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How the Right Performance Management Solution Can Help Your Bank Improve Its Balance Sheet

Corporate Performance Management: W...
Corporate Performance Management: What you need to know

Last updated on October 19th, 2022 at 02:27 pm

Performance scorecards are now an increasingly popular tool for helping banks and other financial institutions achieve sustainable and holistic growth. Unlike conventional approaches that rely solely on financial performance, modern banking scorecards attempt to balance financial, process, customer, and learning goals.

While it may seem that banks are giving up financial growth by focusing on other areas, nothing could be further from the truth.

Indeed, banks that grow in the areas of process, customer, and learning are invariably in a better position for long-term financial success.

Therefore, managing scorecard-related performance well can ensure a more stable balance sheet for years to come.

To help banks use a scorecard framework effectively, financial services analytics software can be used to give decision-makers an accurate data-driven overview of every important activity within an organization. 

How the Right Performance Management Solution Can Help Your Bank Improve Its Balance Sheet

Choosing an appropriate performance management solution gives banks the following capabilities:

Integrated Insights

While it’s generally considered to be ideal to just run one unified system that has all the functions an organization needs, this isn’t always workable in the real world for one reason or another.

For instance, your bank may need to run a separate marketing automation solution separately from its enterprise resource planning (ERP) system, even if the latter has marketing automation functionality. 

The problem with such setups is that data insights from these different systems are often in their own buckets. Using data in one system elsewhere often requires manual data wrangling or unreliable software workarounds.

This common issue is now being addressed more reliably in modern finance solutions. When properly configured, data from parallel systems can be reliably shared, allowing for superior data visibility.

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This makes it much easier for a bank’s financial planners to see current performance and potential courses for action without the need to do tedious manual data reconciliation.

Accelerated Reporting

Financial markets now move much faster than they did in past decades. It’s no longer acceptable for banks to use month-old data as a basis for major decisions. If a bank wants organizational awareness, it needs to be able to generate reports almost immediately.

Current performance management solutions permit faster reporting, allowing financial planners to respond to any emerging threat or opportunity.

The increased report generation speed can be especially important for improving your bank’s resilience to unexpected market events.

Improved Data Accuracy

Performance management tasks can take up a lot of man-hours, especially when data is locked up in different buckets.

Additionally, these activities sometimes require fairly sophisticated calculations that could be easily thrown off if the wrong data is entered or the wrong fields are selected.

These are exactly the types of issues performance management solutions are intended to solve. Current generation solutions are designed to seamlessly automate a wider range of performance management tasks compared to older software. Some solutions come with workflow templates that further reduce the odds of human error.

Mitigated Risks

New systems can help banks and other financial institutions mitigate both long and short-term risks. Because these systems give better data visibility, reduce human input, and permit faster reporting cycles, banks employing them have a much more realistic appreciation of performance and relative risks for different activities compared to those using older systems.

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This can allow a bank to quickly change direction to pursue more profitable markets or to consolidate in response to serious threats.

This risk mitigation capability could also be used to help banks make better investments, safely approve more loans, and prevent problems with liquidity.

Faster Product R&D

Developing new finance products is traditionally a long and drawn-out process. Not only were data modeling solutions rather slow by today’s standards but performance evaluations were also comparatively more difficult, particularly when a lot of data has to be managed.

Today’s banking software suites are a leap forward in terms of both modeling and evaluations thanks to better artificial intelligence and machine learning capabilities.

In practical terms, they offer banks a means to quickly develop and validate new financial products within shorter development cycles and at lower costs.

This gives banks of all sizes the ability to immediately capitalize on emerging market opportunities or pivot in the face of existential threats.

Improved Compliance

Legal and standards compliance is one of the most important things for banks to rate highly on any performance scorecard.

Banks that are unable to meet compliance requirements can be subject to fines and sanctions, effectively limiting their growth potential.

While compliance is fairly simple, it does get tougher to keep up with all the new banking rules and standards that come out each year.

Banks that manage a high volume of international transactions or operate in multiple markets also face significant challenges in maintaining full compliance.

Thankfully, performance management solutions can make it easy for banks and other institutions to set up automation scripts that permit perfect compliance with any standard.

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This can help reduce the long-term cost of facilitating transactions, giving banks a bit more headroom in their balance sheets.

Final Thoughts

If your bank wants to transition to a scorecard framework for growth management, picking the right software for financial services analytics will be key.

Choosing the right performance management tool will enable your financial institution to manage activities at every level, effectively cutting costs without compromising on accuracy or service quality.

In this way, better performance management software can be critical for ensuring that your bank maintains a healthy balance sheet in both the long and short term.

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