Research & Thoughts

Use Strategic Cost Management to Stay on Course

Flying blind on the route to profits?

This Capco white paper explores how one innovation – strategic cost management – can help financial services companies measure profitability more accurately and in richer detail. Built on a rapid prototyping approach to profitability modeling, strategic cost management can help your organization chart a clear course to its true value and profit potential.

Many financial services companies are increasingly concerned about achieving profitability targets and maintaining shareholder value over the next several years. While still profitable today, they face a future constrained by regulatory changes, growing competition and post-crisis reverberations. The loss of fee revenue, new restrictions on proprietary trading, and other industry shifts are compressing margins and compelling institutions to find new routes to bottom-line performance.

To stay competitive, institutions are restructuring products and services, offering new investment vehicles, and working to improve mobile and online account access. Such initiatives could prove essential to maintaining revenue and securing a company’s customer base. But how profitable will these efforts actually turn out to be? Many institutions simply don’t have clear visibility into the economics of each transaction as it flows through the business. What, for example, is the actual profit on a product being sold through a given channel to a customer in a given region?

Certainly, many financial institutions have historically invested in systems to capture and analyze profitability information. Many of these same companies have lost their ability to keep their capabilities current with budget cuts and layoffs. But just as today’s market environment is reshaping products and services, so too is it demanding that institutions find new ways to gather and assess data, within tight cost constraints.

While profitability measurement has historically been considered more of a “nice to have” capability than an imperative, today’s environment is altering that view. Corporate and business unit leaders need precise, timely profitability data more than ever to make critical business decisions.

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