engo 2010 smart english

EngO:From Business Process Outsourcing

Engineering Finance Division

www.eng.it

From Business Process Outsourcing To Business Process Utility

November 2010

Offering

AREAS EngO Services

Banking-Credit

• Mortgage• Rating models updates• Credit administrative services• Collateral Management

• Client personal information

From Business Process Outsourcing to Business Process Utility2

Banking-Commercial

• Client personal information • Opening and closing a bank account• Bank transfers, direct debit, domiciliation• Insurance saving

Banking-Finance & Investiments

• Fin. BO• SGR - Services• Custodian

Banking-Credit

Rating Update Customers economic data recovery in

order to replenish the internal models

• Data Collection• Reworking • Reclassification

• Origination • Proposal• Resolution and delivery• After-delivery and Archive

MortgageAdministrative management


• Collaterals data recovery • RE geo-detection• Fair value determination

Credit administrative servicesBO in order to credit activities

Collateral managementData recovery for Credit Risk

Mitigation

• Centrale Rischi management• CRIC management• Credit Scheduling• Renewals

Banking-Commercials

Banking account managementOpening and maintenance accounts and

others

Population and maintenance client data toolClient data management


Administrative BO for PSD compliance

Insurance BO

Payments managemnt

Underwriting Redemption Suspension Supplement

Banking-Finance & Investiments

• Securities Register• Deposits and depositories management• Asset Management• Funds placement• Settlements and Payments

Finance BO

SGR Services

• Share calculation• Accounting• Activities against money laundering


• Asset Management• Positions in share management• Asset Management (law’s control and value share)

Custodian

SGR Services• Activities against money laundering• Subscribers administration

The financial market today

Ø Momentum of significant discontinuity in the market due to changes in the political-economic scenario that impacted the whole system, generating crisis and reducingtrust from the clients

Ø The market crisis and the change of mentality imposed by the system offer, however,big opportunities that can create value

THE MARKET


Ø Need to develop innovative customer loyalty techniques

Ø Need to revise their own rating systems because of inadequate internal ones and nottrustful external agency (ex. Lehman classified as AAA+)

Ø Implement prompt reply skills to all changes imposed by the market (ex. compliancewith new regulations etc.)

Ø Implement efficient sourcingmodels to reduce costs and gain operational flexibility

FINANCIAL INSTITUTIONS

BPO Market Trend in Financial Services

According to Gartner (Dataquest Insight: BPO Trends in Financial Services, 2008), the market of

BPO Financial Services will grow in the next years with a CAGR of 10.5% from 2007 to 2012,reaching a total of $55.9 billion in expenses by 2012. This growth is mainly due to reduction costsstrategies implemented by the institutions to deal with the recent financial crisis (IT expenses – if

not for the components that guarantee costs reduction – will decrease, while the off shoring

services will see a fast acceleration). In terms of evolution of BPO services provided, we haverecently seen the establishment of the new model known as the BPU (Business Process Utility).


The evolution of BPO: the BPU (Business Process Utility)

In the area of service delivery, in the following years, we will see an evolution from the BusinessProcess Outsourcing towards the Business Process Utility that is, as stated by Gartner, a way todeliver slim, automated services. In the “Four Steps for BPO Success”, Gartner show the trendthese services will have in the next few years:


• Regulatory Compliance(Basel 2, Bersani, Mifid, etc.)

• Credit Excellence• Payments (SEPA)• ……

• Back Office of Second

Offer model

The offer model brought to the market will be made up of three Business lines: Consulting,BPO, Innovation:

Consulting


• Customer Experience• Lean Branch• …….

• Back Office of Second generation

• Rating models• Collateral Collection• …

BPO Innovation

EngO – thanks to its presale structure – will bring its offer to the market with the purpose tomanage and outsource the operational processes of financial intermediaries in an end-2-endperspective, exploiting expertise on process, regulation compliance, and innovation.

Business Partnership objectives

Improve the operational performance of business processes through:

Time to Market reduction Operative Costs

reduction


Process execution control

Increase quality and generate new value

EngO’s model: Business Partnership

Engo model provides a gradual and flexible approach to Business Partnership.

Each of the executive arrangements described below may be implemented stand-alone ortogether with others in the customer's needs.

