Never Let A Crisis Go To Waste: Potential Gains from the Libor Transition

Rahm Emmanuel, the former Chief of Staff for President Obama, is often quoted as saying the “You never let a serious crisis go to waste.” What is often left out is the second half of that quote: “…and what I mean by that, it’s an opportunity to do things you thought you could not do before.” Such an opportunity is presented with the approaching demise of Libor. This “most important number in the world” is deeply embedded in all areas of financial services institutions, making the remediation and replacement of Libor a complex and high-stakes task. In this scenario, much can be gained in other areas of the enterprise through the effective and efficient management of the Libor scenario.

The size and scope of the Libor challenge call for the application of modern technology such as machine learning. In our white paper, Libor as a Template for Digital Document Transformation in Financial Services, we examine the best practices for applying machine learning to the task as well as common pitfalls to be acknowledged and avoided. In this blog post, we detail some of the important gains that can be made by effectively tackling this high stakes challenge.

Potential Gains to Be Won from the Libor Transition

Developments as consequential as the shift away from Libor are a once-in-a-lifetime occurrence and this affords the opportunity to make the most of the challenge and deliver results that are game-changing. While the stakes are extremely high, new technology approaches such as machine learning can deliver outsized gains. Some of the potential rewards are:

  • Lower costs: nothing is more important in the current economic environment and the new technology that underpins a data-driven, cloud-enabled program offers multiple opportunities to address the high costs of existing solutions. Cost savings can take many forms, from lower need for workflow intensive commercial, off-the-shelf (COTS) solutions, a reduction in demands on subject matter experts for operational analysis and processing, and, ultimately, less likelihood of unforeseen expenses arising from preventable, and expensive, errors.
  • Faster results: new technology solutions are engineered to operate with faster cycles and often lead to the virtuous cycle of continual improvement as revised processes deliver greater insight along with reduced costs. Whether it is the acceleration of deal onboarding, claims and payment processing, or underwriting, these insights become the foundation for further gains, which starts the whole process all over again.
  • Reduced risk: Taking a holistic approach to a challenge like Libor affords the enterprise the opportunity to simultaneously address the whole kaleidoscope of risks that arise from legacy technology. A reduction in operations errors such as incorrect payment amounts or payees, as well as flagging invalid claims, inconsistent underwriting practices, and other customer servicing errors, can be addressed. Not only are old holes patched, but new technology also delivers enhanced and comprehensive risk management that is simply unavailable with existing regimes.
  • Extending gains to the larger enterprise: It is no exaggeration to say that a comprehensive approach that includes advanced technologies like machine learning can deliver exponential benefits across the enterprise. For example, interpreted findings from the documents can be merged with proprietary data sets to serve performance, risk, and customer insights. It requires the vision and persistence to make such gains a reality but they are very much within reach.

Making the Most of the Libor Opportunity

It takes a bold and visionary leadership approach to navigate the extreme challenges inherent in a change as momentous as the shift away from Libor but the outsized opportunities for gains make the effort more than worth it. The demise of Libor is going to lead to profound changes to all manner of businesses and processes: it makes perfect sense to make the most of those changes to help drive change and transformation across the enterprise. This “crisis” can be a good one for business.

Maven Wave helps drive the future of financial services with innovative business outcomes, fueled by cloud, with risk top of mind. To help organizations maximize economic outcomes and advancements, Maven Wave brings a rich blend of industry-specific technological expertise, agile-integrated design, and best practices for transformation.  Click here to download the whitepaper or contact us to learn more.

About the Author

Andrew Dunmore
Andrew Dunmore
With over 15 years of solution delivery experience, Andrew Dunmore leads the financial services consulting practice at Maven Wave. Mr. Dunmore is one of Maven Wave’s thought leaders in capital markets innovation and delivery excellence. Prior to Maven Wave, Mr. Dunmore served as a Vice President at Bank of America in their global private equity investment office and an Assistant Vice President at LaSalle Bank in their credit derivatives servicing division.
October 14th, 2020
FINANCIAL SERVICES

Get the latest industry news and insights delivered straight to your inbox.

2020-10-22T13:48:03-05:00