Transforming the Finance Function in Banking.

Introduction

Banks are always searching for new ways to be more efficient and innovative, especially in the current economic landscape. For instance, banking-specific cloud technology, such as regulatory compliance platforms, helps banks streamline their operational processes. Similarly, AI-powered forecasting and data analytics, like predictive rolling forecasts, assist them in automating financial forecasts. 
Cloud technology holds immense potential for banks. To revolutionise their work, banks must overcome their fear of taking risks and embrace innovation. Our blog will share our observations and ideas on how banks can successfully transform their finance function as they introduce technology change.

The Changing Landscape for Finance Teams

The significance of upgrading technology cannot be overstated, especially when transforming the efficiency of a bank's finance function. However, managing the required cultural and human changes is the key to success in any transformation. So, effective change management is a critical component of the roadmap to success.
As advanced core banking systems evolve, finance departments' roles in critical banking processes and improving underlying performance will become more significant. As many finance tasks become more automated and intelligent, powered by AI, this transformation presents an exciting opportunity for finance professionals to focus on strategic decision-making and value creation for their organisations.

To succeed in the dynamic finance landscape, finance professionals must embrace adaptability and equip themselves with the skills to handle new tasks and approaches. Given the various challenges faced by the industry, what proactive measures can finance executives take to drive transformation and motivate their teams towards a successful and sustainable future?

The Ingredients of a Successful Change Plan

What are the principles of a successful change approach in banking and finance?

In today's environment, banks value reliability, predictability, and control. To meet these demands, professionals like accountants, controllers, financial analysts, and financial managers require technical expertise, business acumen, and operational excellence. These professionals are crucial in managing complex reporting structures and navigating the banking industry's constantly evolving regulatory landscape.
Every one of our banking clients is currently undergoing significant transformations, placing tremendous pressure on their finance teams. As a result, there can be a sense of fatigue and a reluctance to embrace change. So, the success of any changes will depend significantly on the implementation of appropriate change management strategies. Based on our experience in the banking industry, we have identified some effective change management strategies that can help ensure success.

SMART Purpose Goals.

A clear, well-presented, and well-defined purpose for change is essential to gaining alignment. In finance functions, improvement goals are often expressed in terms of service quality, control and efficiency. However, while everyone can agree to vague statements such as “Let’s be better, faster and less costly,” absolute alignment of purpose comes from defined statements. “Let’s get to a 3-day close from 20.” “Let’s reduce the cost of financial reporting production by 20%, reinvest the savings in financial analysis, and enable our people.”
SMART objectives are a framework for setting Specific, Measurable, Achievable, Relevant, and Time-bound goals.

They are beneficial for change management in the finance team for a few reasons:

• Clarity and Focus: SMART objectives clearly define what you want to achieve with the change initiative. This approach eliminates ambiguity and ensures that everyone in the team is working towards the same goal.
• Measurable Progress: You can track progress throughout the change process by setting specific and measurable targets. This allows you to identify areas that need improvement and adjust as needed.
• Increased Buy-In: Goals that are achievable and relevant to the team's objectives increase buy-in and motivation. This is especially important in a large organisation like a global bank, where change can be met with resistance.
• Reduced Risk: A clear timeline keeps the project on track and reduces the risk of scope creep or missed deadlines. This is crucial in a financial setting where accuracy and timeliness are paramount.
• Improved Communication:  SMART objectives facilitate better communication throughout the change process. By clearly communicating the goals, everyone understands what's expected and how their role contributes to the overall success.

Team Engagement & Motivation

To successfully implement changes, it's essential to develop strategies that inspire and motivate individuals to learn new ways of working and embrace the changes. 

Motivation is critical, and teams are more likely to commit to transformation when they see how it aligns with their personal or career objectives. It's important to remember that individual goals and incentives may vary based on career stage and the bank’s maturity level.

Focusing on individual motivations and aligning them with enterprise-change goals can create a more constructive and positive environment for change.

Leaders in higher positions tend to resist change. This attitude could be due to their fear of acknowledging prior failed change projects, which results in maintaining the status quo. Alternatively, they may have convinced their organisation to invest significant money in a particular project, making it difficult to admit when the investment has yet to work out as planned. Unfortunately, this resistance can result in doubling down on a failed strategy and a lack of willingness to change.

As you might expect,  employees who are in the early stages of their careers are usually full of enthusiasm when it comes to the changes happening in the field of finance. They have different expectations regarding their job roles, work-life balance, personal growth, and the rewards they receive. For these individuals, professional development is a crucial motivator. Involving them in a change project, even if it is part-time, can be highly motivating if they get to learn on the job and even gain opportunities for formal training and certification in new professional standards and technologies. This project work experience is also essential in preparing them for future management roles.

