Bank It Practices and Alignment with Business - Case Study Example

BANK IT PRACTICES AND ALIGNMENT WITH BUSINESS Bank It Practices and Alignment with Business Customer Name: Lecturer Name: Date: Information of National Bank of Abu Dhabi The National Bank of Abu Dhabi (NBAD) is the leading bank in the United Arab Emirates with more than hundred branches in the UAE, several ATM’s and internet banking. The bank was incorporated in the year 1968. The bank has been awarded several recognitions and awards. The bank operates within the UAE and in other countries such as UK, France, Hong Kong, Switzerland, Bahrain, Kuwait, Oman, Sudan, Libya, Egypt and Jordan. The bank offers diversified services foe the corporate market as well as for consumers. The bank, which is highly rated by credit rating agencies, is structured into different divisions including stock brokerage company Abu Dhabi Financial Services (ADFS), International Banking, Abu Dhabi National Islamic Finance (ADNIF), Domestic Banking, Private Banking and Asset Management Group, Corporate and Investment Banking, Abu Dhabi National Properties (ADNP) Abu Dhabi National Leasing Company (ADNL). The bank has gained several firsts in the past. It is among the first companies in the UAE to publish annual Sustainability Report, and has a comprehensive Corporate Social Responsibility Mission, which is a vital component in the banks strategy. The bank has won prestigious awards including Dubai Quality Award, Sheikh Khalifa Gold Award, Strategic Banking Web Award, Mohammed Bin Rashid Al Maktoum Business Award, Middle East e-Banking Country Award, Middle East Excellence Award, Arab Technology Award for the Banking & Finance and several other awards. Type of bank processes The bank runs several distinct and interrelated processes, depending on its functions. These processes include customer sourcing, customer registration, loan applications, process, deposit and transaction process, telephone-banking process, over the counter banking process, foreign currency deposit process, Offshore banking process, credit card provision, and Capital markets instruments process and customised investment solutions and private equity process. Process description The processes of the bank are in agreement with the products and services provided by the bank. The loan process involves several activities, which can be abstracted to several processes such as Application Process. In this process, the prospective loan applicant provides all the requisite details such as supportive documents and the necessary information to underwrite the loan. Another process in the loaning is the underwriting process where the bank makes a lending decision, utilising the data provided by the client as well as data from external sources such as from the credit reference bureaus. After the bank ascertains the capability of the loan applicant, the nest process is the funding process where the bank and the applicant sign contractual agreement such as loan contract/note after which the requested finances is released to the applicant. The servicing process involves periodic and timely payments on the loan by the applicant, while the bank provides regular updates in terms of statements and information to the borrower. The last process is the payoff process, when the contract is closed after the customer has made the final payment on the loan to the bank. Check clearing process is also a lengthy procedure. A customer pays in the cheque and credit slip the bank, the bank then collects cheques on a specified time scale, such as hourly basis. This is followed by using the Image Character Recording (ICR) technology to read electronically the cheque amount. The ICR or the Magnetic Ink Recognition (MICR) technology is then used to read the cheque number and the sort code account number. Cheques are then sorted and pilled depending on the clearing bank, after which IBDE (Inter Bank Data Exchange) files of cheque payment are created. The bank then enters the electronic credit record into its accounting systems. The bank then sends the cheques to the clearing banks, from where they pick the cheques, they are supposed to clear, and as well exchange the files of payments in the form of IBDE files with other banks. On receiving the cheques from other banks, in addition to the in-house cheques, the bank verifies the records in the IBDE file of electronic payments. The bank then provisionally debits the customers account. Using a combination of human based and computer based methodologies, the clearing bank then makes a decision on whether to honour the cheque of disown it. This engages several activities such as determining the account balance of the cheque drawer; ensuring the similarity of signatures with was is on the account opening, profiling tests to highlight unusual payments and cheque stoppage by customers. If the cheque passes all the tests, the customers account is debited, otherwise the cheque is returned to the customer. Account opening is another banking process. This contains several sets of activities such as physical presence of the customer in the bank during the working hours; a customer then chooses the most appropriate account from the variety of account types and services available in the bank, the assistance of the bank staff in explaining the various accounts is important. The customer then provides some information to the bank such as identification data, after which they fill account-opening forms. The customer then signs a contractual agreement with the bank through signing of terms and conditions. The bank then enters the account opening data into electronic form and assigns an account number to the customer. This marks the end of the account opening process. Transaction by the customer is a collection of activities, which make up different processes such as funds withdrawal process, funds deposit process and the funds transfer. During the funds deposit process, a customer fills in a money or cheque deposit form, they then give the form to the teller and the money to be deposited, the teller confirms the accuracy of the details entered in the form and confirms the agreement between the entered amount and the actual amount. If the information entered is in agreement, the teller debits the customer’s account, makes a printout of the transaction and gives the customer the print out to sign. In case of withdrawal Over the Counter, withdrawal and ATM withdrawal are the common alternatives. In ATM withdrawal, the customer has to have a Debit/Credit card. The customer inserts the card into the ATM machine, after which they enter their Personal