Offshoring and centralizing to transform the front office

As the regulatory and market environment evolves, relationship managers at banks and credit unions face a tough challenge in combining their role as an effective first line of defense and meeting commercial business and revenue targets.

A big part of the challenge is the significant administrative burden – our experience indicates that relationship managers (RMs) can spend close to 60 percent of their time on such tasks.

Rapidly evolving portfolios in the current environment, multiple fragmented systems and a number of digitalization initiatives within banks make the jobs of RMs extremely complex and stressful. This has a cascading effect on customer relationships and a decreasing share of wallet, with less and less time spend on client differentiation or customer-facing activities. This percentage decreases further if the bank still relies on outdated or inefficient technology solutions.

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Sales executives still identify winning and growing business as the main goal for RMs. However, the path to secure this growth is now even more challenging than before – earlier, there were largely external market, or competition-driven pressures. But now, even the internal processes are adding to that burden.

A strong credit risk assessment support function can empower RMs to drive business and foster customer relationships, which, along with speed to market, are critical for banks to retain their share of wallet. The ability to see market trends, adjust strategies, make tactical decisions and deploy resources quickly provide a business with an advantage at a time of unprecedented change.

With consumers adjusting the way they transact, and with digitalization opening the doors to real-time data analytics, the stakes for efficiency have never been higher. For that reason, it is important that banks look at optimizing workflow in a way that their RMs feel more empowered and can spend more time on client-differentiating activities.

The amount of time a relationship manager spends preparing client risk profiles, doing market risk analysis on the underlying collateral, or updating risk calculation sheets could be freed up for more impactful work if these tasks could be allocated to a qualified support function.

Offshoring this work can help banks better allocate their resources to achieve cost-effectiveness and increased sales bandwidth. Banks need to look at centralizing credit monitoring and other administrative activities with teams that can focus on the accuracy, timeliness and consistency of credit analysis and loan portfolio monitoring activities.

In the current environment, RMs should be supported by domain specialists who help them monitor and develop a deeper understanding of their portfolios. Facing customers is important, but so is keeping track of portfolio performance, especially when portfolio performance moves sharply. Timeliness and accuracy have become more important in the way banks analyze their credit, so credit teams need to be equipped with robust portfolio monitoring mechanisms and proper ways of reporting early warning signals for credit risk assessment to be effective.

Previously, banks had objections to outsourcing parts of their business because of the remote and virtual nature of offshoring. This is no longer a barrier in the post-COVID world, as the pandemic forced businesses into a trial-by-fire of remote work. Offshoring will be a strong differentiator for banks that want to grow without substantial increases in costs.

Due to remote work and offshoring, banks are now experiencing the benefits of an expanded talent pool, and the ability to add a flexible workforce quickly. The model has delivered effective modes of working across time zones and better management of operational risk and effective delivery models. Such benefits have accelerated the use of offshore data centers for knowledge services.

However, the offshoring industry is not one size fits all. A key factor for banks and credit unions is finding functional expertise that addresses their specific needs, along with contextual technology and flexibility on the cost side. That expertise can also provide analytical insights augmented with process best practices.

The workplace of the future is about having teams that are intellectually present and that help an organization not just survive but thrive in a competitive business environment.

Rajul Sood is senior director, commercial lending services, at Acuity Knowledge Partners.