1 | 2019 intâ€™l
Rubrik | 1
The Magazine Management know-how for practical use
Blockchain & Money: Crypto Currency Accounts as a New Service Blockchain & Sustainability: Stopping Ocean Plastic While Reducing Poverty How to Recover Gems in Insurance Contracts
«While technology is important, it’s what we do with it that truly matters.»
4 | Rubrik
Blockchain technology fascinates me, even though the sheer speed at which it is developing can be intimidating. Most people associate blockchain mainly with crypto currency, but the technology goes far beyond that. For example, crypto currency visionary Jeffrey Berns recently announced plans to create a desert city that will run completely on blockchain technology. The smart city, called «Sandbox», will have over 67'000 acres of space in northern Nevada. A decentralized blockchain will manage all business within the smart city. This management pertains to facilities like residential homes, retail spaces, an eSports area and a high-tech park for ventures using artificial intelligence as well as to 3D printing and nanotechnology. Sandbox's residents can have their ownership and voting rights recorded on the blockchain in a process that is both transparent and shielded from manipulation. This may seem like the type of venture that is only found in science fiction movies, but it is based on facts that are already a part of everyday life. Other blockchain ventures, such as a floating city off the coast of French Polynesia, have received substantial support and are expected to emerge within the next ten to 20 years. Blockchain, as our interview partner Plastic Bank in this edition puts it, is just a method for coding an exchange of value on a shared digital ledger. The Canada-based bank shows that blockchain technology can help solve human problems. People in developing countries bring plastic to a recycling station and receive blockchain-secured tokens in exchange. These tokens can be used to pay for essential «commodities» such as education. In this way, plastic becomes currency. The bank's founders established «social plastic» as a brand and persuaded companies like Henkel, Marks and Spencer as well as SC Johnson to use its recycled plastic. Shaun Frankson, CTO & Co-Founder of Plastic Bank, shares his company's success story in our «From Outside In Interview». Synpulse helps insurers and banks to take advantage of disruptive technologies like blockchain. With our industry expertise and profound know-how of local markets, we can develop solutions for our customers and implement them successfully as shown in this Magazine. As always, I wish you an informative and inspiring read. Your Christoph Nützenadel
Table of Contents | 5
Editorial ................................................................................................................................................................................. Digital Banking & Operational Excellence
Operational Implications of Crypto Currency Accounts as a New Service ............................................................... Operational Excellence Banking
Unlocking Opportunities by Serving the Affluent in Asia ............................................................................................. Regulatory & Compliance
Nimble IFRS 17 Reporting and Impact Assessment ......................................................................................................... Operational Excellence Banking
Banking Is Necessary, Banks Are Not? Redefine Your Operating Model in Time! ................................................... Operational Excellence Wealth Management
AI and Robotics in Wealth Management: Step into the Future! – Part 2 .....................................................................
6 10 14 18 22
From Outside In
Interview with Shaun Frankson, Co-Founder & CTO of the Plastic Bank «Stopping ocean plastic while reducing poverty is our goal – by blockchain» ......................................................... Operational Excellence
Bringing Discipline and Expertise to M&A ....................................................................................................................... Digital Transformation Insurance
Tackling Information Overload: Equipping the Digital Risk Professional .................................................................. Digital Transformation Insurance
How to Recover Gems in Insurance Contracts ............................................................................................................... Operational Excellence Insurance
26 30 34 38
Succeeding in the Millennial Insurance Market with Speed and Stability ................................................................
6 | Digital Banking & Operational Excellence
Operational Implications of Crypto Currency Accounts as a New Service Crypto currencies and initial coin offerings (ICO) provide attractive service and revenue opportunities but come with compliance and operational risks. Gazprombank Switzerland, Synpulse and Prospire reveal how crypto currency accounts and ICO support can be offered in corporate banking in a compliant, efficient and secure way. Authors: Edouard Hurstel | David Steiger | Dennis Flad | Heinrich Frankenbach
Digital Banking & Operational Excellence | 7
Among crypto-friendly nations, Switzerland has positioned
crypto currencies and, hence, reduces the risk of banks not
itself in a top rank. Proof of this is the «Crypto Valley» in Zug.
being compliant when doing business with the ICO sector.
It has become a globally recognized center of crypto inno-
Some banks see great opportunities in the crypto area and
vation and domicile of some of the most recognized initial
believe the guidelines are a starting point for developing
coin offerings (ICO). Especially the vehicle for ICO has
service offerings. For banks, the opportunities in this space
become very popular in the start-up scene. ICO enable
are attractive as they can leverage their banking license as
young companies to raise funding by issuing tokens as digi-
well as their core capabilities, that is extend them to the
tal assets. Buyers of such tokens gain tradeable assets.
specifics of crypto currencies.
