Summary of best practices session

1. Summary of best practices session

2. Ms. Amelita EspanolaRB Brooke’s Point • Working in far flung areas • Working as a team = “construction/structure/strategy” and “finishing/detail/tactical” • Local area development = market creation • Partnerships with grassroots communities • Challenge now is to balance local area operations versus complex national regulations

3. Mr. Eugenio Demegillo, Jr.Partner Rural Bank, Inc. • A Best Practices Discussion • Leading Research: Daniel O’Keefe, Ashish Jain Booz & Co.

4. Executive summary : - No single method can transform any of a bank’s operations model. - Adopted approach depends on bank’s goal. - Definitely, every bank’s approach will differ then.

5. Suggested five ( 5 ) best practices for transforming Operational model of banks. Customer – back process transformation. Product and service simplification. Aggressive digitization. Governance and Performance Management transparency. Delivery model optimization.

6. Banks with successful operations transformation by adopting Best Practices achieve four benefits. • Enhanced Client Experience. • Eliminate client • complaints. • Improved responsiveness • to customers / clients. • Streamline process. • Operational and Cost • Efficiency. • Reduced cost by driving • out variability. • Create capacity and • scale. • Provide cost - effective • services. • Continuous improvements. • Defined standard processes. • Train organization in • process – oriented thinking. • Instill a culture of • continuous improvement. • Risk Mitigation. • Ensure consistent and • auditable controls. • Align operating model • to changing regulations.

7. Atty. Edward Garcia, Jr.Quezon Capital Rural Bank, Inc. • Focus on Governance at the Board level • Foundation of effective governance: • Mutual trust • Respect • Openness to ideas and discussion • Consensus decisions • Critical, but respectful = good, effective relations • These stand despite generational differences • Ex. Actual board meetings, build-up bank to attract next generation

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9. Notes by lead researchers: The 5 suggested Best Practices, combined with aligning the Operational performance goals to business priorities will: • Enhance operations capabilities, and • Meet transformation objectives.

10. Moreover, your decision on what primary banking business objective you want will determine what approach you will use. Examples of business objectives and/or purposes: • Drive efficiency and reduce/ increase volume. • Simplify and standardize operations. • Improve customer experiences and customer relations. So question, what exactly do you want to do?

11. Researches show that the 5 Best Practices are common across all initiatives that led to successful transformation of operations: • Customer – back Process Transformation. Actions: 1.1. Redesign end-to-end process based on desired client experience. 1.2. Analyze trade – offs between level of customization and the value perceived by the client. 1.3. Use a structured, consistent methodology to drive change.

12. 2. Product and Service Simplification: Actions: 2.1. Minimize customization where the client sees no value. 2.2. Align cost-versus-complexity trade – offs with the strategic direction of the bank/ business. 2.3. Standardize processes and supporting platforms to drive digitization of client experience.

13. 3. Aggressive Digitization. Actions: 3.1. Use digital media to create better front-end client inter – actions. (paperless statements, tablet interfaces, etc.) 3.2. Implement straight – through processing to avoid manual processing. 3.3. Form partnership with positioned and non- traditional service providers to build and deploy digital capabilities.

14. 4. Governance and Performance Management Transparency/ies. Actions: 4.1. Establish and reinforce clear accountabi- lities, decision rights, and stakeholder roles. 4.2. Define goals and incentives that are clearly aligned with strategic objectives. 4.3. Adhere to a metrics – driven culture with key performance indicators (KPI), unit cost management, etc.

15. 5. Delivery Model Optimization. Actions: 5.1. Move to shared – services or utility models to maximize scale and reduce costs within banks. 5.2. Integrate and align process – centric IT operational capabilities. 5.3. Increase integration of 3rd – party providers into the delivery model to add variation to cost and to build capabilities.