An HML White Paper: Business

Process Management

Generating efficiency and service

improvements in financial services

© HML 2012. All rights reserved. 2

ABOUT THIS PAPERCONTENTS

Page 2: About this

paper

Page 3: Introduction

Page 4: The challenge

facing financial services

Page 5: The solution:

Business Process

Management

Page 6-8: BPM in

action: CREWS

Page 8: What next for

BPM?

Page 9: Contact details

The purpose of this paper is to give an insight into the ways in which

business process management (BPM) can be used to generate efficiency

and service enhancements in UK financial services companies.

The paper is based on HML’s own experience of using BPM over the

course of the past 4 years and includes details of a credit management

project (CREWS), in association with IBM.

The successful implementation of CREWS has resulted in HML being

shortlisted for a global award for BPM excellence, alongside

organisations such as Toyota, Audi and the US Navy.

“Introducing BPM has allowed HML to improve processes that have a

direct impact on our clients. Applying BPM to the CREWS process for

example has significantly reduced the volume of manual tasks at a crucial

stage of the pre-litigation process. In turn, it has quickened the process,

reduced operational risk by limiting the scope for manual error and

allowed HML’s consultants to spend more time communicating with

clients’ customers to deliver the kind of experience our clients desire.

“Furthermore, when applying BPM, we have designed it with the flexibility

to comfortably absorb change, so clients have control over how their work

is administered, now and in the future.”

Ian Cornelius, Commercial Director, HML

© HML 2012. All rights reserved. 3

INTRODUCTION

The objective

behind BPM is to

maximise the

efficiency and cost

effectiveness of

processes within an

organisation,

resulting in faster

processing,

reduced wastage

and re-work, higher

and more

consistent quality

output and lower

production costs.

•Business Process Management (BPM) is not a new technique. It’s

history stretches back to the early 20th century when American engineer

Frederick Winslow Taylor’s management theories were first published.

•BPM is simply a way of analysing and then optimising processes which

are present in any organisation. These can be either production or

administrative processes.

•The objective behind BPM is to maximise the efficiency and cost

effectiveness of processes within an organisation, resulting in faster

processing, reduced wastage and re-work, higher and more consistent

quality output and lower production costs.

•Most BPM projects involve the following key steps:

- Analysis

- Re-design and modeling

- Implementation

- Monitoring

- Management

- Automation

•BPM is not a one-off exercise. It involves the continuous analysis and

evaluation of a process, so that it can be enhanced and improved on an

ongoing basis.

•BPM started to establish itself in the financial services industry in the

1980s, when computer and image scanning technology was first

deployed to improve business processes.

•The precursor to BPM was ‘workflow’ (the person-to-person routing of

scanned documents through a pre-determined process).

•Although BPM is well understood and its benefits have been realised for

many years in manufacturing, the UK financial services market has not

yet fully embraced this methodology.

© HML 2012. All rights reserved. 4

THE CHALLENGE FACING FINANCIAL

SERVICESA number of

existing

administrative

processes are

labour intensive

and depend on

manual

intervention. Not

only is this slow

and expensive, but

it also makes it

difficult to deliver a

consistently high

quality service.

•The UK financial services industry has undergone a period of radical

change following the onset of the credit-crunch. Banks and building

societies are facing a number of challenges including the need to:

-restructure their balance sheets

-rebuild their capital positions

-reduce their cost bases and restructure their businesses so that

they are ‘right-sized’ for slower markets

- improve operational efficiency and ensure the delivery of a high

quality service

- be able to respond to new market opportunities as they arise

•The sector also has to accommodate the constantly changing

requirements of the regulatory regime in which it operates. For example,

the UK mortgage market is already heavily regulated but will nonetheless

have to implement the requirements of the Mortgage Market Review.

•Many banks and building societies use legacy computer systems and

operational infrastructures that have been developed piecemeal over the

course of several decades. This makes harmonising existing procedures

very difficult and introducing new processes both expensive and slow.

•A number of existing administrative processes are labour intensive and

depend on manual intervention. Not only is this slow and expensive, but it

also makes it difficult to deliver a consistently high quality service.

•Financial organisations need to improve staff productivity and flexibility

by removing non-value adding processes. By releasing staff from

mundane and repetitive tasks, they can apply their skills to enhancing the

customer experience and also responding to changing business

requirements.

•Banks and building societies are constantly looking for ways to prevent

problems such as arrears from developing, rather than having to respond

to such problems when they do manifest themselves. Faster and more

accurate business processing means management information can be

provided in a timely fashion, which enables preventative measures to be

put in place.

© HML 2012. All rights reserved. 5

THE SOLUTION: BUSINESS

PROCESS MANAGEMENTBy streamlining

end-to-end client

management

processes, financial

institutions are

often able to

reduce human

intervention by as

much as 80% and

be better able to

target and serve

their customers.

•BPM enables financial organisations to automate processes such as

account opening, payment processing, credit management and arrears

and possessions management. This not only reduces costs and wasted

time, but also ensures consistency of delivery.

•By streamlining end-to-end client management processes, financial

institutions are often able to reduce human intervention by as much as

80% and be better able to target and serve their customers.

•Analysing, mapping, re-engineering and implementing new processes

means that firms have a clearer understanding of their existing

procedures and are better able to make future enhancements without

needing to make wholesale changes to existing processes.

•BPM also enables organisations to take a more holistic view of their

client relationships and better understand where issues are likely to arise

and how they can best be resolved.

•BPM systems, once implemented, mean that a financial institution can

react to situations and new business requirements in real time and make

any changes immediately.

•BPM does not, however, provide an overnight solution. To analyse, map

and develop replacement processes takes time (many months) and the

implementation programme may involve a similar period. However, the

benefits, both in terms of improved efficiency and cost savings, can be

great (see results of project CREWS).

