Why Cost Cutting?
Nowadays everybody in the banking
sector talking about effects related to cost-cutting. The question is why any bank
or financial organization need to reduce or cutting their expenses (Cost
Cutting)? If the Bank or any financial organizations struggling to improve its return on capital, many have to
be forced to restructure and cut costs.
In this article, I’m trying to focus on how can bank think over about how it can best achieve its cost
reduction measures in a sustainable, balanced way. The most important fact is each measure was devised to reduce the bank’s costs in the most effective way, while
not damaging ongoing operations and the bank’s reputation amongst its
customers.
Innovative and Strategic
Ways.
- Assessing digital and operational maturity to eliminate non-value-added work, deflecting work to lower-cost channels, and driving automation to reduce processing costs.
- Rationalizing and redirecting existing investment plans to better align with the bank’s digital and business needs.
- Developing a governance model to drive global consistency, efficiently to achieve overall targets and allow for local customization.
- Business realignment, the basic premise is to exit business lines that have high costs and low margins and expand those lines that are inherently more cost-effective and profitable.
- Vendor relationships, improved vendor management is focused on deriving the greatest possible value from a vendor relationship. Important tools include using service-level agreements and vendor scorecards to monitor performance issues.
Banks seeking healthy profit
margins must incorporate practical, cost-saving measures that boost banks’
digital capabilities and enable more flexible operating models which will allow
for better customer service and greater reinvestment opportunities. And also
risk officers must merge with the HRM team for analysis and make plans to face
future challenges. With this in mind, Bank Risk Officers must ensure their
approach to risk mitigation and HRD must carry out strategic plans to best
positioned them to boost returns.
Risk Officers and HRM must
get together
In 2020, with this pandemic, we
can see banks focusing their transformation agendas to streamline businesses
and better serve customers. Against this background, banks need a strong
control infrastructure to manage change and invest seriously in technology.
For banks, the ability to continue to invest in digital transformation will
depend on efforts now to improve profitability. Banks can learn lessons from
peers that have consistently outperformed through driving efficiency,
strengthening resilience, and creating a customer-centric culture.
The recession is an opportunity
for HR professionals to step and contribute strategically. In the classical
strategy paradigm, Risk Officers begin by looking at the economic environment
and Then Risk Officers look at the effects on us and our competitors. Next, RO’s
and HRD can establish which strategic factors HR influences directly. Finally, they
can drop down to their tactics. The recession is about creative Human
Resources Management. The HRM Function is asked to bring new ideas, to change
the HRM Processes, and develop or change the procedures. And this effort has
to be cheap or it has to cut the costs of the organization. HRM Innovation
is easy in times of business growth, but the recession is not good for big
innovative HRM Initiatives.
Innovative and Global HRM practices can drive through Beyond Cost-Cutting: boost returns.
The HR Management has to focus on
unpopular innovations during the recession as the role of HR during the
recession is to save money for the organization. The senior management expects
all the support functions to bring innovative ideas and solutions, which will
lead to a stronger organization when the next growth era comes. It’s important
to recognize that long-term cost-effective operations are impossible to achieve
without a corporate culture that supports and values it. This requires a
visible commitment from top management and HRM to balance value and cost,
reduce unnecessary expenditures, and implement metrics and accountability that
encourage individual attention to cost reduction and efficiency.
Given today’s unstable economies
and hypercompetitive markets, businesses are under constant pressure to
compress costs and improve profitability. For HR, this challenge is
multi-faceted as the department is tasked with cutting costs, without cutting
heads, and boosting productivity, employee morale, and engagement at the same
time. However, being a strategic business function, HR has numerous advantages
and can really help companies cut costs. That’s why I said HRM must be the most
strategic and Innovative department in the Bank.
Reference:
https://www.shrm.org/hr-today/trends-and-forecasting/research-andsurveys/Documents/2016-Human- Capital-Report.pdf
Any company in the industry drive for a reasonable profit. Get profits companies to use strategies. cost-cutting is a famous strategy. It has both advantages and disadvantages. The responsibility of HRM is to keep an employee happy when the company does cost-cutting.
ReplyDeleteBanking sector is now trying to manage cost efficiently by implementing technological innovations. Though they cost a higher initial costs and maintenance costs, the industry is highly dependent as they can function 24*7 enhancing the overall profits.
ReplyDeleteAs you have mention here its better to use innovative and strategic ways to manage cost while upgrading performances of the employees in a manner which will achieve company profits and targets.
If your company is struggling financially, reducing expenses may be a necessary step to stay in business. Even if your company is financially stable, though, cutting costs in business provides multiple benefits: Reducing the likelihood that you will run into cash flow problems in the future.
ReplyDeleteYes. but not only cash flow in this matter most of the businesses are under constant pressure to compress costs and improve profitability. For HR, this challenge is multi-faceted as the department is tasked with cutting costs, without cutting heads, and boosting productivity, employee morale, and engagement at the same time. That's why HRM must be use SHRM & IHRM practices for greater good for all.
DeleteDue to ongoing Covid-19 pandemic around the globe, most of the country’s economies are down turning. Hence companies are seeking for a cost cutting in their organizations. “Successful HR leaders focus on cost optimization as an ongoing discipline, not as a one-off exercise,” says Gartner senior executive advisor Matthias Graf. “Cost optimization strategies should look beyond cost-cutting and proactively promote options for immediate efficiency gains while not compromising on long-term impact on business performance.”
ReplyDeleteTrue, This requires a visible commitment from top management and HRM to balance value and cost, reduce unnecessary expenditures, and implement metrics and accountability that encourage individual attention to cost reduction and efficiency.
DeleteIn 2021, Due to the pandemic situation, most of the companies going down their growth and some of the start-up companies Have crashed their economy. In that situation, companies have to reduce expenses. for that cost-cutting had happened. but HRM has the responsibility to manage the Quality and performance of the company.
ReplyDelete