Information anxiety: business intelligence in commercial banking

Remember when only a few banks and financial companies could originate major syndicated loans and asset-backed financing packages? Today there are dozens, and the list is growing fast. Competition is intense; margins have been shaved to the bone. And that was before Enron.

In this business environment, it's obvious that decision makers at every stage in the lending process need timely, actionable business intelligence-the kind of up-to-the-minute decision support that I characterize as immediate information. But where can commercial bankers go to get it?

One good place to begin is with their own lending systems. With foresight and the right tools, commercial lenders can leverage their loan-processing installations into decision-support systems that deliver detailed, credible, up-to-date information about profitability, portfolio risk, and exposure. Here are the basic tools and principles you'll need.

A Separate, Historical Database and Server

Most lending systems store data for only a few periods. Some of your customers have been with you for years, and you want to keep them for many more. Data storage is cheap and historical information can be valuable. It may, for example, reveal how a profitable customer relationship is becoming unprofitable.

Business intelligence tasks like modeling and forecasting place enormous loads on a database. So it makes sense to keep the historical database separate from the operational loan-processing database. It also makes sense to keep it on a separate server, or if you're processing on a mid-range or mainframe, in a separate partition. Separation can also eliminate contentions for system resources and performance degradation on your production databases.

End-of-Day Extracts and Interfaces

Why would you want to start analyzing today's problem with last month's data? You're already running the EOD routine anyway; why waste fresh data?

Preestablished, Multidimensional Data Hierarchies and Business Models

The basic structures for most forms of business analysis are common from task to task and bank to bank. If you're doing a profitability analysis, at some point you are going to roll revenues up in one place and costs up in another, and then subtract. Whether you're looking at customer relationships or products or business units, the basic methodology will be the same.

It's expensive and time consuming to reinvent the wheel for every analysis. Using pre-adapted business models will save time and money. If you use multi-dimensional structures and models, then you will be able to rotate, pivot, drill down ("slice and dice the information"), or aggregate according to the demands of the task.

Off-the-Shelf, Multidimensional Data Analysis/Presentation Tools

There are at least a half dozen strong OLAP/MOLAP solutions out there from providers like Oracle, Business Solutions, Cognos, or Brio. They feature intuitive GUI front-ends and user-defined options. And they're all a lot cheaper than anything you could build in-house. Pick one and get to work. In fact, you could even pick two: one for the power users who do the number crunching; another for executives who want to review results fast to see what they have to take care of today.

Choose Web-enabled Solutions

Information is genuinely valuable only when it is in the hands of the people who need it to make decisions and take action. Make sure that report writers can generate reports in HTML so that they are quickly distributed to users in distant offices or easily read by traveling executives.

Aim for Self-Sufficiency

Few business analysts can write queries in SQL, and I doubt that any commercial banking executives can. You need tools that let users try different approaches. If you have to wait weeks for the IT department to provide your data, you're dead meat for more nimble competitors. Immediate information means information you get and use now.

It makes good business sense to get more value out of the data that your enterprise is spending so much money to process. With ingenuity and good tools, today's advanced commercial banking systems do a lot more than process loans. And one of the things they can do is provide the immediate information your business analysts and executives need to thrive in a dangerous, volatile economy.

For more information, e-mail richard_levy@acbs.com or chris_spence@acbs.com

[c] 2002 by RMA. Levy is president of the ACBS organization of ALLTEL Information Systems.

COPYRIGHT 2002 The Risk Management Association
COPYRIGHT 2005 Gale Group