These assets, in turn, grant access to a future service of the start-up (like a voucher) promise a certain return based on
Crypto banking services
predefined rules (like a smart contract). Often, the funding
To address the demand of institutional and corporate
is paid in established crypto currencies (e.g. Bitcoin, Ethere-
clients in the blockchain space, three crypto banking
um). After collecting the funds, the start-ups have huge
services must be established:
amounts of crypto currencies in their wallets. But they face three key issues during the process: Many banks do not offer ICO start-ups bank accounts.
safekeeping of wallets and crypto currencies; investments in crypto currencies; and
This is due to uncertainty about the ICO’s unregulated business. Banks are concerned that they may support
inbound and outbound transfers of crypto currencies.
illicit activities. Safekeeping of crypto currencies and providing crypto Start-ups need to exchange crypto currencies into fiat
wallets is similar to providing and securing bank accounts.
currencies. This will enable them to pay their ongoing
Investing in crypto currencies is already well established
expenses or invest in business development. However,
in the Swiss financial market (e.g. Falcon Bank, Swissquote).
as described in The Magazine 1-2018 int’l, banks refrain
Here, bank clients can buy and sell crypto currencies
from co-operating with ICO start-ups. They do not
by debiting their fiat currency accounts and exchanging
accept deposits of crypto currencies due to compliance
them for crypto currencies. We see the transfer of crypto
risks. It is therefore difficult for start-ups to make use of
currencies as the next step for crypto banking. This can be
their existing funds.
done by transfer to a beneficiary’s crypto currency wallet (outbound) from an originator’s crypto currency wallet
The start-ups’ wallets are mostly held by a broker or wallet provider, but not by a bank. Safekeeping of
(inbound) outside the bank. Essentially, this service is like a cross-border payment with traditional fiat currencies.
the crypto holdings is an expensive task, as it requires a sophisticated security concept. Most brokers and wallet providers are start-ups with limited funding
Approach for a Succesful Crypto Initiative
themselves. Along with the sakekeeping issue, there is counterparty risk.
Level the playing field and enable the management team to understand and assess the potential of
These examples highlight the demand for banking services
for ICO start-ups in the blockchain and crypto currency environment.
Start with the client experience and then determine the gaps and risks in the system along the client
Regulatory framework for crypto banking
In February 2018 the Swiss Financial Market Supervisory Authority (FINMA) published «guidelines for enquiries
Go beyond fiat standards and use the technological
regarding the regulatory framework for initial coin offer-
advantages of crypto currencies to mitigate risk.
ings (ICOs)». It provides the first regulatory framework for
8 | Digital Banking & Operational Excellence
Based on these three crypto banking services, banks can
lic wallet key. To bring crypto transfers into a regulated
provide a variety of services to their client base. Or they can
environment, due diligence on the beneficiary or origi-
serve blockchain and crypto start-ups. Such service could
nator needs to be done. Unmasking the originator
include ICO execution, ICO financing and ICO investment
would also make the crypto transfer similar to today’s
Five challenges for crypto banking services
Use of crypto coins from illicit sources
Banks who want to offer crypto-related services need to be
To comply with AML regulation, the history of transac-
aware of the specific challenges and risks. This is especially
tions needs to be explored in the fiat world. The client
true when it comes to offering inbound and outbound trans-
needs to declare this history to the bank. The block-
fer of crypto currencies. We identified several issues that
chain, however, offers an advantage that can be used
banks need to solve to be legally compliant.
to increase the level of confidence among regulators and compliance specialists regarding the transfer.
1. Safekeeping and segregation of wallets
The blockchain stores every transaction in a history that can be analyzed. It can be identified from which
wallets a specific coin has been transferred. If this
segregated crypto wallets for the bank’s clients; and
wallet was connected to illicit activities in the past, the blockchain can reveal this by analyzing the trans-
a safekeeping solution for crypto currencies, wal-
action history and then calucating an AML risk score.
lets and private keys.
This score indicates whether it is recommended to execute the transfer with the beneficiary’s or origina-
2. Unknown counterparty and legal framework
Unlike with current fiat payments, the beneficiary or originator is not an account holder at a regulated
Core banking integration of cryptos
bank respecting the same standards like «Know Your
Crypto currencies need to be integrated into existing
Customer» (KYC), «Anti Money Laundering» (AML) and
core payment processes and systems. Our view is that
«Financial Action Task Force» (FATF). The beneficiary or
existing payment processes may be used for crypto
originator is an unknown identity hidden behind a pub-
payments after being slightly adjusted.
Current high-level payment process
Enter payment order
Enter crypto transfer order
Check payment order
Check crypto transfer order
Crypto outbound transfer process 1: High-Level Process Comparison
Beneficiary due diligence
Execute transfer (blockchain)
Digital Banking & Operational Excellence | 9
an overview of the outbound transfer process and the
derstand the basic concepts of blockchain and crypto cur-
difference between current payment processes is high-
rencies. This will enable an assessment of the opportunities
and risks related to blockchain, distributed ledger technology and crypto currencies. The bank’s solution should also
Investor protection of crypto currency specifics
focus on leveraging existing processes and frameworks for
Crypto currencies are more volatile than fiat currencies.
payments. While the technology and many of its features are
Additionally, liquidity might be an issue if the crypto cur-
new, the payment services essentially remain the same. It is,
rency is not well known and therefore not traded
however, necessary to adapt the processes to comply with
frequently. In order to protect its clients, a bank should
regulatory requirements and to take into account crypto
carefully select the among the crypto currencies provid-
ed. Additionally, clients must be made aware of the risks before they invest in crypto currencies. Other measures
Our assessment shows that by dealing thoroughly with the
to mitigate risk to the client are limit orders, loss report-
challenges described and applying the success factors,
ing and investments without leverage.
banks can access the field of crypto product and service offerings.
