In a troubled economy, insurers that cut costs broadly and blindly without understanding whether those cuts further compromise their survival may face dire consequences. New research from Gartner, a Stamford, Conn., consultancy, presents some real-life examples in which business process management (BPM) has helped organizations survive by identifying ways to improve business processes and cut costs at the same time.
According to research author Elise Olding, BPM gives companies visibility into processes that are key to cost management. Companies that use BPM create business process models that identify process redundancies, hidden costs and avoidable risks. Insurers face a better chance of survival by using cost savings from BPM efforts to fund critical business operations.
Olding recommends that companies focus on gaining BPM competency. Gaining visibility can help to coordinate the work being performed, and enable better coordination of activities.
Before you wield the cost-cutting axe, she says, construct a high-level business process model to understand the impact of head count and resource cuts across the enterprise so that you do not decrease process efficiency and inadvertently drive up costs.
Olding presents as an example a financial services company that used process modeling as a means to validate project benefits and avoid funding proposed projects that would not deliver the projected outcome.
In one division, she says, it began to delve deeper into these business cases to prove the benefits at a more-granular level. It is now finding that these benefits are often not justified, and approximately one-third of the projects are not approved, resulting in avoiding expenditures for projects that are not of high value.
Use BPM to manage your business case justification and measurement processes, says Olding. Then identify processes where costs may be high and there is not a focus on measurement. Target one of these processes for your first or next BPM project, and demonstrate tangible results.
In another example, Olding points to a financial services organization that, in order to comply with the Patriot Act, used a BPMS to automate data collection, quality control, exception handling and reporting of new customer loans. The company estimates that deploying the BPMS solution cost 30% less than the cost of using traditional technologies, and also reduced personnel costs associated with manual compliance processing by 40%all while giving them the visibility they needed for compliance.
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