Transform

H

COSTS/ADDED VALUE

Transform• Transformation of one or more parts of the value chain

• Certainty of the result in terms of business performance

EngO


COMPLEXITYL H

L

COSTS/ADDED VALUE

Service Delivery• “as is” execution

Re-Engineer• Efficiency induced by changes in process and organization

• Using technology to support the efficiency of processes

performance

Reengineer

Service Delivery

EngO mission

EngO was born by the desire of Engineering Group of challenging the right mix of capacity for "listening to the customer" with operational powers and set of methodologies, asset and experiences.

In the context of the model of services provision, in the coming years we will see the development of Business Process Outsourcing into the Business Process Utility that is in fact, as defined by Gartner, a way of providing services leaner, automated.


is in fact, as defined by Gartner, a way of providing services leaner, automated.

The “Human Intensive” activities are physiologically migrating to IT transactions: unstructured information (typical of the paper contents) become in Engo structured information in a position to be directly drawn up by information systems. Engo accompanies its partners in this path with the credibility of being part of one of the main actors ICT.

Improve efficiency of Back Office structures

The application of the EngO offer, identified by projects to increase efficiency of the financialintermediaries Back Office operational structures, is based on the following stages: processassessment and gap analysis, activity reengineering (Consulting), definition and implementation ofnew operational model (Innovation), outsourcing to EngO structures (BPO).

Service quality improvement

SLA Improvement

Service Monitoring (BAM)

Process mapping vs. best practice Process mapping vs. best practice

BSC Application and Back Office activityBSC Application and Back Office activity


Assessmentprocesses &

Gap Analysis

Activity Reengineering BPOImplementation

new operational modelCommitmentEngO

Costs analysis

Reduction of redundant, low value activitiesReduction of redundant, low value activities

Productivity increase

Cost control in real time

Business Process Transformation

Service cost reduction

t0 time

BPU

The EngO approach

Methodology Approach

Project Plan

EngO aims to become the Bank industrial partner for the realization of a BusinessProcess Outsourcing project of the Bank Back Office activities, that can be identifiedinto four macro phases:


ApproachProject Plan

Know-how Acquisition

Transition Plan

This phase is applicable to each process analyzed, and the key activity is the definition of the process KPI for their subsequent evaluation.

Quality management

Flow Rollout and

Start

KPI represents the small group of indicators that have been identified as critical variables to reflect the value of the process management strategies adopted, and that can be categorized as follows:

Methodology: Processes and relevant KPI definition


Definition and evaluation of reference benchmark

Flow Chart Drafting

Definition of reference metrics

Flow Rollout and process book sharing

Definition of Monitoring Model

Acceptance Test

Planning

categorized as follows:•Service Level Agreement•Performance Time and % Based•Human Resource Management•Volume•Customer Satisfaction

KPI also represent an evaluation of the success strictly connected to the improvement targeted with the initiative.

Flow Chart Drafting

Methodology: Processes and relevant KPI definition

• The activity wants to draft a back office project flow chart according to a logic temporal succession of structural

• The activity aims to define the reference metrics for each entity indicated in the flow chart.

• Metrics will be extracted from

• The activity’s objective is to measure processing timing for each entity identify in the flow chart.

• Reference

• This activity intend to define the monitoring model of the process shown in the flow chart.

• The model could be

• The purpose of this activity is to validate deliverables in the previous phases, and verify the equity of models created

• The activity aims to define the Process Book and its continuous update in time.

Phase: Acceptance Test

Definition and Evaluation of referenceBenchmark

Definition of Monitoring Model

Flow roll-out, and process book update

Definition of reference metrics


activities. extracted from the catalogue of metrics defined within the EngO® Method, and will be implemented at the maximum level of detail expected in the flow.

• Reference benchmark will be collected and implemented at the maximum level of detail expected in the flow.

could be defined at single entity or entire flow level, and its realization implies many different activities.

according to EngO quality guidelines.

Definitions :

The Process is decomposable in subsequent phases. The Phase is an macroactivity succession. Every process (working) will have to be represented with the level of decomposition till the Macro activity or, if necessary, with the level of detail on the single Activity

Macroactivities

This second activity has as objective the design of the flow chart of aoffice process of back a temporal logical sequence of structured activity.

Activities

§ The macroactivity can be subdivided in

Flow Chart Drafting


Macroactivities• The Phase is decomposable in

Macro having activities specific input/an output. Every Macro activity is characterized the being carried out from operatingly homogenous subjects.