Success factors for new services-setup Based on our experience, it is crucial for banks to find viable
In addition to the authors mentioned below, Edouard Hurstel,
solutions for the challenges presented. These must be
Advisor to the CEO of Gazprombank Switzerland Ltd. and Den-
checked with their clients, the regulator and those respon
nis Flad, Partner of Prospire AG have contributed to this article.
sible at the bank. We have identified some general factors behind the success of a crypto initiative. This analysis is based on an initiative of Gazprombank Educating the bank’s leadership and all project managers at
Switzerland Ltd. (https://gazprombank.ch/)
the beginning of the initiative is crucial so that they all un-
David Steiger Associated Partner (Synpulse Switzerland) email@example.com
Heinrich Frankenbach Manager (Synpulse Switzerland) firstname.lastname@example.org
10 | Operational Excellence Banking
Unlocking Opportunities by Serving the Affluent in Asia With the rising wealth of the Asian middle class and the increased sophistication of retail clients, banks intend to enhance their service models. A platform extension better caters to the affluent, ensures a consistent client journey and boosts cost efficiency. Authors: Rahul Bansal | Gregory Achache | Evan Chang | Dalston Leong
A major contributor of growth in assets under management
turn poses a challenge to client retention across segments.
(AUM) in Asia (e.g. Singapore, China & Hong Kong) has been
What are the benefits and challenges in redesigning the ser-
the emergence of High Net Worth (HNW) and Ultra High Net
vice model for the affluent? Let’s take a closer look at some
Worth (UHNW) individuals. The growing affluent segment in
industry best practice implementation guidelines.
Asia presents a significant opportunity. By 2020, Asia should account for 54%2 of the global middle-class population. Its
A consistent client journey
wealth is expected to reach USD 43 trillion. 3
Establishing a consistent client journey across segments involves the expansion of front-end client offerings and the
To put the figures into perspective: Much of the wealth is
simultaneous consolidation of back-end systems and pro-
untapped given that the combined AUM of the top 20 Asia
cesses across traditionally separated retail and private client
wealth managers amounted to USD two trillion in 2017.4
segments. Retail clients are increasingly looking for a quality
Moreover, there exists within this segment a shifting inclina-
advisory proposition with a portfolio concept and a wider
tion towards a portfolio-based proposition from traditional
variety of product offerings. A platform extension program
product pushing. This means that serving increasingly so-
provides banks with the opportunity to bridge the gap in the
phisticated and affluent clients through retail banking may
service and product offerings with a less fragmented archi-
not be sufficient. That said, an internal survey reflects that
more than 60% of banks in Asia are still servicing the retail and private segments separately using different platforms
Identified benefits of a platform extension
and service models. The resulting client journeys and service
The key objectives of initiating a platform extension pro-
levels are diametrically different for each segment. This in
1 2 3 4
Led by China, a new billionaire is created in Asia every other day — 2017 The Unprecedented Expansion of the Global Middle Class: An Update — 2017 The Growing Asian Wealth Management Market Capturing the Mass Affluent Opportunity — 2018 Asia 2017 AUM League Table — 2017
Operational Excellence Banking | 11
To ensure a consistent client experience
and a reduction in costs. This cost benefit is derived from
Extending platforms between retail and private seg-
a decreased per unit transactional cost as well as from
ments allows banks to deliver a consistent client experi-
cost efficiencies gained through the consolidation of
ence across segments. A prime example is the transition
teams and the streamlining of processes.
of a retail client to a private banking stature. A unified platform can minimize the impact to client account han-
Some banks have recognized the opportunity and have al-
dling, the performance calculation methodology and
ready begun committed large investment to such programs.
the client statements. This ensures a consistent client
Some of the challenges of a platform extension are highlighted
in the next section. This alignment is, in any case, inevitable.
To boost revenue through sales propositions
Challenges of a platform extension
From the front-office perspective, expanding the prod-
A platform extension can be complex in the short term due
uct and service matrix intended for a single segment to
to the isolated setup of the two segments within a bank. In
both segments can expand the bankâ€™s client pool and its
the most extreme cases, it can bring complexities similar to
revenue. This is especially the case where retail clients
those related to a merger. In simpler cases, it can be a basic
become more sophisticated investors.
extension of the existing services. Some of the key challenges from a business and technical standpoint are shown in
To attain cost efficiency via economies of scale
The key is to be aware of such complexity and to tackle it
From the operations perspective, the increased size of
upfront in the target operating model (TOM) and analysis &
the combined platform allows for economies of scale
design (A&D) phases of a platform extension.
Business Model The retail segment does not have a portfolio concept and the alignment in the object model presents a huge change management challenge.
Implementation Complexity Segment specific requirements often result in over-customization of a system which substantially increases implementation complexity & efforts.