Motivating team members who are already advanced in their careers can be a challenging task. These individuals may have been working in a stable Business as Usual (BAU) role for a significant period and may consider moving to a dedicated project role as a risky move. To help them overcome this perception, it's essential to provide them with clear information about the BAU role they will return to after completing the project. This can give them a much-needed sense of security. Furthermore, offering financial incentives or promotion opportunities for their contribution to the project can further motivate them and make them feel valued.

Finance Transformation Success Formula

Based on our observations, mainly supporting the technology implementation of change, the following qualities and characteristics have created successful finance transformations:

• Focus on Business Value:  The program should demonstrably improve the bank's financial performance.  This can include cost reduction, increased efficiency, reduced regulatory and compliance costs, improved risk management, or better decision-making capabilities.
• Forward-Thinking CFOs: To achieve a successful finance function transformation, it's essential to have a proactive and visionary CFO who possesses a deep understanding of the business and aspires to become a CEO in the long run. The senior leadership team should share the CFO's business-first approach, and the IT function should cater to the specific needs of the finance department. A venture capitalist mindset can go a long way in making bold yet well-informed decisions. It's essential to be guided by strong beliefs and principles rather than relying solely on calculators.
• Focus on use cases: When integrating people and data, leading through use cases rather than organisational consolidation or large data programs driven solely by technology is best. People tend to be more engaged when they clearly understand how their work impacts meaningful business issues and challenges, for example, reducing close cycles or reducing the steps to complete a CSRD submission. Select the highest impact use cases and then give the program a name that resonates with your team and focuses on the end goal rather than the technical details, which is important. For instance, instead of calling it "Ledger Transformation," it's better to frame it as "Daily Close" to convey the project's significance.
• Leverage regulatory change mandates: Don’t just settle on meeting a regulatory change demand; use it as an opportunity to modernise and transform. Motivating change managers to surpass compliance requirements is good, especially when dealing with significant regulatory spending. Reg changes often create funding opportunities to revamp processes and data, which can lead to more efficient upstream processes.
  One size doesn’t fit all: We have seen clients impose specific tools or platforms into a change plan, believing that a single platform is the best strategy. This immediately constrains the potential for improvement. We believe the best outcomes are achieved when banks take a portfolio approach and assemble the best-in-breed solutions based on specific use cases.
• Strong Business Architects: Banks are striving to achieve advanced capabilities in finance, and to do so, they are implementing finance transformation programs that leverage advanced cloud platforms and best-of-breed applications. This is great, but it is critical to develop a robust finance business architecture capability alongside this to ensure the successful implementation and scalability of such solutions. There are significant moving parts across the finance function, so a robust business architecture capability is critical.
  
  

Examples of successful execution strategies for finance transformation.

The following tactics and techniques have helped finance leaders create capacity and advocate for finance function transformation:

1. Involve teams early: To achieve a successful transformation, banks should prioritise the people involved in the process over systems, processes, or automation. This can be done by involving the finance staff in the transformation process from the early stages and incentivising their participation through financial and non-financial rewards. Additionally, it is important to train key team members before embarking on a major change program so that they are well-equipped to handle any challenges and not be overwhelmed.
2. Accelerating design without overloading BAU: We recommend assembling a team of subject matter experts from different departments, including finance, risk, technology, and compliance. Have them collaborate for a week, like a Sprint in the agile methodology, to discover solutions to complex business problems from a multidisciplinary viewpoint. After each week, allow the team members to return to their respective departments. This method of working can be an effective and efficient approach to address challenging business issues without burdening regular operations.
   Assign talent to change projects full-time: Most clients have “Change the Bank” and “Run the Bank” teams, which makes sense. To ensure the success of a change project, it makes sense to transfer employees onto the project team while backfilling their current positions with the assurance that their role will be secure after the project. This approach not only helps to retain skilled team members but also provides them with the security of a guaranteed role after the completion of the project.
3. Amplify “quick-win” successes: To succeed when working with people, it's important to remember that change cannot happen overnight. To maintain credibility, it's best to deliver on each promise one at a time. It's helpful to communicate the achievements as they occur to gain momentum and support. For example, in less than six months, we successfully implemented a workforce planning application for a bank with 130,000 employees. This achievement was then shared with other divisions, who are now working towards scaling the implementation due to its quick success.
4. Partner with Niche Experts: While Big Four firms like PwC, EY, and Accenture offer undeniable expertise, consider the advantages of partnering with a niche finance transformation specialist for your bank. These specialists possess a laser focus on the unique challenges of financial institutions. They understand the intricacies of bank regulations, core banking systems, and the specific cultural dynamics within the finance department.  This specialised knowledge translates to faster project liftoff, a deeper understanding of your goals, and a more tailored approach to your transformation journey.  Niche firms can provide the agility and responsiveness that large consultancies may need help to match, ensuring a smoother and more successful transformation for your bank.
   
