Cost reduction in times of uncertainty and risk it is

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Unformatted text preview: its can grow. Cost reduction: In times of uncertainty and risk, it is essential to keep costs down to ensure profitability and provide the financial robustness that can withstand major market changes. Governance: Change brings risk, and it is therefore vital that business outcomes are constantly validated, measured and audited to ensure accuracy, consistency and compliance with corporate and regulatory goals. While the high-level processes that drive the business are usually reasonably well understood, it is the decisionmaking that controls how these transactions are executed in day-to-day business operations and hence offers the potential to create new value in operational execution. A simple example may help to set the scene for the subsequent discussion. It is not uncommon to find banks building a limit into their loan approval systems beyond which supervisory approval is required. The argument is that while the decision-making process required to approve or reject loans is usually pretty simple, making it easily handled by less experienced personnel, in more complex cases with larger loans there may be many additional factors to take into account; overall liquidity levels, exposure to a particular market sector or organization, a suspect credit rating, sensitive geographies and a host of other factors. Hence the need for an experienced supervisor to get involved. But Page 3 these people are expensive, and the complexity of the process may mean that each supervisor might take a different reading and make a different decision. By taking these complex decision-making algorithms and placing them in a set of business rules, decisions will always be consistent and can be made immediately rather than waiting, with no need to involve highly-paid staff. In addition, because the rules are clearly visible to the business community, they can be tuned and optimized based on operational performance, while at the same time validated for regulatory compliance. But there is a problem. The information controlling decision-making is often spread throughout the enterprise in diffe...
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This note was uploaded on 01/29/2014 for the course ACC 230 taught by Professor Xia during the Winter '13 term at Bloomsburg.

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