The COVID-19 crisis has provided a moment of truth for leadership teams, driving an immediate change in how we operate and forcing many organisations to assess their efficiency.
While some organisations are now looking to revert to business as usual, the more enlightened ones are considering what they can learn from the crisis and what efficiencies this might drive in their business. Optimising expense performance is proving to be a key focus point for many of these organisations; future cost reduction programmes now need to find a balance between what worked before and what needs to happen to succeed in the next ‘normal’.
Six areas to unlock expense efficiency
1. Now more than ever strategy & clear objectives are pivotal: Experience tells us that some of the biggest shifts in performance result from economic downturns. Having a clearly defined strategy and objectives for your business is essential. Once this exists, it is far easier to set the scale of your ambition for expense reduction.
2. Recalibrate costs for the new world: Counterintuitively, not all cost savings are good savings – sorting the ‘value’ adding costs from the ‘bad’ costs and taking a holistic approach is critical to building resilience and avoiding long-term impacts on growth, innovation, core market differentiating capabilities and reputation.
3. Overcome silos & roadblocks: Leadership teams and employees driven by necessity during the crisis abandoned ‘siloed’ thinking to create cross-functional teams. With a well-defined mission and a sense of urgency, expertise overcame ‘turf battles’ with expertise outweighing rank. This is an excellent environment to launch an efficiency drive.
4. Automation is only one part of the solution: To date, digital technology has played a critical role in the initial response to the crisis and recent studies estimate nearly all financial services organisations are accelerating the automation of processes – but our experience shows fewer than half will meet their goals.
5. The office is well defined – the virtual world is not: A decentralised workforce requires more than a laptop and collaboration software – a human connection is still required. Traditional organisational and programme structures are being challenged by cross-functional teams which are flexible, inclusive and accountable.
6. Standardised methods & tools reduce reaction time: The crisis necessitated rapid behavioural changes and quick decisions, but the initial all-hands-on-deck approach does not translate into long-term success. Sustainable benefits are accelerated by applying standardised approaches to redesign operating models and processes that will provide the most value.
Now, more so than ever, reducing expenses and optimising costs is a priority for all insurers, however, sustainable success in this area can be elusive particularly under the prevailing conditions.
Where many see challenges, we see opportunity – and FTI Consulting can rapidly assess and assist you to address your cost base. Learn more here.