   

Common Finance Transformation Mistakes

Here are some common mistakes to avoid during a finance systems transformation in banks:

• Lack of clear goals and objectives: Failing to set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals can lead to ambiguity and lack of alignment within the finance team. Clear and well-defined objectives are essential for gaining buy-in and measuring progress.
• Insufficient change management strategies: Failure to implement effective change management strategies can result in resistance from employees, especially those in leadership positions who may be reluctant to acknowledge past failed projects or admit to sunk costs. Robust change management is critical for overcoming this resistance and fatigue.
• One-size-fits-all technology approach: Imposing a single platform or tool across the entire transformation can constrain potential improvements. A more flexible, best-of-breed approach that assembles solutions based on specific use cases is recommended.
• Overlooking team engagement and motivation: Failing to motivate and incentivise team members based on their career stage and personal goals can hinder their commitment to the transformation. Key motivators include involving them early, offering professional development, and providing role security.
  Siloed approach to transformation: Focusing solely on organisational consolidation or data programs driven by technology rather than integrating people and processes through meaningful use cases can lead to disengagement and a lack of understanding of the transformation's impact.
• Missed opportunities from regulatory changes: Banks should leverage regulatory changes instead of just meeting compliance requirements as opportunities to revamp processes, data, and systems for greater efficiency and streamlined compliance.

By avoiding these common pitfalls and following best practices, such as having a forward-thinking CFO, focusing on use cases, and adopting a portfolio approach with cloud technology, banks can increase their chances of successfully transforming their finance function.

The Role of GenAI in Finance Transformation

Generative AI (GenAI) has the potential to be a game-changer for finance transformation technology change programs, particularly in these areas:

1. Enhanced Communication and Training:

• Personalised Learning Paths: GenAI can personalise training materials for different roles and skill levels within the finance department. This ensures employees receive targeted information that directly applies to their responsibilities and facilitates faster adoption of new technologies.
• Interactive Chatbots: GenAI-powered chatbots can provide real-time support and answer employee questions about the new technology. This readily available assistance reduces frustration and fosters a smoother transition process.
  Automated Content Creation: GenAI can generate training manuals, FAQs, and other communication materials tailored to the specific transformation program. This frees up valuable time for human experts to focus on more complex tasks.

2. Streamlined Data Analysis and Insights:

• Automated Data Cleaning and Preparation: GenAI can automate the cleaning and preparation of vast datasets, a notoriously time-consuming task in financial institutions. This allows for faster and more accurate data analysis, leading to better decision-making throughout the transformation program.
• Predictive Analytics: GenAI can be used to develop advanced predictive models that identify potential risks, roadblocks, or areas for optimisation during the transformation process. This proactive approach allows for course correction and ensures the program stays on track.
• Data-Driven Scenario Planning: GenAI can generate various "what-if" scenarios based on real-time data and historical trends. This allows finance leaders to explore potential outcomes and make informed decisions about the transformation program.

3. Improved Change Management and User Adoption:

• Sentiment Analysis: GenAI can analyse employee communication regarding the transformation program to identify areas of concern or resistance. This allows for early intervention and targeted communication strategies to address employee anxieties.
• Personalised Change Management Plans: GenAI can personalise change management plans for individual employees based on their past behaviour and resistance to change. This ensures appropriate support mechanisms are in place for a smoother transition.
• Gamification and Reinforcement Learning: GenAI can create engaging gamified experiences that motivate employees to learn about the new technology and participate actively in the transformation process.

By leveraging GenAI's capabilities, finance transformation programs can be more efficient, data-driven, and user-centric, ultimately increasing the chances of a successful and sustainable transformation for the finance department.

Conclusion

The finance function in banking is undergoing a transformative shift driven by technological advancements and evolving industry demands. As a finance transformation leader in a global bank, you have the opportunity to spearhead this change and position your institution at the forefront of innovation. By embracing a strategic approach, fostering a culture of adaptability, and leveraging cutting-edge technologies like GenAI, you can unlock new levels of efficiency, insights, and value creation.

How can we help?

Revvence can help in several valuable ways:

• Provide proven finance transformation leaders.
• Augment your team with specialised skills in critical technical roles.
• The design and delivery of end-to-end finance transformation solutions.
• Check out Revvy, our Narrow-GPT for Finance Transformation. Read all about Revvy here.