Trends suggest the economic downturn still has a ways to go, requiring all companies in it to take action. Those who do manage to steer through it successfully can actually benefit from it to a great extent.
Forte Consultancy Group has offered key guidelines it adheres to and will apply in the region in engagements in the coming months. These guidelines are targeted at all main areas of the organization, which need to work together in applying cost cutting efforts to the company.
Outsource: Outsourcing can be an effective way of decreasing operational costs and complexities. Companies are now looking to outsource an increasing number of activities besides call center and IT operations outsourcing.
Optimize Employee Performance: Layoffs recently has increased drastically among financial institutions. But companies should also look into maximizing their staff utilization and allocate cross-functional responsibilities to them.
Improve Service Levels: Service levels across an organization are key parameters in defining the resource requirements. But companies need to look into its impact on their bottom-line and refine their balance between customer centricity and cost efficiency before tweaking the service levels.
Reduce Service and Maintenance Cost: Companies can employ a set of methods (i.e. loyalty program incentives, higher interest rates, etc.) to drive the migration of customers to lower cost channels in order to decrease cost of sales and services. Consolidating certain functions via the utilization of a centralized approach can result in significant savings. Relocating may become a more preferable option at least for some of the business functions as it helps in sufficient cost-cutting on maintenance.
Rationalize the Portfolio: An economic downturn is an ideal time for rationalizing marketing portfolios and eliminating the unprofitable offerings, ultimately to save money and resources.
Use the Right Channel: Another way of decreasing marketing costs is through the utilization of lower cost channels in outbound activities. Companies can move towards using channels such as e-mail and SMS instead of eliminating their marketing communications all together.
Economize Process: Process re-engineering for elimination of inconsequential steps, or economizing process designs and using less expensive resources for their execution, is at the heart of noteworthy cost cutting projects.
Automate: Automation can mean lower cost of human resources, less paper use and faster operations, all resulting in substantial cost savings. Companies which can find ways to make better use of their existing IT systems or make minimal investments with substantial impact can create considerable cost savings through such efforts.
Minimize Cost of Cash: By optimizing levels of cash in ATM machines and across branches as well as automating transactions as much as possible, banks can decrease cash handling maintenance costs as well as their opportunity costs.
Renegotiate: As much as it is critical for financial institutions to keep their high value customers during the downturn, it is also critical for their suppliers and service providers to keep these companies. Renegotiating prices is an effective tactic in this environment, where substantial savings can be gained from better bargains.
Centralize Procurement Decisions: Centralizing and re-evaluating all procurement decisions is necessary to settle for potentially less satisfying but still functional alternatives. Companies should hinder from renewals and upgrades, as long as it does not significantly affect operations.
Reduce IT Spends: Revisiting IT expenditures and looking for alternatives in hardware with lower maintenance costs, software with lower-license fees and services without nice-to-have features can contribute substantially to cost cutting initiatives.
Pragmatic and quick actions are necessary before conditions get more challenging.
But companies should start with a detailed analysis and understanding of their cost items and opportunities for improvement, before launching draconian cost cutting measures. Financial institutions should leverage both their internal resources - such as employee suggestion programs to get them involved and provide benefits in return - and external resources - which can provide temporary support and know-how decreasing time and permanent resource needs - to ultimately make the changes needed to reduce costs.
