After achieving success using the lean-management approach in retail financial services, leading institutions are starting to utilize lean-management principles in their wholesale businesses. Some early adopters we know, recognizing that areas such as securities services and the processing of trades are ripe for change, have already achieved major improvements in accuracy, timeliness, efficiency, and even risk control—for instance, a reduction in the number of “breaks,” open items, and errors.
Yet some in the industry remain skeptical. First, the wholesale sector’s profitability has historically depended on a constant stream of innovative expert-based, highly tailored, and high-margin products, so leaders may question whether lean’s production-based insights apply to wholesale banking. Moreover, although the processes supporting those products usually start off as intensely manual, the industry has been at the forefront in the use of automation, outsourcing, and offshoring to reduce marginal costs as products mature. An understandable concern is that lean’s process changes would upend vendor relationships or require yet another round of technology investments. Finally, some institutions we’ve seen are pursuing other efficiency initiatives that appear to incorporate similar ideas and fear that lean might interrupt them.
For a few banks, however, it is exactly this high-risk, highly complex environment that makes lean’s comprehensive approach to minimizing waste and variability so valuable. By focusing on end-to-end processes rather than on individual activities or functions, lean allows institutions to see that they have many more “factory-like” workstreams than they may have realized. They then can adapt lean’s traditional approach to each specific operation—especially improving the alignment of operating teams, the balancing of capacity and workloads, and the transparency of information flows.
These changes allow institutions to use the investments they have already made—in IT, outsourcing, or offshoring—far more effectively. The impact can be dramatic. At one large asset manager we studied, for example, new fund-accounting processes reduced costs by 30 percent as error rates dropped by 75 percent. In the confirmation of derivatives, a global investment bank increased its efficiency by 40 percent while reducing errors by 50 percent and exposure to risky clients by 12 percent.