• Eg. Asset Management

§ The macroactivity can be subdivided in activities, that they constitute the minimal level of analysis of the process. The activities are determined decomposing the macroactivities second a sequential parallel logic

Examples:

§ Formal control ( / open note WF)

§ Verify “bene firma” ( / open note WF)

§ Angrafic control ( / open notes WF)

§ Inclusion in proceedings …

Process Repository and Work List

Process Repository

Work list

The Organizational Repository is characterized from a structurebased on the catalogue of the business processes (taxonomy), thatit constitutes the infrastructure on which the characterizing mappingsare placed the operativity of the nets, of the offices center them andof the outsourcer in an univocal context, homogenous andintegrated.


Work list (the operating guides) for the operators, bring back the description ofevery single activity member the operating procedures in which the Service isarticulated. Inside of every operating guide the following elements are indicated atleast:

• the single elementary steps that compose every activity and the relative modalities of execution;

• the reference to the line controls that must be carried out by the operators; • the activities to undertake to forehead of anomalies; • the activities for which an explicit authorization from the Customer is

previewed.

Control system

• Leaving from the risk analysis, connected to the activity of the Finance, EngO aninner control system has elaborated on the activities of the Service that can bereviewed for the specific requirements of the Customers, the system is such that:

– it assures an effective management of the operativity and of the connected risks, definingpolitical and appropriate procedures of control;

– it establishes effective communication channels to the aim to assure that all the staff is

Control system


– it establishes effective communication channels to the aim to assure that all the staff isto acquaintance of the policies and the relative procedures to own tasks andresponsibility;

– it defines the informative flows faces to assure to the full Customer acquaintance andgovernance of the operating procedures object of the Service.

• The control system previews the institution of operational controls on line thatwill come executed from the operators of the supplier in order to control thecorrectness than operated.

• Such controls will be in appropriate controls card’s

Flowchart example


This activity has as objective the definition of reference metrics for every entity defined in the flow chart. The metrics will be extracted from the metric’s catalogue defined inside of the EngO® Method and will be applied to the maximum level of detail previewed in the flow.

Volume• Percentage practical subdivided for channel • Percentage practical subdivided for typology• Medium number of practical that an operator manages

medium Number for the time being managed practical all' year from an operating medium Number of practical for

Service Level Agreement• Aging practices in Backlog anomalies• Medium number of practical managed to the day in lying from

48 hours • Quality: Percentage practical managed in wrong way shifting

percentage on the Previewed Volumes

Reference Metrics

Reference Metrics Definition


Performance Time and % Based• Medium time Practical Management

• Medium time Wait Which had to I.S.• Percentage One Step Resolution • Percentage of Practical Suspended to external cause• Percentage Practical Reject to the competence sender

because not Percentage • Practical Transferred to other Back Office • Percentage Practical that demands a call to the

customer Medium time called duration customer (outbound)

• Average ready Time on effectiveness Time in seconds Medium time Availability to the Effective Job vs Contractual Time

• Occupation Operating Percentage

year from an operating medium Number of practical for Customer for Year

Customer Satisfaction• Percentage Customers whom Percentage supplies a positive

feedback in last the 90 days • Customers whom a negative feedback supplies in last the 90

days

Human Resource Management• Annual turnover• Operating cost of new Assumption • Necessary time for the formation of a new Operator

percentage on the Previewed Volumes

Performance IT• IS accessibility

This activity has as objective the measurement of the timing of working for every entity defined in the flow chart. The reference benchmarks will be found and applied to the maximum level of detail previewed in the flow.

MeasurementsHaving decomposed every process in the macroactivities/activity composes that it concurs a measurement of detail of the single entities that takes part to the realization of the same process. It will have to be given evidence of the dependencies from the used systemsManual Survey• The timing of processing for each

Automatic Detection• Should be identified Processes, Phases, the

Measurement and definition of the reference benchmarks


• The timing of processing for each Macroactivities / Activities represented in the model are detected manually by stopwatch in assistance to operators.

• Should be identified Processes, Phases, the Macroactivities or traceable activities automatically and the possible interventions to be implemented to simplify the measurement of the same.

BenchmarksThe reference benchmarks will be those now found for each process. In the absence of a reference model should be created one base of measurements on significant volumes :- Last month- Last quarter- Last half-year- Last year

This activity has as objective the definition of the model of monitoring ofthe process represented from the flow chart.The model could be defined at the level of single entity or at the level offlow in its complex and its realization it previews multiple activities.

