More NewsOperational Efficiency Needs to Improve for Financial Institutions

Operational Efficiency Needs to Improve for Financial Institutions

According to new research from TowerGroup, many global financial services institutions lag the industry’s leaders in operational efficiency by as much as 30 per cent. A review of a select group of top diversified global financial institutions found that these institutions averaged around 60 cents in cost to produce $1.00 of revenue. This is compared with the industry’s top performers, who spend just over 40 cents for that same $1.00 of revenue. “Bank, securities firms and insurance companies have tended to rush into cost cutting, as a tactical response to lagging efficiency ratios,” said Guillermo Kopp, vice president of the Cross-Industry research practice at TowerGroup and author of the report entitled, “The Path to Operational Efficiency: FSIs Drive Holistic Business and Technology Transformations”. He added that: “Panicked about meeting expense reduction targets, institutions spend too little time figuring out where and how to cut cost, quickly reducing their opportunities to eliminate redundant expenses and sacrificing long-term transformation for short-term goals.” Kopp added, “Now that business is rebounding across most financial services sectors, many institutions are finding that their operational efficiency is burdened by convoluted business processes, fragment IT systems and intricate legacy interfaces.”

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