for those vendors who were identified as the Leaders as per our PEAK Matrix™ assessment on RPA included:

  • Customer support and service
  • Ease of use and robot development
  • Vision and strategy

Key improvement areas for Leaders included:

  • Responsiveness
  • Product vision and strategy
  • Product training and support

The X Factors

As there are so many RPA tools available in the market, each with its own strengths and weaknesses, it can be daunting for enterprises to select the right vendor for their unique needs. One critical part of the decision-making process is to focus on the X factors that are most important to their strategic agendas.

Our study found that factors including “ease of use and robot maintenance” and “scalability” highly correlate to buyers’ overall satisfaction levels. This is not surprising, as these are factors that buyers typically face issues with during RPA adoption. “Product vision and strategy” – and in some cases vendor expertise in a specific vertical industry or function – are also important buyer X factors.

While it’s clear that RPA vendors can do more to satisfy the needs of their customers – and that they’ll need to continually evolve their solutions – they have indeed been relatively MARVELous in delivering value and overall satisfaction to their buyers.

To learn more, please read our report “Buyer Satisfaction with RPA – How Far or Close is Reality From Hype.”