Targets To provide the guidelines for monitoring the workflows of each practice run in the Back Office by:

Analisys and definition of:• Instruments

Monitoring Model Definition


Identification of a set of recommendations and requests through the creation of functional specifications for:

• Customer IT• Internal IT

Identification of monitoring methods and types :• Manual• Automatic• Mixed

• Instruments• Methods• Support procedures

This activity aims to validate the deliverables of the previous steps andverify the consistency of models made in accordance with the Engoguidelines.

In this phase it should validate:

• the flowchart

Acceptance Test


• the reference metrics and their applications

• the measurement model

• the monitoring model

In the event that these deliverables are not acceding to the quality guidelines,

recommendations for the revision and completion of the models should be discussed

and provided.

This activity aims at defining the Process Book and its continuouslyupdate in time.The Book consists of three types of documents:

Process ListIt’s the file (Excel format) that contains the stock of working according to the triplets structure: • Type

– Family • Subfamily

Summary

Flow Rollout and process book update


– Reference to the Flow Chart document – Reference to the Card Process document: Metrics and Associated Measurements

Flow ChartIt’s the file (Visio format) that represents the flow chart of the process (subfamily) concerned with a detail level of or Macroactivities or Activities depending on the complexity of processing.

Card Process document: Metrics and Associated MeasurementsIt is the rows (formed excel) that it takes a census metric of reference for the working (family) and the carried out

tsurveys (times of working, incidence %, etc…). The metric ones could be applied on various levels: the process; the phase; the macroactivity; the activity

Detail Document for each Subfamily

Project Plan - Phases

DIC 09 30/04/2010

End actual Service

July 2010

New Operating Model START

Transition Consolidation

Service Improvement

Service Model fully implemented

Initial AssessmentSept 09

Start (Sign LOI)

Due Diligence e Contracting


As Is SLA collection

To Be SLA definition

Services responsibility

SLA management

EngO

Operating & Service Model

deployment

Operating & Service Model consolidation

To Be SLAtuning

To Be SLA start measurement / responsibility

Internal Back Office

Activity Descriptiong Collection of Bank requests for the activity that will have to be delivered by the service centerg Definition of user requirements to connect the delivery center with the volumes it will have to manageg Analysis and definition of transition phase from the paper driven to the paperless working modelg Collection of Bank/EngO IT specifications for the monitoring activities of mailing and reporting servicesg Definition and sharing of contractual SLA (metrics to measure performance, collection instruments, recurrence, reference temporal span, actual level of performance, target level of performance,…)

g Definition, sharing, planning, and start up activities of Knowledge Transfer

Project : Services and IT Infrastructure – Start –UP Form

DeliverablesgContractual addendum paper filing procedure

gDocument with detailed technical requirements

gPersonnel involved List

ObjectivegCensus of the applicative/infrastructural/policy context, and of relevant indicators within the project g Identification of user requirements for the set – up of infrastructure needed by the Supplier to deliver the service (user profile, applications, connectivity, …)

gGuarantee the correct implementation or user requirements towards IT, that can activate the operation

— Gantt of project — Responsabile


• Logistic Infrastructure project

§ Census of areas, office realization, work places

§ Management transition phase couriers services from bank to service center

§ Filing of registered and processed documents

• IT infrastructure project

§ Census of applications

§ Collection of Bank requirements

§ Implementation requirements and test

• Mailing service project

§ Analysis processes/sub-processes, procedure and service level

§ Personnel selection and Knowledge Transfer activities

§ Management of transition from paper driven to paperless model

— Gantt of project —OctFeb Mar May June JulyApr Sept Nov DecAug

EngO

EngO

EngO

Release of detailed technical requirements document

Personnel List

Production of contractual addendum

Start up Service (1/06/2010)

Example of Governance

Director

Project Management

Knowledge ManagementProcess & SolutionsEngineearinga.i. C.Guerrini

Process & QualityManagement

Issue/Risk Mgmt

Request Change

Contract & Budget

Transition Staff

Transition Project manager

People Manager

Business TransitionProject

Technical Transition Project

Business CapabilitiesManagement

Improvement Project

HR & FacilitiesService Performance

ManagementService

Management Steering Committee


Operation Manager

Recruitment and HRIT FinanceFacilities and ServicesE

ngO

Back End

Structure

Operating

Structure

Operation Manager

Banking Operations Structure

Banking Operations Structure

Operating Committee

Structure 1 Structure n

Know-how acquisition

The model to be followed during the Knowledge Transfer/Training process will be definedby EngO during the preparation of the project plan. The EngO method involve a constantinformation exchange with Bank personnel to reduce operator “Time to proficiency” .

