Summary of best practices session

Ms. Amelita Espanola RB Brooke’s Point Working in far flung areas Working as a team = “construction/structure/strategy” and “finishing/detail/tactical” Local area development = market creation Partnerships with grassroots communities Challenge now is to balance local area operations versus complex national regulations

Mr. Eugenio Demegillo, Jr. Partner Rural Bank, Inc. A Best Practices Discussion Leading Research: Daniel O’Keefe, Ashish Jain Booz & Co.

Executive summary : - No single method can transform any of a bank’s operations model. - Adopted approach depends on bank’s goal. - Definitely, every bank’s approach will differ then.

Suggested five ( 5 ) best practices for transforming Operational model of banks. Customer – back process transformation. Product and service simplification. Aggressive digitization. Governance and Performance Management transparency. Delivery model optimization.

Banks with successful operations transformation by adopting Best Practices achieve four benefits. Enhanced Client Experience. Eliminate client complaints. Improved responsiveness to customers / clients. Streamline process. Operational and Cost Efficiency. Reduced cost by driving out variability. Create capacity and scale. Provide cost - effective services. Continuous improvements. Defined standard processes. Train organization in process – oriented thinking. Instill a culture of continuous improvement. Risk Mitigation. Ensure consistent and auditable controls. Align operating model to changing regulations.

Atty. Edward Garcia, Jr. Quezon Capital Rural Bank, Inc. Focus on Governance at the Board level Foundation of effective governance: Mutual trust Respect Openness to ideas and discussion Consensus decisions Critical, but respectful = good, effective relations These stand despite generational differences Ex. Actual board meetings, build-up bank to attract next generation

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Notes by lead researchers: The 5 suggested Best Practices, combined with aligning the Operational performance goals to business priorities will: Enhance operations capabilities, and Meet transformation objectives.

Moreover, your decision on what primary banking business objective you want will determine what approach you will use. Examples of business objectives and/or purposes: Drive efficiency and reduce/ increase volume. Simplify and standardize operations. Improve customer experiences and customer relations. So question, what exactly do you want to do?

Customer – back Process Transformation. Researches show that the 5 Best Practices are common across all initiatives that led to successful transformation of operations: Customer – back Process Transformation. Actions: 1.1. Redesign end-to-end process based on desired client experience. 1.2. Analyze trade – offs between level of customization and the value perceived by the client. 1.3. Use a structured, consistent methodology to drive change.

2. Product and Service Simplification: Actions: 2.1. Minimize customization where the client sees no value. 2.2. Align cost-versus-complexity trade – offs with the strategic direction of the bank/ business. 2.3. Standardize processes and supporting platforms to drive digitization of client experience.

3. Aggressive Digitization. Actions: 3.1. Use digital media to create better front-end client inter – actions. (paperless statements, tablet interfaces, etc.) 3.2. Implement straight – through processing to avoid manual processing. 3.3. Form partnership with positioned and non- traditional service providers to build and deploy digital capabilities.

4. Governance and Performance Management Transparency/ies. Actions: 4.1. Establish and reinforce clear accountabi- lities, decision rights, and stakeholder roles. 4.2. Define goals and incentives that are clearly aligned with strategic objectives. 4.3. Adhere to a metrics – driven culture with key performance indicators (KPI), unit cost management, etc.

5. Delivery Model Optimization. Actions: 5.1. Move to shared – services or utility models to maximize scale and reduce costs within banks. 5.2. Integrate and align process – centric IT operational capabilities. 5.3. Increase integration of 3rd – party providers into the delivery model to add variation to cost and to build capabilities.