The Systemic Crisis is driving a major transformation in the Financial Services Industry, from a business model based in volume to a business model based in efficient management of Capital and Liquidity (both critical and scarce resources).
This is a new scenario in which the objective is not selling as much as possible for maximizing profit; rather, it’s about maximizing profit optimizing capital and liquidity consumption.
This new paradigm has significant ramifications for the architecture of the Information Systems for Banks. If the new scenario has new priorities, Information Systems must be aligned with them.
Let’s look at some examples from the past.
Historically, Information Systems were based in Accounting, as the accounting perspective was considered the most complete representation of the company. Typically, companies were managed by looking at its accounting magnitudes.
On the 70s, 80s, and driven by the Oil crisis, executives priority moved towards considering the company as a number of resources which should be managed in an integrated way (optimizing the use of the resources). Consequently, we developed Enterprise Resource Planning Systems (ERP), with SAP as the visionary leader.
At the end of the 80s and early 90s the priority was optimizing Production, Storage and Transportation resources and we designed Information Systems centered in optimization of logistics resources. As a consequence a new architecture showed up: Supply Chain Management (SCM) systems became the priority.
At the end of the 90s, with the Internet revolution and the over-consumption society we have enjoyed since then, business became client-centered. The priority was to sell the client as much as possible (cross-selling and up-selling). Thus, Information Systems were built around the client: Customer Relationship Management (CRM).
With the Financial Crisis and the new regulation increasing Capital and Liquidity Levels (Basel III for instance), the new paradigm is efficient Capital and Liquidity management. What is the answer of the Information Systems to the new requests?
Capital and Liquidity management must be at the center of the Banking Information Systems. They’re the most critical resources, and managing them efficiently, is the main priority.
This is not CRM, SCM, ERP or SOA; it’s something new. They all offer advantages which are still valid, but as the situation is new and the requirements have changed, the architecture needs to be adapted to the new scenario.
Risk, Liquidity and Profit must be at the center of the information system offering to the executives and integrated vision of where and how Capital is allocated and consumed.
In my opinion, the Integrated Financial and Risk Architecture of SAP Bank Analyzer is an excellent candidate for this Capital-centric architecture which is going to be required.
We also need to educate the market about this new architecture and how can be aligned with the new paradigm, but this is a different story.
Looking forward to read your opinions.