Accenture: Operational Inefficiencies Can Prove Costly

How much are operational inefficiencies costing your business?

A new survey from Accenture and Clearstream found that the financial services sector could save more than 4 billion (about $5.5 billion) annually in collateral management costs by addressing operational inefficiencies.

Clearly, collateral management has become a critical industry issue because 1) regulators have set more rigorous capital and liquidity standards, and 2) banks are confronting new cost and growth challenges in the wake of the global financial crisis. Done right, however, efficient collateral management can free up liquidity for banks, enabling them to meet new regulatory requirements while offering more products and services.

According to the Accenture survey, banks' key collateral management challenges include:


An incomplete view of all collateral and an inability to manage holdings centrally


Suboptimal internal governance leading to a misalignment of objectives


Inadequate internal transfer-pricing mechanisms


A lack of optimization engines or the ability to deploy them effectively


Inability to perform inventory projections


Excessive staff costs as a result of process complexity


The highest potential cost savings, according to survey respondents, can be achieved by:


Reducing the number of collateral pools or silos


Implementing a single IT solution that provides a complete overview of all assets across all business entities


Adopting optimization algorithms


Improving internal transfer-pricing mechanisms


It boils down to centralizing operations, updating processes and aligning business objectives.

"The majority of our survey respondents agreed that streamlining internal processes and governance and enhancing the visibility of collateral are value-creation opportunities," said Owen Jelf, managing director, Accenture Core Trading and Settlement Services. "Our research makes clear that not only can the banking industry save 4 billion annually through better collateral management, but it has a precious opportunity to increase revenues and profitability by getting this function right."