BankDocument Identification

Details Processes

• Knowledge Base Contents

IdentificationProcedures CompanyProduct

Approccio Metodologico

Piano Progettuale

Acquisizione Know-how

Piano di Transizione


IT Infrastructure (Knowledge Base)

EngO

Processes

Request of updates/amendments to knowledge base

• AnalysisProcess Flow• AnalysisOperative Procedures

Knowledge Transfer – Training Plan

The training plan that EngO intends to implement to reach the operator expertiselevel needed to manage the working, contemplates 3 main phases:

Ph 1

• Theoretical training• Formal verifications• Theoretical training• Formal verifications

• Bank support• Operative verifications• Bank support• Operative verifications


Ph 2 • Operative verifications• Operative verifications

Ph 3

• Activities start-up• Quality control• Activities start-up• Quality control

At the end of each phase there are the quality controls that must be overcome by alloperators. During the service delivering are provided continuous training sessions(both platforms through portals e-learning and classroom

Back Office

Distribution:• Files• SLA

Automated BO operatorsManagement:

• Files• SLA

Bank Management Systems

Branch/Client

The new generation operative engine activating BPU

Engine for:

Info & Control:• Reporting• Alerting


Operative production

Communication• Mail• Text messages• Fax

§Distribution of files to operators§Classification of files based on workability §Optimal management operators skills§Monitoring in real time of Back Office status in terms of:- compliance with SLA- instantaneous loading of BO- Actual or potential Backlog- “Dangerous” events:- Entrance flows anomaly- Delay in crossing time - Automation of repetitive files and processes

Flexibility and EfficiencyEngine for:• Analysis• Distribution• Monitor & Alerting

• Alerting• Monitoring real-time

Phase 3

Transition Plan from BPO to BPU

The approach is very flexible and scalable, and can also be modeledaccording to the agreement between the Bank and EngO.

BaselineeffectivenessBaselineeffectiveness

EffectivenessIncreaseEffectivenessIncrease

Control of Business process

Increment in production flow control

Slim production processes

Increase of speed in feeding Back Office production

Baselineeffectiveness

EffectivenessIncrease

Control of Business process

Increment in production flow control

Slim production processes

Increase of speed in feeding Back Office production


Partial CHARGE over some activities

Phase 1

Phase 2

Month 1 Month 2 Month 3 Month 4

BaselineService CostBaselineService Cost

Service Cost ReductionService Cost Reduction


Adoption Paperless Strategy


Transition of Back Office towards EngOTransition of Back

Office towards EngOBack Office of new

generationBack Office of new

generation

Workforce Optimization (Outsourcing)


BPUBPU

Reduced paper processes

Reduces production time for each requirement

Increase operator productivity


BaselineService Cost

Service Cost Reduction



Transition of Back Office towards EngO

Back Office of new generation


BPU

Reduced paper processes

Reduces production time for each requirement

Increase operator productivity


The Delivery Model

www.eng.it

The Delivery Model

Governance/Monitoring structure

EngO Delivery Structure

Delivery Model

The Delivery Model embraced by EngO will be a “lean” model, made of the following:1. A Governance structure (to monitor and control processing)2. An Operational Brain structure (to fraction different process phases, and for dispatching activitiestowards external factories)

3. A net made up of partners and third parties (for execution of process micro activities)

Operational Brain

Internal Structures


Onshore Near shore OffshoreSite 1 Site 2

..Site 4Site 3EngO Delivery Structure

Operational Brain

Third Parties

Each activity will be analyzed, mapped, and divided into micro activities which execution will beoutsourced towards onshore, near shore and off shore third parties.

Fine Tuning

Back-OfficeLevel I

(operation)

Back-OfficeLevel II

(supervision)

Administration(ratification)

The operative back-office performances are guaranteed by a multi level control


(operation) (supervision)

The fine-tuning among the different levels allows to minimize the number of manual intervention in favor of control automatism.The final result is very high quality.

EngO: From Business Process Outsourcing

Engineering Finance Division

Thank you

www.eng.it

From Business Process OutsourcingTo Business Process Utility

Novembre 2010

engo 2010 smart english

Economy & Finance

business process utility6

financial market

bo sgr services custodian

market crisis

bpo market trend

rating systems

bpo trends

bank account bank transfers