Other parts of this series:
Cost reduction has been a strategic battleground for financial services organizations since the 2008 crisis. Though many have made strides, for established organizations, outperforming the new entrants to the market on cost and with shareholder expectations remains a challenge.
Our most recent research with more than 700 change leaders in the industry still placed cost reduction as one of the top four investment priorities (alongside customer, digital and regulatory change) and the number one benefits metric that is used.
According to Accenture research, further cost reductions are still among the key pillars of three- to five-year strategic plans of largest European banks and insurers. Furthermore, our 2017 Tech Vision survey found that 86 percent of insurance executives agree their organization must innovate at an increasingly rapid pace just to keep a competitive advantage.
In their struggle to beat rivals and deliver value, many financial services leaders look to short-term savings to achieve rapid cost reduction. However, these quick fixes could do more harm than good, if not planned or executed properly.
To reach the competitive CI ratios necessary to survive and thrive in the face of disruption, traditional firms must radically change the way they operate. They need to transform their core business operations or adopt altogether new ways of running their business in the future.
This requires finding the right mix of tactical “diet” cost reduction solutions and more strategic “healthy lifestyle” initiatives. In the short term, firms must employ tried and tested solutions to achieve immediate cost reduction, free capital for investment in longer-term initiatives, and generate momentum for wider cost reduction agendas. However, they must also make further investments to drive truly innovative and transformational change, otherwise cost will quickly creep back in.
As anyone who has ever made a New Year’s resolution to lose weight knows, getting fit is tough and staying healthy in the long term should be the goal. Financial services organizations are no different.
Coming up next, we will examine in detail the two approaches to cost reduction, the “Diet” and the “Healthy Lifestyle.”
To learn more, register to download the report: Piling off the Pounds in Financial Services