Running the bank

In the fast-moving and rapidly changing world of banking, core operations are the bedrock necessary for ensuring the smooth running of day-to-day activities that underpin the success of any financial institution. Quite often, it is also referred to as “Running the Bank.” As a rule, innovation and transformation attract much more attention, but running the bank provides the stability, reliability, and customer trust which acts as the firm foundation that even the most ambitious innovations or transformations simply cannot struggle along without.

What Does “Running the Bank” Mean?

Running the bank means everything involved in keeping the day-to-day operation of the institution. It would include the processing of customer transactions, following various regulatory dictates, security and availability of the banking systems, and performing efficient, consistent customer service. In other words, it’s about reliable and effective delivery of services with minimal risks and cost control.

Let’s break it down a bit further:

• Operational Processes: This would involve everything from processing of payment and account management to lending and mortgages. These processes should be streamlined so the business can work smoothly and stay operationally excellent. Just think of the operational hell without these processes aligned and managed properly. It would be like trying to sail a ship through a storm without a rudder.
• Risk Management and Compliance: Banks operate within one of the most highly regulated environments. For this very reason, compliance with regulatory requirements is not open for negotiation, be it anti-money laundering (AML) practices, protection of data, or privacy regulation. Strong risk management frameworks ensure that the bank is able to identify, assess, and mitigate any potential risks before they occur and affect operations. It’s the safety net that catches you before you fall.
• IT Infrastructure and Systems: The core IT of a bank provides the backbone for all core functions-from transaction processing systems to online banking platforms. For a bank’s perpetual running, it is paramount that all these systems become and remain safe, reliable, and scalable. Just think about it-as if it’s the invisible engine in the operation that allows it to run and move on.
• Customer Service: Customer expectations about banking are higher than ever, and seamless, personalized experiences at every touchpoint can be expected. Ensuring customer service that is responsive, knowledgeable, and consistent is a key component to the running of the bank. After all, a satisfied customer is the best business strategy of all.
• Cost Management: It’s a continuous juggling act-operational cost control without sacrificing high service levels. Efficient resource utilization, process optimization, and automation are some of the highly sought-after strategies in cost management. It is like juggling-you’ve got to keep everything up in the air without dropping the ball.

The Challenges of Running the Bank

While running the bank may be less glamorous than transformation or innovation of the bank, it has its own challenges:

• Balancing Stability and Agility: The operations need to be made stable on one hand, yet dexterous enough to respond to changes in the market, technology, or regulations. Finding this balance could keep the bank competitive and yet not have its core functions compromised. It’s a tight rope to walk-you have got to be steady, but at the same time, be prepared to shift your weight.
• Regulatory Pressures: Issues like regulatory compliance are always in movement-there is always the introduction of new rules and new guidelines. Being able to understand the changes around this will help keep one abreast. The feeling is like playing a game where the rules keep changing, which is at once challenging and essential.
• Operational Risks: These are omnipresent-from cybersecurity threats to system outages. Banks need to have a proper infrastructure of risk management and business continuity plans so that they can respond quickly and adequately in case such adversities occur. It is about expecting the unexpected but having a Plan B, C, and D.
• Cost Efficiency vs. Service Quality: Cost efficiency and service quality are two working sides that many times compete. It is a case of shaving operation costs while not impacting the customer experience. Well-thought-out plans and shrewd investments in technology and process improvements can achieve this, much like trying to tighten your belt without cutting off your circulation.

Best Practices for Running the Bank

To be the best at running the bank, institutions have to focus on a few key best practices, including:

• Process Optimization: Constantly observe and perfect the operational processes to eliminate waste, get rid of inefficiency, and further enhance the services provided. Examples of options that can be utilized toward this goal include Lean methodologies and Six Sigma. It’s a question of fine-tuning the machine so that it runs like clockwork.
• Automation and Technology: Invest in automation technologies to streamline repetitive tasks, reduce errors, and free up human resources for more strategic activities. This can range from robotic process automation (RPA) to advanced analytics for predictive maintenance. Think of it as putting your processes on autopilot, freeing up your team to focus on what really matters.
• Risk Management Integration: Ingrain risk management across the spectrum of operations, from front office to back office. This is a proactive method of identifying and mitigating risks rather than a reactive one. It’s like having a security system that alerts you before the intruder even gets close.
• Employee Training and Development: As much as the processes and systems, the people who run the bank are important. Through continuous training and development, it enables staff to upgrade themselves to be more competent in their jobs, thus being more effective, and to accept changes. It means keeping your team sharp and ready for anything.
• Customer-Centric Focus: The customer forms the core of business operations. The culture of understanding and anticipating customer needs, and aligning relevant operational processes to their needs, essentially forms the heart of any strategy that seeks to keep customers confident and satisfied. After all, the real value of any bank can be assessed by the satisfaction of its customers.

Running the Bank as a Strategic Pillar

It means it is not just about keeping the lights on, but about building a stable and reliable foundation upon which everything else-whether transformation or innovation of the bank-is built. Three cornerstones that will ensure a bank’s ongoing concern supports the long-term strategic objectives of the business are: operational excellence in conducting the business of banking, effective management of risk, and customer-centric service.

Of the three pillars in the wider perspective of banking strategy, running the bank might be seen as the least glamorous, but it is probably the most critical. Without solid operations, there would be no platform from which to launch transformational projects or innovate new products and services.

Moreover, as we progress through the rest of the pillars in this series, remember that a bank’s capability of changing or innovating fundamentally emanates from how well the bank is run. Thereafter, in later articles in this series, we come to each of the intricacies of both changing and innovating the bank-both standing upon this foundation of running the bank effectively.

Found this article interesting? Want a deeper dive? Check out our book on how to create the Strategic Flywheel or, Continue reading some of our articles

• The strategic trinity: Understanding the distinctions between running, changing, and innovating the bank
  
• Changing the bank – Adapting to evolving market dynamics
  
• Innovating the bank – Pioneering the future of financial services

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