Business planning for banking happens certainly way different from other industries and is quiet unique. In this blog would like to share some of the insights and experiences working with some global banks Reporting & Planning groups. Also very pleased to share some of the information that Claudia Wilkerling and I had pulled together on how best practices planning with SAP planning solutions will help Banks driver better forecast accuracy.
Let’s first explore the key business requirements for Integrated Business Planning for Banks:
As you see in the above picture, there is a core operational planning element that involves Asset Liability planning that required in Capital & Risk Planning area. And there is the generic Sales, Operations and Financial planning pieces that help build the consolidated financial plan. Financial planning is the center of the planning that would be of huge value for top management, banking unit heads and CFOs.
The banks planning activities surround the following and the goal is to get all the activities to be integrated in order for the projected financial plans are reflecting the underlying Sales, Operations and Capital/Risk plans.
Also as banks have different sales models based on each of their segments, the planning would be extremely different for each of them. The below table highlights few of the differences between Retail, Wealth and Corporate banking:
Now let’s explore how SAP’s Planning solution helps the above requirements. SAP Business Planning and Consolidations (BPC) has evolved to become central to solve business planning requirements of Banks. In the below picture we highlight how BPC can work with other solutions to offer Integrated Business Planning & Analytics.
While BPC is not the solution to handle the detailed Capital & Risk planning pieces that ALM solutions serve, it would certainly help in doing high level average volume and margin planning including facilitating what if scenarios. For Banks, the crux of the planning is Balance sheet planning that derives the P&L. Loans are Assets and Deposits are liabilities for Banks. Essentially the planners go and define the average margins and FTP rates by different product lines (asset types) that would derive the income. Similarly on the liabilities side, users would go and define the rates for liabilities and the movements, that can derive the interest expended. Planning these at every branch level and deriving and consolidating is a huge value for Banks to get the full single version of truth and especially with familiar Microsoft Excel user interface.
In addition to the crux of Balance sheet planning, banks operate is a very distributed manner. So its important to bring a standard approach to getting all their sales teams and branch operating with respect to the planning. BPC can play a very effective role in getting these plans together, consolidating them and providing a view that can help decision making at consolidated level or down the hierarchy – regions, countries, territories or branch levels.
The below planning methodology demonstrates how banks can really benefit from planning with BPC.
One of the best examples of bank leveraging the capabilities of BPC is NedBank, leading south African bank. They set out with objectives of streamlining and harmonizing the planning process, cover strategic planning and 3 year rolling plan as well as company wide access to planning models. Nedbank saw tremendous results with about 30% better accuracy, reports that could be created in 15 mins (vs. what were taking 24 hours), and elimination of overtime people spend in the planning process. Nedbank certainly appreciates the new found time of people as they can engage in better and value added activities.Check out the video of Nedbank’s story
Big data & Dynamic forecasting – Banks are a natural big data candidate. The sheer volume of their transactions, the variety of the products that they offer and the sales channel being like a retailer calls for managing and making sense of big data. Given banks tracks things at a daily level, the dynamic forecasting calls for solutions that can support “real time” planning. This is where banks can benefit from BPC on HANA, as large banks are exploring this solution further to make it mission critical. The below graphic presents how big data can be processed, analyzed and help create few scenario plans that will faciliate quick decisions.
Please share your views comments and experience of planning for Banks...and how BPC can help !