Regulatory Landscape The regulatory requirements across segments are different and require a holistic cross segment setup in terms of risk profile and suitability checks.
Integration of Systems A platform extension will result in the integration of legacy retail systems (e.g. CRM, finance, execution) with the wealth system resulting in architecture challenges.
Retail Services The retail segment has additional cash management requirements which increases the complexity of integration with the wealth system.
System Performance Handling of retail volumes for order entry & portfolio view requires substantial system performance optimization.
Product Catalogue The merging of segment specific product catalogue to a single product catalogue requires substantial clean-up effort.
Migration The legacy retail systems are accompanied with data quality & integrity issues which need to be addressed as part of the migration.
Source: Synpulse 1: Identified Challenges of a Platform Extension
12 | Operational Excellence Banking
How does a TOM approach solve the challenges?
Technology & architecture
A clear TOM definition should form the baseline of a platform
extension program. A TOM approach will help a bank get a full
Define the target application landscape and IT architecture design.
understanding of the business strategy and vision, define Partnership & sourcing
project scope priority and plan the extension together with relevant stakeholders from the business and technology departments. The Synpulse TOM approach provides a frame-
Explore sourcing or vendor potential and define the target partnering model.
work that has been used across multiple projects for baselining and launching a platform extension program (see
A TOM assessment will be run across four pillars:
The definition of target front to back processes using a set of best practice processes is at the core of such an assessment. Synpulseâ€™s BANKINABOX covers all the processes with-
Organization & processes
in a core banking setup and contains know-how from various
Analyze and define the target organizational structure
platform extension programs. While defining the target,
and business process landscape.
a bank should consider the prioritization of the TOM pillar and the preferred rollout approach (i.e. phased versus big
Products & services
bang). A holistic analysis considering the cost, benefits and
Define future products & services, new market require-
risks will provide a clear roadmap for implementation of the
ments and functionality gaps of the program.
Target Operating Model (TOM) Vision Strategy
Organization & Processes
Partnership & Sourcing
Country organizations & functions
Product & offerings
Channels Countries Jurisdictions Market trends & opportunities
Organization & functions analysis
BANKINABOX Products & services capability Products-servicesprocess matrix Products & Services
Target solution architecture Cash model Booking flows Technologies & Architecture Business case
Transformation planning and implementation
Source: Synpulse 2: Synpulse Target Operating Model (TOM) Approach
Operational Excellence Banking | 13
Key implementation guidelines
platform coupled with in-depth knowledge of the
Platform extensions are challenging and the complexity
requirements of the different segments. This helps to
is further increased given the typical program mandate for
identify system gaps early and, hence, reduces the cost
maximum alignment. Therefore, a clear framework is re-
per change. This also needs to be supplemented by
quired to define, plan and implement such a transformation-
dedicated support from the platform provider.
al project. Some key insights for launching such a program Sequential implementation plan
are highlighted below: Planning and scoping
sequentially across the permutations of divisions and
Planning and scoping a platform extension require
locations. A strong private banking booking center
a deep understanding of the IT and business complexi-
should form the baseline. This makes it easier to launch
ties along with the platform capabilities. There needs to
the platform to additional divisions in the region. From
be a holistic TOM exercise for scoping and a clear defini-
an APAC perspective, the simultaneous go-live in Hong
tion of the target architecture for such a program. A real-
Kong and Singapore with a big bang approach has been
istic bottom-up project plan should be developed based
proven successful. However, this requires strong gov-
on this exercise.
ernance in the form of aligned business requirements.
Project governance is a long-term investment
It is recommended to launch an implementation project
Banks often begin investing in strong project govern-
With the rising wealth in the Asian middle class and in-
ance after the initial delays and as part of the project
creased sophistication of retail clients, there is a need to
turnaround initiative. A strong project governance from
enhance the retail offering and service model. A platform
the onset can help kick start a project in the correct
extension will not only better cater to the affluent, it will
direction and prevent unnecessary delays.
also ensure a consistent client journey as well as boost revenue and cost efficiency. Given the business and technical
Functional and technical know-how is a must
challenges, a systematic approach with strong project gov-
It is important to ensure that the project team has
ernance and know-how is vital for the success of such
a strong functional and technical expertise about the
a large-scale program.
Rahul Bansal Manager (Synpulse Singapore) email@example.com
Gregory Achache Manager (Synpulse Hong Kong) firstname.lastname@example.org
14 | Regulatory & Compliance
Nimble IFRS 17 Reporting and Impact Assessment IFRS 17 will take effect in 2022, establishing internationally consistent accounting standards for insurance contracts. In order to fulfill the requirements, insurers must assess several methodologies. This assessment includes data collection and handling. Author: Daniel Diederichs | Dr. Daniel Trzesniak
The financial services industry is undergoing a reporting
ic, so dataset can be viewed immediately. This accelerated
revolution due to the new international reporting standard
reporting time, the need for current data and the require-
(IFRS 17). IFRS 17 requires financial service firms to publish
ment for flexible modeling and iteration are behind this
detailed and accurate financial reports in a timely fashion.
reporting revolution for insurers. It also demands that the
This is a major departure from past reporting practices,
industry rethinks its data gathering and reporting process-
where the firms could afford the high cost of gathering
es as well as the tools that support it.
data, running analysis and issuing reports based on nonintegrated systems.
