The current Barclays scandal has gathered momentum and has now gone way beyond “it had insufficient business controls” as the recent Guardian article today, Barclays Libor scandal: how can we change banking culture? spells out in graphic detail. The UK population has been well and truly bankered.
To sum up the excellent article
According to the IMF, the British stuck £1.2 trillion behind the finance sector. Read that again: well over a trillion pounds in bailouts, and loans and state guarantees on bankers’ trading.
In just a few months, and with barely any public debate, every household subbed £46,774 to the City. A sliver of that money eventually went unused; as for the remaining hundreds of billions, we have no idea just how much we’ll get back – or when.
There is talk of how to change the culture of banking. As usual there is lots of rhetoric and bold statements made by the executives. But this is an operational issue and boils down to metrics and processes.
People are driven by metrics. They act as they are measured. Bankers with expensive lifestyles to maintain are driven by money – metrics. But they need clear guidelines to ensure that hit their metrics without cheating – transparent processes and business controls. This needs to be through the entire organisation – top down.
Nothing else changes culture. Not MP’s getting passionate in the House of Commons. Not threats of prison for the senior people. Not the resignation of the Chairman.
Putting in place the framework of processes and metrics throughout an organisation is very achievable as countless Nimbus clients can demonstrate. In a couple of minutes you can see how BAE Systems transformed its Shares Services operation in this video.
Now Barclays are undertaking and independent audit – but this will highlight the problems. Far better if that work is a process-driven where the outcome is a operational process model with related metrics. Something that will change the culture. Not a report for the Barclays spin doctors.
And the good news is it will take less time that any “formal investigation” and cost less that £46,774 per person
Ian, notwithstanding my full agreement on the behavior of Barclays management, I would really like to know which processes and which metrics would change the way the bank squandered money with ridiculous investments. In my mind it is those brainless processes that require for example no more than a totally useless AAA rating to invest that caused the banking sectors downfall. There is no process in place to ensure cross-investment risk exposure because there are no such numbers and models that will ensure a multiple risk balancing. There are simply no models with the right probability distribution, and if each bank and department uses uses different ones and they all ignore the possible black swans.
I really value your posts and expertize but I would seriously appreciate if you’d stop claiming or at least suggesting benefits of process management that are simply unproven and far fetched. We would do all our prospects a favor if we become more real-world in our claims. If you have an example I would really like to see the REAL thing, because I know it can be improved by turning into adaptive rather than rigid processes.
Processes don’t change culture, they stop people from thinking for themselves.
PS: I did look at the BAE video and it isn’t anywhere close to what Barclays would need …
Max
I acknowledge that processes (automated or non automated) will not stop people making poor investment decisions. But the current Libor-fixing scandal is a clear breakdown of process and a lack of business controls – by the bank and auditors own admission.
>>> Tracey McDermott, acting director of enforcement and financial crime at the FSA, said Barclays’ misconduct was “serious, widespread and extended over a number of years”. She said that Barclays traders’ attempts to manipulate interest rates “to try to benefit trading positions is wholly unacceptable. “This was possible because Barclays failed to ensure it had proper controls in place.
With the resignation of the Chairman they have launched an audit which has 3 objectives. A root and branch review of business practices (ie processes), a public report of the findings, and a mandatory code of conduct.
My claims are not “simply unproven and far fetched.” Watch any of the Nimbus video case studies and you will see the clients has achieved real and sustainable benefits. Pop into any Carphone Warehouse store and talk to the people working behind the counter. Talk to the Gartner analysts who award Carphone Warehouse the BPM Award last year. This is real life.
Adaptive processes may be better than rigid processes, but rigid processes are better than none at all. Surely we can agree on that?
Hi Ian, we do mostly agree! Processes can do many things but they are not a heal-all! I am not intending to comment on the Nimbus product as a matter of professonality. We clearly have differing focus. I did by the way pop into a Carphone Warehouse over a year ago … I will tell you in person about it eventually.
I am not so sure about about rigid processes being better than none. But much of that is a matter of perspective. Thanks for the reply. All the best. Max