Improving customer service through reducing operational risk

Relationships at risk

Our client, a FTSE 250 leading merchant banking group, provided lending, deposit taking, wealth management services, and securities trading to their customers. Their strategy focused on their relationships, services and expertise through which they aimed to build leadership in specialist markets. We supported our client to deliver a Customer Service Program (CSP), helping them to identify and address known issues and risks within Premium Finance. This was to mitigate any negative impact on customers and improve overall customer service.

Customer service constrained by operational risk

Our client was finding it increasingly difficult to effectively manage their relationships and maintain service levels due to the increase in regulatory requirements and a subsequent increased risk of financial losses, regulatory fines, and reputational impacts.

The CSP encountered three specific challenges – all common to the delivery of projects in the financial sector:

• The evolving regulatory landscape, evidenced by a change of scope within the CSP. This then required a permanent capability within Premium Finance to assess requirements and capability.
• The complexity and effort required to implement changes in the legacy IT system was significantly higher than envisaged. The resource burden of the IT scope introduced risk to the business and hence the customer outcomes. 
• The significant amount of management bandwidth that was required to support delivery throughout the program lifecycle. As complexity increased, more time was required from management to take key decisions on issue priority and solution options. Therefore, effective and ongoing resource planning was essential with an alignment of project and business-as-usual activities and ring-fencing project resource.

The scope of the program was required to flex over time to stay current and relevant to meet the needs of the business. This resulted in some workstreams being brought into scope late on during the program, only providing time for quantification and qualification of the issues, not necessarily the required remediation. For this small number of issues, the relevant analysis and options were successfully handed over to business-as-usual (BAU) systems to progress as required.

Manage the risk to improve service delivery

The program addressed each issue in scope following the approach below:

1. Quantify and qualify: Assess and scale each of the prioritized risks and issues to understand whether the issue was material and whether remediation against the issue was required
2. Remediate: For those issues which required addressing, implement appropriate solutions (either within IT or within the business)
3. Embed and stabilize: Ensure that once issues had been addressed or agreed not material, continued risk reduction or monitoring was embedded successfully within BAU practices.

For each issue identified one of the following responses was undertaken:

• Solution delivered: The risk was deemed to require remediation and a solution was delivered, either through an IT release or through updated business process / documentation.
• Accepted risk: Following analysis to define and scale the issue in detail, a decision was taken that no remedial action was required and the issue could be classified as an accepted business risk, or a non-issue.
• Manual workaround: The issue was deemed to require remediation, but legacy system constraints prevented an IT solution being delivered within the time / budget available hence a manual process was put in place to address.
• Handed over to business-as-usual activities: issue was deemed to require remediation. However, this was agreed to be addressed within BAU activities.

Delivering results

The key business driver for the CSP was to increase positive outcomes for customers by addressing specific risks within the business relating to regulatory requirements. This meant that the benefits were not expressed in monetary terms but in terms of reduction in operational risk. The benefits being tracked on a monthly basis in the steering committee level were:

• Benefit 1: Improved customer focus and service 
  • Measure of success: Delivery of best practice product and service offering
• Benefit 2: Reduced operational, regulatory, financial and legal risk
  • Measure of success: Reduction in the number of perceived issues. Improved reporting of issue and risk mitigation

As well as assessing whether the intended benefit was achieved by the CSP we also recommended that an evaluation as to whether all of the risk and issues identified against each of the benefits had been mitigated and this would safeguard future operations within Premium Finance. We also gathered data to identify the common reasons other financial organizations had been issued with fines by the FCA and incorporated these into the risk and issue identification for our client.

Berkeley supported our client to successfully identify and mitigate the Top 20 issues and complete all associated projects.