New Initiatives Must Pass ROI Test

In the wake of the global economic slowdown, the dot-com demise, and the September 11th tragedy, large financial institutions are reexamining their IT spending initiatives, leading to project resizing or reallocation of resources.

Global IT spending for strategic wholesale initiatives in 2002 will be essentially flat at $26.2 billion, according to Meridien Research. "In some cases, financial institutions are aggressively downsizing their commitment to e-commerce initiatives and focusing on strategic projects that can achieve the greatest return on investment," said Bill Bradway, cofounder and research director at Meridien.

Credit risk management tops the list of strategic initiatives for financial institutions in Meridien's third annual Top 10 IT analysis for Wholesale Financial Services. "In this kind of climate where economic turbulence is present, credit risk takes on a premium impact," said Bradway. That point has been further accentuated by recent corporate scandals. "You can't pick up a publication without seeing something about Enron because of the sheer size, politics and the fact that billions of dollars were at stake that were basically part of a credit infrastructure."

Enterprise business process management ranked second on the list. This initiative encompasses more than application integration. "What we're talking about is the challenge to integrate business process in association with application integration," said Bradway.

Institutions need to think beyond a departmental mode and look at opportunities for business process integration across the enterprise. If they don't, they may miss opportunities to improve processes that will reduce costs and/or produce better service or workflow. "It takes enlightened leadership at the top of the institution to be successful in pursuing that type of initiative," Bradway said.

Rounding out the top three is return on IT investments. Too many institutions get started on initiatives in me-too mode, said Bradway. "That isn't looking at their business objectives, unless one of their objectives is to keep up with the Joneses."

While there's a constant development cycle around tools, it's more important for institutions to understand the metrics that can drive their business and capture the information they need to understand the consumption of resources. "What set of resources are really required to deliver services to customers or to support channels? Where is the institution at in terms of capacity utilization? Those kinds of mistakes produce business problems," said Bradway.

While Meridien's top ten list is an overall view and not all of the initiatives are relevant to every business, Bradway advises that management in financial institutions should be constantly looking at strategic initiatives and adjusting their plans to incorporate the strategic opportunities in the marketplace. "Our point is, consciously look at what are the strategic initiative opportunities facing my institution, and ask, 'What am I doing about them right now?'"

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Top 10 Strategic Initiatives for Wholesale Financial Services

1. Credit Risk

2. Enterprise Business Process Management Integration

3. Return on IT Investments

4. Straight-through Processing

5. Regulatory Changes

6. Knowledge Management

7. Portal Solutions/Self Service

8. Security

9. Outsourced and Packaged Applications

10. Financial Institutions as IT Solution Providers