The old school way «But we’ve always done it this way.» No doubt those words
New reporting requirements
have been uttered at many insurers since the reporting
To meet the new reporting requirement, such data must
revolution began. But the old school way of generating
be collected, analyzed and disclosed in a matter of days.
financial reports is no longer appropriate. The time and
The data should also be as current as possible. Insurers
effort required to gather data across the organization for
have to be ready to iterate and modify models immediately.
reporting have become too much.
The recipients of the reports – whether auditors, shareholders, clients, regulators or institutional investors – may ask for rapid slicing and dicing of data in many different ways.
«Insurers have to be ready to iterate and modify models immediately.»
It is nearly impossible to anticipate all their questions and prepare all dataset combinations supporting the
Consider all the steps related to the old data management
answers beforehand. The functionality needs to be dynam-
and reporting process:
Regulatory & Compliance | 15
Develop the architecture. This likely entails the gather-
Code, then code some more.
ing of data from many different systems and business units. It also involves many different owners, sometimes via a data feed but often via a manual process. Define the models and underlying calculations that will be used based on the required reports.
Activate the systems and process and generate the reports. Go back and troubleshoot and write more code if all fails to work as desired.
Design and build out the software to implement the architecture, collect the feeds, perform the required calculations and generate the reports based on predefined models.
Document the whole process, end-to-end and generate a customized report for many different audiences. Ensure that everything has an audit trail and is properly versioned.
Review platform & graphics
Sample cashflow preparation
Full cashflow preparation
Handover of report structure
First results for sample
Set up calculation
Week 4 Comparative analysis Unit of account
Results for 1 portfolio
Integration of your report structure
Adjustments of report structure (if required)
Balance sheet, other comprehensive income, profit & loss
Full cashflow upload
CSM and RA
Graphical representation Sample cashflow upload Process implementation
1: Implementation of IFRS 17 in Four Weeks
Estimation of transition costs Estimation of full implementation costs
16 | Regulatory & Compliance
A software project like this will likely take many years before
under IFRS 17 in an innovative, trouble-free manner. Addi-
it achieves the desired outcome. And many of these projects
tionally, the ability to rapidly iterate, modify models as well
fail altogether and require starting over from scratch.
as use modern software and the cloud for calculation and report generation means that the data management pro-
Once the reporting system is in place, just running regular
cess is much more flexible than a traditional one bound by
reports is a lengthy process. This is due to the varied data
rigid specifications. Now you can conduct stress testing,
sources; inconsistent methods of data collection and
sensitivity analysis, variable modification without breaking
extraction; the slow process of data validation; as well as
your models or being constrained by fixed specifications.
any needed reworking. There is also the possibility that the
Harnessing such modern software technology also means
model changes or that a new report is needed requiring the
that insurers will benefit from shorter development and
retooling of the inputs with different granularity. This rede-
implementation times as well as lower development and
sign of the system leads to yet another round of heavyweight
development and coding.
Reporting reinvented for IFRS 17
«The functionality needs to be dynamic, so dataset can be viewed immediately.»
The Systemorph IFRS 17 product utilizes the cloud-enabled «Software-as-a-Service» functionality of the Systemorph «Vertex» platform. This provides powerful yet simple features and functions for creating models, integrating data feeds, calculating outputs and generating reports.
The reporting revolution is placing entirely new demands on
The product combines data-gathering workflows, a master
this outdated model. Especially around data management,
data hub, a calculation engine as well as analytics and visual-
many companies still rely on a dated tech stack, using data
ization tools into a single solution. It supports an end-to-end
feeds from many systems to be assembled in a central data-
business process that centralizes data control while distrib-
base. This concept can no longer cope with modern data
uting data management tasks. The product provides users
requirements. It also does not take into account the extraordinarily high costs of these software projects, especially
Key features of Systemorph Vertex:
when they go wrong and must be corrected. In short, such
The platform revolutionizing data management
old school projects mean that business managers must spend too much time supporting the software system build-
out, instead of focusing on business content. Unique data versioning & automated audit trail
Nimble data management for swift reporting Synpulse has teamed up with Systemorph to bring insurers
Integrated business process workflow
a sophisticated approach to data management and reporting under IFRS 17. The new approach uses Systemorph’s IFRS 17 solution to accelerate data collection, simplify
Central data storage incl. historization & restatement
reporting processes and streamline calculation and analysis. The result is nimble data management producing agile
Interactive reporting with drill down & visualization
reporting for IFRS 17 compliance. User friendly mobile interface Together, Systemorph and Synpulse provide workable software for data management and reporting within weeks
rather than months or years as in traditional software development. In doing so, they have helped companies to adopt
Highly scalable platform using «AZURE» Cloud
modern approaches to financial data management. The difference from the old methods is vast and helps insurers accelerate implementation of their reporting process
Regulatory & Compliance | 17
across the entire reporting process with intuitive data man-
pulse approach brings modern software, cloud technology
agement tools that are as simple as using a smartphone app.
and advanced deployment techniques to form a highly-efficient IFRS 17 reporting process. This allows business man-
The interface also standardizes the data reporting and vali-
agers to focus on their business rather than on software sys-
dation processes, ensuring data is collected very quickly
tems or the project needed to build them.
and validation is smooth and simple. As a result, data is current and accurate at all reporting and analysis levels.