Identification Number (PIN), the machine verifies the accuracy of the PIN after which the customer is given on-screen instructions. After the customer enters the required amount, the machine cross checks with the available funds, and dispenses the money accordingly. The customer then takes their card and the money, marking the end of the process In the over the counter withdrawal alternative, the customer fills out the withdrawal slip with their name, account number and the amount to withdraw. The customer then takes the withdrawal slip to the teller and provides any required identification. The teller then confirms the availability of funds in the account and the accuracy of the client details. If they agree, they teller credits the customer’s account, and gives the customer an equivalent amount of money. The customer then signs the computer printout to mark the end of the transaction. Customer relations process in the bank consists of several activities. The bank has a suggestions box, complaints box and a customer relationships representative strategically placed in a visible area in the bank. The process begins with the customer making a formal or informal complaint or compliment about a service or a product, the customer care personnel ascertains the accuracy of the customer’s claims. If there is a problem, the bank employee apologizes to the customer and corrects the problem; a more serious problem escalates to the relations manager. In case of misinformation, the employee offers the customer the correct information. Mission and Vision of the Bank The National Bank of Abu Dhabi’s vision is to be recognised as the World’s Best Arab Bank, while the mission of the bank is to offer clients excellent services through creation of products and continuously delivering quality services, which are value for the growth of the customers. Processes that need re-engineering Banking is an intricate relationship between integrated processes. Process reengineering in the bank can be extremely complicated, considering that, virtually all banking processes are interdependent and no banking process has all of its variables contained within one functional area. Process reengineering in the bank can entail a single process, several related processes or the entire organization. Reengineering a single process is a complicated venture since the process depends on other functional areas. The sanctioning and disbursal of loans process need reengineering. Reasons for re-engineering the processes It is important to re-engineer the loan sanctioning and disbursal processes for several reasons. . The overall objective of reengineering is to enhance the effectiveness and efficiency of value-added activities and to eliminate or minimize the non-value-added processes. To enhance the banks services, it is vital to reduce and eliminate handoffs. The re-engineering is aimed at eliminating handoffs of moving the customer and work from one process or one stop to another one, before a decision is made. Whereas the underlying factor necessitating the handoff in the bank is control and security, majority of the handoffs are not contributing to the realization of the objectives and are not processes in themselves, since the document or the contents of the document does not change. In the loan appraisal process, the application documents goes through several persons where the documents are simply checked, cross-checked, counter-checked, rechecked, or validated. The stages just involve reaffirming or faulting what the initial staff entered. This creates a long chain of handoffs where people check people who checked other people. The bank has argued that the long steps are vital to conform to standard industry practices and ensure security. The handoff is however unnecessary due to the increased workload are reduction in efficiency, hence delaying the loan process are creating unnecessary customer run around. The handoffs have worked against the bank, injecting unnecessary delays in emergency loans, unnecessarily delaying the customer and suggesting that the bank does not trust the entries made by their staff. There is need therefore to reengineer the loaning process to reduce handoff and possibly empower employees through technology and information to make decisions, such that a single bank staff can receive a loan application, using computerised systems such as data mining make the customers credit appraisal, determine the most appropriate amount of loaning and award the loans. The Customer Relationship Management process also deserves reengineering. The current process tends to be reactive and at its pre-active. There is need to reengineer the process to be proactive through designing a desired future status. The bank should then be able to control the outcome of customer relationships and developing means to create the future state. Reasons for customer relationship management reengineering include fostering and enhancing customer relations Advantages of reengineering The bank stands to gain substantially from reengineering the loaning process. The bank shall be able to save on costs. The current loan process is unjustifiable long and time consuming, yet what is actually done is confirming reaffirming what is entered on the loan application form and the applicant’s capacity to repay the loan. Reengineering the process, enables the bank to save on costs, since with the help of computerised systems, one person can perform all the tasks in the loaning process. Reengineering the loaning process also has the advantage of marketing the banks services. With reduced turnaround and loaning time, more customers shall prefer taking loans from the banks, hence enabling the bank to prosper in its quest to attain strategic competitive advantage. Furthermore, with the elimination of unnecessary handoffs, the bank shall be able to focus on its primary activities, and converging the effort of the human resource to the core banking activities. The other advantage of the reengineering is that several activities and tasks in the bank shall be integrated. This serves as advantage, where decision-making is enhanced, and reducing the number of steps necessary for the loaning process, in addition the reengineering motivates the employees, since they are given the powers to make decisions. Furthermore, the reengineering has the advantage of providing the loan applicants a single point of contact, therefore easily ensuring the tracking of the loan application. Reengineering the Customer Relationship management has several advantages. The reengineering assists in customer attraction and customer