Select impacts
The following are 5 examples of specific application of my operating model engineering skills to materially change an operating model or project performance. The examples are real but simplified for illustration. No assumptions should be made to which employer the relate to.
Impact example 1: Permanent resolution of long-standing overdue KYC reviews
In this impact example, additional resources have been provided at point (A) to reduce the KYC overdues however by point (B) the gains have declined. The subsequent increase at (C) is due to a new platform deployment, but what was done at point (D) to permanently resolve the KYC overdues?
KYC reviews across multiple jurisdictions (in some cases >30 locations) and have a client co-creation element which means reliance on the client to keep to time. In this case 4 months are allowed to complete a KYC review. The change that occurred at point (D) was the implementation of case management and tracking against progress milestones selected according to the completion critical path and a time distribution which allows identification of an issue and resolution and still being able to keep a case on track. The time selections followed operational science principles providing time buffer for resolution.
The technique allows a risk of overdue calculation based on last milestone completed and remaining time available, e.g., as is done in managing a project schedule. Case managers were then provided with a risk of overdue dashboard for their in-flight portfolio and were then able to prioritise delay resolution and keep cases on track. Problem resolution support was also provided.
This example shows how an understanding of operational science is important to properly resolve operational performance issues.
Impact example 2: Risk mitigation for deployment where in-flight cases cannot be migrated
In this impact example, all in-flight cases will need to be re-worked on the new system after cutover creating a backlog of work at cutover. Plans were put in place to minimise the population and additional resources were provided for the rework. Client co-creation is involved so the exact size of the backlog is not known until cutover.
The management problem is that the standard performance metric was completion rate. This is problematic for managing operational risk for two reasons:
1) it is not available for 4 months by which any backlog due to greater than expected operational impact would be substantial, and
2) the completion rate for standard operations would be unclear due to the backlog work.
The resolution was to create two separate populations and assign capacity to the BAU work exactly as expected - e.g., not share capacity. Key milestone tracking was implemented (as covered above in example 1) so that lead indicators of operational impact were available. Impact to operations was then known within a month rather than after at least 4 months. This turned out to be important.
Although the solution seems obvious the complication is that there is a client risk distribution in both the backlog and BAU populations. Risk custodians would prefer that case completion is on a risk basis but to do that would compromise the insight into operational performance with potentially significant implications as backlog built up. The client risk was mitigated in the order of work.
The principle used here is similar to what would be done in manufacturing. A problem on the assembly line would be handled by moving the impacted units to a parking lot to be remediated whilst the assembly line problem was addressed so that normal operation could be resumed. This example also shows the value of operational science in managing operational risk. The impact from this intervention was that the consequences of a big hit to productivity from the deployment were able to be managed before they got out of hand.
Impact example 3: Addressing inappropriate process bundling
In this impact example, a past decision has been made to request new signatory lists at the time of the KYC regular review. This is because large clients operating multi-nationally can have 100s of authorised signatories which are difficult to reconcile to the KYC record on a periodic basis.
The business problem created is that clients would then proceed to update their authorised signatory lists which would take longer than the allowed time for the KYC periodic review, resulting in the client being subject to business restrictions beyond the expected completion date.
Authorised signatures and KYC periodic reviews are 2 distinct processes. An authorised signatory is not actually a signatory until KYC is completed for them so any updated documents are due to a process failure or changed regulatory requirements.
Process bundling is often done for efficiency reasons or to improve client experience. In this case it was done to solve an internal reconciliation problem but creates a different problem in overdue KYC reviews. It also impacts client experience negatively. Unbundling the two processes and instituting quality control on the authorised signatory updates eliminated this cause of overdue KYC reviews and improved the client experience.
Impact example 4: Need to change operating model fundamental principles
In this impact example KYC for some locations was never completed.
The business environment reason is that some countries base their KYC regulations on risk providing some leeway for risk based decisions on requirements, whilst other locations are rules based, probably due to a mix of cultural/society reasons and KYC maturity in the country. The rules in these countries are often domestically focused and difficult for a multi-national to meet in their home country, most often for data privacy reasons.
The client main location has responsibility for KYC for all locations which the other locations ‘rely’ on. The client meets the KYC requirements for the risk based location but not some of the requirements for the rules based location. The RM in the client main location has met their local requirements and does not carry any local regulatory risk to the rules based locations. The other location RMs take no responsibility due to the reliance model.
The result was many country level KYC requirements not being met and rolling over to the next refresh. The resolution was to change the fundamental principle of the reliance model for the local RMs to resolve the non-compliance with their FCC or escalate to the country risk committee for risk acceptance or to exit the client from the location. Following implementation there were no instance of unresolved cases needing to be escalated to the country risk committee.
Impact example 5: Addressing unexpected consequences from well intentioned initiative
In this impact example an initiative to group all entities in a Corporate Group into a grouped KYC review was intended to make use of common KYC information across the client group and improve the client experience. The outcome was increased overdue KYC reviews.
The reason for increased KYC reviews is that multi-national companies will often set up subsidiaries for specific geographic locations. These subsidiaries will often have multiple booking locations. If the Corporate Group KYC requirements are directed to the TopCo then the client will need to contact their subsidiaries for the requirements. If the additional KYC requirements are requested to each subsidiary location there is no local RM taking ownership. The consequence was increased overdues.
Additionally the grouping creates a ‘big-batch’ problem. For very large client groups with many booking locations across the subsidiaries the KYC requirements are very large. Absence of a common requirement holds up all the KYC reviews being completed. A KYC case manager will not be able to achieve a regular flow of other cases and the corporate group will inflate the KYC overdue controls.
The ‘big-batch’ phenomena is familiar to any small business who may refuse to take a large order due to the impact it has on the flow of their other work. Additionally, the client’s preference on outreach needs to be considered as some may be centrally organised but others will be distributed with local accountability for KYC. Grouping will suit some clients but not others. The outcome was to roll back the initiative. The example shows the importance of considering operational science and the impact on ‘flow’.