IFRS 17 solution foundation in four weeks Synpulse’s finance, accounting and actuarial knowledge as
The system enables the insurer to easily adopt the models
well as deployment experience enable the Systemorph
and valuation methodologies identified by the IFRS 17
product to quickly become operational. In fact, we built
standard. This includes the «building block approach», the
a live system using real data in just four weeks for several
«premium allocation approach» and the «variable fee ap-
proach». The Vertex platform technology was developed
agers can explore their modeling and reporting ideas in
hand-in-hand with the agile development process and
working software rather than trying to plan abstractly with
serves as its underlying foundation.
diagrams or long documents. Our solution lets business
1). That means an insurer’s business man-
managers see their methodologies come to life, allowing Many insurers looking to comply with IFRS 17 no longer have
them to analyze and refine them in real time. Rapid iteration
the appetite for long and expensive software build-out and
enables managers to make the right choices for modeling
customization projects. Instead, the Systemorph and Syn-
and calculation without setting their decisions in stone.
Daniel Diederichs Associate Partner (Synpulse Switzerland) email@example.com
Dr. Daniel Trzesniak Head of Marketing (Systemorph AG, Switzerland) firstname.lastname@example.org
18 | Operational Excellence Banking
Banking Is Necessary, Banks Are Not? Redefine Your Operating Model in Time! Technology has already changed the business models of many banks, but some operating models have been slow to catch up. Modernizing the core banking system and establishing an IT archtitecture driven by modular and harmonized applications are the key to success. Authors: Lukas Hohl | Dr. Simon Alioth
Operational Excellence Banking | 19
The banking industry and its underlying operating model are
vate. The banks not only want to retain their customers but
under pressure from multiple angles. New technologies like
win new ones from the younger generation, e.g. millennials.
blockchain and artificial intelligence have emerged and are
Though fintechs were once seen as a major threat to incum-
impacting the business models of banks.
bent banks, time has shown that embracing these newcomers may at times be more beneficial than competing with
Digitalization of the business model
them. Challenger banks, which are new and fully digital
To respond to these industry challenges, banks have begun
banks, are increasing competition, especially in Europe.
to adapt their business models. Many banks have embraced
Though these banks are not as prevalent in the US as they
the new technologies or are in the midst of doing so. Unfor-
are in Europe, they will likely make a significant impact in the
tunately, corresponding changes to their underlying operat-
US as well.
ing models often lag behind this embrace. There is a strong need to realign this part of the bank’s core functions (see
So, what does «realign» mean from an IT architecture point of view?
«Many banks have embraced new technology. Unfortunately, the corresponding changes to the operating models often lag behind.»
«Core banking system modernization and the adoption of microservice-driven architecture are key to realigning the operating model.» It is also worth noting that many banks continue to invest heavily in new products and services. By offering existing products and services through new channels, such as via mobile devices, banks have improved the customer experi-
In recent years, digitalization has created opportunities for
ence. These digitalization initiatives have had an impact on
new business models across various industries. An example
existing business models and on the underlying operating
are the fintechs mentioned above. These fintechs are putting
model. Changes driven by regulatory requirements have
mounting pressure on banks to digitalize faster and inno-
also had an impact.
API Layer Core 1
Core Source: Synpulse
1: Building an IT Architecture with an API Layer
20 | Operational Excellence Banking
By not digitalizing, banks will lower their profitability and
will save time and money. This can be done through a proper
lessen the chance to connect with new and existing custo-
service orchestration layer that accommodates seamless in-
mers. The operating models of many banks will need to
tegration of a new innovative solution and also complies
be realigned given the impact of digitalization on existing
with recent market directives such as the revised Payment
business models as well as the ever-changing regulatory
Services Directive, PSD2 in Europe (see
Core banking system modernization Additionally, to keep up with the fast-paced digital innova-
Banks are spending a significant amount of their IT budget on
tion, investments have largely focused on end-user applica-
running existing IT systems. This allows only specific parts to
tions. This has helped banks to be seen as innovative and
be modernized. A simple upgrade of your core banking sys-
more digital friendly.
tem will likely not have the desired impact in terms of digitalizing processes from front to back. Banks should therefore
However, in many cases these actions have led to operational
consider replacing their legacy core banking systems to build
inefficiency. There are several reasons for this. One is a lack
a base for future innovation. This can lead to new opportuni-
of integration between applications resulting in a siloed
ties to consolidate multiple legacy systems, reducing opera-
data flow. More often, however, the reason is the legacy core
tional expenditures and mitigating operational risks in the
that does not allow seamless integration of tools from front
process. In addition, a core banking replacement allows for
to back of an organization. Moreover, M&A activity has led
the business to scale much easier as it grows.