acquisition, through identification of the unique customer characteristics and personalised the services offered to the customer. Furthermore, the reengineering has the advantage of enabling the bank to increase revenues since marketing techniques and strategies can be directed at specific customers. Furthermore, this has the advantage of enhancing customer satisfaction therefore enabling the bank to enhance higher customer retention. Adopting proactive customer relationship system enhances relevant sharing of customer information in the bank, therefore enhancing informed decision making and follow-up, and as well enabling the bank’s staff to have customer information at the click of a mouse. Reengineering also fosters productivity and saves time for the banks’ staff. Moreover, the reengineering fosters business performance through convenience and enhanced data tracking and report generation. The reengineering has the advantage of ensuring and enabling an integrated, enterprise wide Customer Relationship Management platform where the bank is able to capitalize on these market dynamics, instead of losing out because of them. Reengineering therefore provides numerous benefits to the bank, from the Customer Relationship Management perspective. Challenges to reengineering process There are several challenges to the reengineering process. Employee resistance to change and lack of cooperation is a challenge (Kevin, 2000). The challenge is in most cases related with the development of pessimistic perceptions to change, in which the staff productivity, morale, and turnover intentions are greatly influenced by the attitudes towards change, introduced by the reengineering. Reengineering can be exceptionally stressful occurrence for employees, there are several emotional states experience by employees during change processes, which are equilibrium, denial, anger, bargaining, chaos, depression, resignation, openness, readiness and re-emergence. This is a result from departing from the usual way of doing things, and departing from known to the unknown. There is the challenge of integrating the reengineered business process, with other processes in the bank. Some of the reengineered processes such as loaning may require input data from other processes, which may be slow and incompatible with the constraints of the reengineered process. Moreover, other processes may require the output of the reengineered process to be their inputs. The outputs may be in highly visualized or in a graphical manner such that other process may fail to understand the data. Lack of sufficient resources is also a challenge. Reengineering is a resource intensive undertaking, especially when the processes to be reengineered involve the core banking procedures. Furthermore, human resource expertise may be a challenge. Considering that the reengineering is Information communication Technology based, the required expertise may not be available in the bank. Plan to face the challenges The resistance to change shall be handled by training staff and informing them of the merits and benefits of reengineering process and be enlightened on the need for the reengineering. The staff shall also be trained on the skills that me be on demand due to the reengineering. Furthermore, employees shall be engaged in the reengineering process and their views, concerns and opinions addressed. Furthermore, the workers union shall be engaged in the reengineering process, and in cases where the reengineering jeopardizes or affects the job of an employee, they shall be informed in advance and given the opportunity to acquire other skills. To face the challenge of incompatibility, phased implementation shall be used, where the current system shall run in parallel with the reengineered process. There shall be intermediary systems between the current system and the reengineered processes. The current processes shall then be gradually phased out, and the reengineered processes being fully implemented. The challenge of human resource is dealt with by contracting out the reengineering process to experts and as well developing the local talent in the bank, so that there shall be continuity. Steps of Business Process Reengineering The business process reengineering is a process that involves other diverse processes in the organization. In deciding on the steps of business process reengineering, several principles govern the process, these includes organizing around outcome and not around tasks, to simplify the debugging process in case of problems. Having the persons who need the business output controlling the variables of output generation and treating geographically disperse resources as though they were centralized is also a consideration as well as linking parallel activities instead of integrating their results. Furthermore, the steps consider incorporating information-processing work into the real work that produces the raw information and capturing data at the source. The first step of the Business Process Reengineering is the The first step in the process is to Develop Process Vision and Determining Process Objectives through stating of the State the reasons for the BPR. This includes understanding expected benefits such as the enhanced operational performance, improved competencies, reduced costs and labor savings. In this stage, affected stakeholders, customers, activities and employees are identified. At the end of the first step, key processes are identified as well as mission and vision of the implementation. The second stage involves defining the process to be reengineered. The step encompasses several important activities such as developing and establishing a common understanding of the bank’s processes, as well as controlling and ensuring process outcomes. Performance metrics such as production and planning are measured. The third step is Understanding and Measuring Existing Processes. This is important to understand the shortcomings of the current process, and as well decide on the best way that the processes can be integrated. It is important also to identify the BPR drivers such as rising overhead costs, lack of customer satisfaction, stagnant business conditions and Information Communication Technology developments and advances. After which the suitable alternative is chosen Developing a prototype and implementing the reengineering is the last step, which involves Managing the entire change process, creating new organization structures, managing technologies and Changing people’s attitudes and mindsets. References Kevin, Forsberg.(2000). Visualizing Project Management. Hoboken, John Wiley & Sons. Read More