Many one-off cost reduction programmes focus only on delivering immediate financial benefits. They often ignore the longer-term requirements of the organisation because entrenched inefficiencies are difficult to address or strategic needs and value drivers have not been adequately defined.

It can be challenging to sustain cost savings and ensure core market differentiating capabilities are not adversely impacted by the cuts. In a post-pandemic world, the urgent requirement to rapidly reduce costs without due consideration of the longer-term consequences exponentially increases the chances of ‘getting it wrong’.

Complex cost reduction programmes typically require a number of different dimensions to be incorporated into an integrated, holistic programme of work. Although adopting digital technologies are clearly an important component of a future operating model, in our experience, all change is inevitably about the people from both an internal and customer perspective. Effectiveness, sustainability and realising benefits without cutting into the core capabilities of the organisation are critical considerations.

The five levers of expense optimisation

1. Do different – optimise operating models

Are you constrained by your existing operating model and require new ways of working?

  • Diagnose current operating model issues & constraints
  • Implement new operating model & working practices
  • Consolidate & simplify organisational silos – shared service operations, centres of excellence

2. Do better – generate performance efficiencies

How can you reengineer your processes to drive efficiencies and market differentiation?

  • Re-engineer end-to-end processes, standardise, eliminate waste
  • Implement effective performance management & accountability frameworks
  • Develop continuous improvement culture & capability

3. Do without – restructure cost base

Do you have an effective approach to managing demand and controlling expenditure?

  • Control expenditure & manage demand (discretionary spend, contractor spend, re-negotiate vendor contracts)
  • Rationalise product & services portfolio
  • Disposal/closure of assets

4. Do with less – review infrastructure costs

Do you have a strategy for where to cut and where to spend?

  • Optimise property costs (number of sites, prestige locations)
  • Rationalise infrastructure services spend
  • Consolidate/rationalise technology & IT spend

5. Do smarter – innovate & adopt digital technologies

Are you still trying to generate insights from legacy technologies?

  • Leverage ‘Big Data’ & actionable analytics – predictive models, treated segments, decision support tools
  • Value chain automation, process mining, robotic process automation (RPA), virtual workforce
  • Engage in strategic partnerships

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.

For further information please contact Linda Bertolissio or Riina Rintanen.