many banks to have several core legacy systems. These legacy systems are often not harmonized or exist as multiple
«Banks cannot do all application development in-house if they want to stay competitive.»
back-end systems catering to a specific set of products. This complicates the creation of a holistic view of the information for both the client and financial advisor. There are two ways of addressing the above-mentioned challenges to remain successful in the long-run:
A modern core banking system is designed and built in a mod Microservice-driven architecture
ular way. This allows flexibility to decide whether a specific system module will be implemented as part of the existing
Core banking system modernization
core banking system or if external solutions will be interfaced instead. The latter results in a hybrid model with best-of-
breed applications seamlessly integrated with the core bank-
Establishing an ecosystem of software partners is important
to excel amid rapid innovation. Banks cannot do all the application development in house as they have in the past if they
want to focus on key competences and stay competitive.
Many banks are embracing digitalization but are taking time
A microservice-driven architecture, that is an architecture
to make the corresponding changes to underlying operation-
driven by modular, independently deployable and harmo-
al models. Given rapid technological innovation, investments
nized applications, is crucial.
in modernizing those models will pay off in improved operational efficiency and lower cost. Core banking system mod-
The innovation cycles of core banking systems are less fre-
ernization and adoption of the microservice-driven architec-
quent than the innovation cycles for client and advisor facing
ture are major investments in realigning a bank’s operating
applications. To guarantee seamless integration of the two,
banks need to build up their architecture so that it fully supports application programming interfaces (APIs). The API
Redefining the operating model will increase the ability to
concept is nothing new. To «fully» support APIs, the use of
innovate, resulting in a positive influence on the top line due
standardized interfaces that enable seamless integration
to a better client experience.
Operational Excellence Banking | 21
New Market Entrants Strategy
Key Activities Value Proposition
S P O S
Value Delivery Chain(s) Value Proposition(s)
Customer / Beneficiary
Strategy Source: Synpulse
2: Aligning the Business and Operating Model Competing Sucessfully and Sustainably
Lukas Hohl Associate Partner (Synpulse United States of America) email@example.com
Dr. Simon Alioth Associate Partner (Synpulse Switzerland) firstname.lastname@example.org
22 | Operational Excellence Wealth Management
AI and Robotics in Wealth Management: Step into the Future! â€“ Part 2 Artificial intelligence and robotics allow early adopters to leverage efficiency and compete amid declining margins. In part 2 we analyse concrete adaptions on the client side, describe benefits in end-to-end operations and give guidelines based on our UK wealth and asset managers survey, whereas in part 1 we provide a general overview of the market. Authors: Tariq Khan | Vladimir Dimitroff | Aastha Dhawan
Operational Excellence Wealth Management | 23
Robotic Process Automation (RPA) allows early adopters to
30% saying they would be «significant» (see
leverage efficiency amid declining fees and margins. This
of the respondents were still hesitant and «considering» pos-
and the higher maturity of the solution, are possibly the rea-
sible adoption, while 11% actually implemented the techno-
son for more deployment cases. These are not only proof
logy already (see
of concept (PoC) and pilot projects, but also quite a few
In subsequent in-depth interviews with a number of C-level
«business as usual» robotic processes.
executives from the sector, we kept hearing about pressures
and challenges that draw resources to more urgent priori Artificial intelligence (AI) can enhance, through human interaction interfaces and assistants, the customer
ties. These might be eased by the right adoption of AI and/or robotics. Such pressures include:
experience and attract new client acquisitions. It also can improve the retention of existing clients. Insight
continuing regulatory pressures;
into needs, motivations and behaviors can mean more assets under management.
vanishing margins due to competition and the ubiquity of information;
AI can also ensure better compliance through intelligent «know your customer» (KYC) and «anti-money launder-
rapid consolidation as the last remaining source of growth;
ing» (AML) applications. the need to radically improve efficiency to benefit from In our ongoing research, we keep hearing about intent, in-
stead of active projects or success stories. A survey at the end of 2017 found that over 60% of senior industry leaders expect
and increased caution in anticipation of an overdue
a «very significant» impact for AI and robotics, with another
Still considering/early stage
Have a plan
1: Stage of Adopting AI & Robotics among UK Wealth and Asset Managers
2: Impact of AI & Robotics on Efficiency over the Next 18 Months Source: Synpulse UK, Survey December 2017
24 | Operational Excellence Wealth Management
In addition to these objective factors, many executives open-
«referrals», «reputation» and strong «relationship»). Intelli-
ly admitted insufficient awareness and knowledge of the
gent targeting can benefit from modern cognitive solutions.
subject area. This includes not knowing what solutions are
These include AI-driven analysis of unstructured data and
available and what they can do for their business. In additi-
decision-supporting algorithms. Enabling technologies and
on, the respondents believed that all these solutions are pro-
domain expertise exist and they can be a start to bringing AI
hibitively expensive. This is not necessarily the case. There is
into your operations.