•Staff need to be taken on the BPM journey and engage with the process.

Their co-operation is essential and it’s important they understand the

benefits that will accrue from the changes being made.

© HML 2012. All rights reserved. 6

BPM IN ACTION: CREWS

"BPM software and

services help

empower

organizations to

exceed their

customers'

expectations, react

to and anticipate

shifts in their

marketplace and

keep costs under

control.

“It takes a process

aware organization

to achieve this level

of agility and HML

has raised the bar

for companies

seeking to

streamline and

accelerate their

business

processes. In

collaboration with

IBM, the CREWS

project has enabled

HML to deliver an

agile application

that can be

customized rapidly

to meet changing

regulations and

requirements."

Phil Gilbert, Vice

President,

Business Process

and Decision

Management, IBM

Software Group.

•HML is the UK’s largest specialist mortgage servicer, providing

outsourced mortgage administration services to 50 leading financial

institutions. HML operates out of three UK locations: Skipton,

Londonderry and Glasgow. The company was established in 1988 and

manages approximately £43bn of mortgage assets and 400,000

customer accounts.

•In late 2007 HML embarked on its business process management (BPM)

journey to improve, streamline and increase overall control of its credit

management processes, in response to rapidly changing market

conditions and regulatory requirements.

•HML’s first BPM initiative resulted in the development of a credit

management workflow system (CREWS), which automated processes in

the firm’s pre-litigation department.

•The objective of the CREWS programme was to implement repeatable,

efficient, consistent credit management processes across HML’s client

base. HML worked closely with IBM, providers of the BPM software used

throughout this project.

•An analysis of existing credit management processes confirmed that

HML’s credit management function was heavily focused on manual tasks,

which meant that the costs associated with debt recovery were

significant.

•HML is a multi-client environment and its BPM toolset includes

approximately 400 business rules and is used by 350 credit management

specialists within the business.

•By automating non-value adding manual processes such as the

identification and distribution of work items, employees have more time to

spend with customers resolving issues. This has improved staff morale

and overall engagement within teams. People also have a greater

understanding of how the speed and accuracy of their work impacts on

the credit management and arrears process.

•Training for new and existing employees is much easier because

processes are clearly defined, and ‘coaches’ are used to guide

employees through the specific task they are working on.

© HML 2012. All rights reserved. 7

BPM IN ACTION: CREWS

The successful

implementation of

the CREWS project

has resulted in a

cost saving of

£440,000 a year.

•Team managers have access to real-time dashboard reporting which

gives an instant view of key data, enabling them to make informed

resource allocation decisions.

•With CREWS being the first implementation of BPM within HML, it was

decided to develop a ‘centre of excellence’. This comprised modelers,

developers and testers who followed documented best practice and

upheld strict standards. With this team in place, the subsequent rollout of

the project was easier to deliver on time and within budget.

•HML has fully embraced BPM and sees it as an enabler for further

process change throughout the organisation.

•The successful implementation of the CREWS project has resulted in a

cost saving of £440,000 a year.

•The next phase of CREWS is the implementation of a possessions

project. Based on the experience gained from CREWS, the possessions

project is expected to reduce the processing time for new possessions by

60 per cent. In addition saving a further £200,000 a year by reducing

manual effort.

•The elimination of manual intervention also means improved compliance

reporting and the ability to demonstrate that processes are effective and

in accordance with Financial Services Authority regulations.

•The BPM centre of excellence has improved business support by

answering 90 per cent of queries within 1 hour, comfortably within service

levels.

•The key elements of CREWS includes:

- IBM Business Process Manager (Standard) software.

- HML’s core operating system

- Peripheral HML applications, which handle actions such as

sending-out letters and automatically dialing customers.

•These elements have been fully integrated using Web Services, allowing

each system to focus on what it does best. The systems exchange

information in real time.

© HML 2012. All rights reserved. 8

BPM IN ACTION: CREWS

The financial

services industry is

lagging behind

other industries in

adopting BPM

methodology. As

financial institutions

look for ways to

reduce costs,

increase

productivity and

ensure consistency

of service delivery,

BPM will inevitably

become more

common

throughout financial

organisations, both

large and small.

•Credit management processes and associated business rules are held

on the IBM BPM system in the form of business process definitions,

allowing users to create and make changes using a graphical interface.

•As a result of the successful implementation of project CREWS, HML

has been shortlisted as one of only six European finalists in the

prestigious Global Awards for Excellence in Business Process

Management and Workflow.

•The awards, which are in their 18th year, recognise organisations

around the world which have excelled in implementing innovative

business process solutions.

•Other finalists include Toyota in Spain, Audi in Japan and the US Navy.

WHAT NEXT FOR BPM?

•BPM is a constantly evolving management science and is a journey that

has no defined end-point.

•More sophisticated and integrated technology developments play to

BPM’s strengths and will enable further productivity and cost saving gains

to be made.

•The financial services industry is lagging behind other industries in

adopting BPM methodology. As financial institutions look for ways to

reduce costs, increase productivity and ensure consistency of service

delivery, BPM will inevitably become more common throughout financial

organisations, both large and small.

•BPM is not a ‘passing fad’. It’s based on sound management principles

and proven techniques which deliver tangible benefits.

© HML 2012. All rights reserved. 9

For further information

If you would like further information about BPM

and the way in which HML has implemented

project CREWS, contact Paul Swinson,

Programme Manager at HML on (0044)7967

110063.

Further information about HML can be found at

www.hml.co.uk or by phoning 0844 892 2596.

For more information about IBM’s BPM solution,

please call (0044)1475 898688.