a consensus that vendors and their implementation/consulting partners should do more to educate the market and
Even if the acquisition/sales process is successful, onboar-
build confidence by sharing case studies of completed deploy-
ding the new client can be a challenge. Growing regulatory
demands as well as the need for efficiency and the best customer experience (CX) are putting pressure on onboarding
«We would like to hear more examples of applying AI and robotics to the immediate practical challenges of the private wealth sector. To give us the confidence to try it, we need case studies of successful projects, including real implementation durations and costs.» (COO of a prominent wealth manager)
teams. Here, multiple applications can add value, including managing the end-to-end onboarding process on a single dedicated platform with maximum built-in automation or automating manual tasks in an existing environment with rapidly deployed and cost-effective RPA. They can deliver speed and efficiency, helping to improve the CX. Within the onboarding process, KYC steps pose challenges and risks. Here, a simple RPA robot can create efficiency in a number of ways. These include connecting to reference sources (e.g. Thomson-Reuters’ «World Check», «KYC360 RiskScreen»), filling out a form, as well as receiving the data
Private wealth management opportunities
and attaching it to the client’s documentation. Beyond this,
Shall we automate front-office interactions or the back-of-
AI-based solutions capture input from multiple sources like
fice processing? Is AI useful for our firm or is RPA? The ans-
unstructured data. They then subject it to cognitive analysis
wer to both questions is: «Yes – we need both of these.»
and provide a more comprehensive and informative client
Although a wealth manager may potentially benefit from
background. Some of those are geared to satisfy compliance
both – i.e. intelligent front-end automation and back-end
needs, while others extend to ongoing monitoring of a client’s
efficiency – the real world is somewhat different. The «ideal
life-cycle to find potentially adverse information. The latter
world» may envisage a large and diverse population of bots
helps to prevent risk.
working in harmony for the joy and benefit of customers and shareholders alike. But the benefit in any of these cases
During the life-cycle, increasing the managed assets through
would depend on focus, timely and effective delivery as well
targeted cross-sell offerings can benefit from a better insight
as optimal resource allocation toward such objectives. The
of client needs. These are beyond those declared in conversa-
proverbial «one bite at a time» rings true in this context and
tions and filled forms. Modern behavioral psychology, com-
is a proven way to build success with minimum risk and cost.
bined with deep learning tools, can help an advisor provide
Let’s now look at some very realistic scenarios for the broa-
a more relevant offering to the client. Similarly, the outflow of
der wealth and asset management industry.
assets – not to mention the churn of clients – at competing institutions can be detected early with intelligent algorithms.
Benefits of AI and RPA in end-to-end operations
Such outflows can also be prevented through other AI-based
The acquisition of new clients in wealth management relies
decisions and actions.
on different lead generation and opportunity management
While all these client-facing activities take place, the back
from the mass retail market. With or without a sales automa-
office is concerned with processing the transactions, regula-
tion (SFA) system, the «R» in CRM is far more important (as in
tory compliance and filing reports. These operations often
Operational Excellence Wealth Management | 25
require manual data entry or transfer across systems and
only be monetary (e.g. cost savings), but also account for qua-
their respective interfaces. Identifying such tasks and assig-
litative factors like accuracy, risk reduction and CX impro-
ning them to RPA is one of the fastest paths to measurable
results from the use of robotics.
A few guidelines In a digitalization strategy paper presented at our Senior Executives Forum in London , we came up with the concept of «focused initiatives». This is an alternative approach to «big bang» transformation programs. In our view, the concept is even more compelling with respect to adopting AI and robotics in the wealth management industry.
«Start small, with a focus towards a simple and clear goal. Keep in mind, though, that this is the start of a journey. Envisage the bigger picture and longer term direction for ultimate success.»
The keyword is «focus», or the importance of rigorous prioritization and commitment to a chosen use case and solution.
Last, but not least: The PoC project should not be seen in
We feel the concept ensures successful implementation and
isolation or as a one-off effort. One should consider the po-
the rapid realization of benefits. Some readers may have
tential for extension, that is leveraging the learning and the
needs that were not mentioned above. All should, however,
initial investment to build further capabilities and to meet
benefit from automation. We feel that it is important to take
new objectives. You are embarking on a journey to reach
inventory of all known use cases, agree the criteria for priori-
much higher goals. These may include the outcome of a «big
tization and shortlist those cases that would merit a pilot pro-
bang» transformation, but without the strong change re-
ject. A pilot, or PoC project, must have a clear business case
sistance, prohibitive budgets and failure risks. We strongly
with tangible benefits. The project also should have a short
recommend selecting a small and viable project with the big
time frame and low cost. The benefits to consider should not
picture in mind.
Tariq Khan Associate Partner (Synpulse United Kingdom) email@example.com
Vladimir Dimitroff Principal (Synpulse United Kingdom) firstname.lastname@example.org
26 | From Outside In
«Stopping ocean plastic while reducing poverty with blockchain is our goal» The Plastic Bank has gained a lot of attention for its global efforts of turning plastic waste into currency and providing economic opportunities for the poor. The bank received an award at an UN Climate Change conference and is subject of the documentary «A Plastic Ocean». Even Pope Francis wanted to know more about it. Interview with Shaun Frankson, Co-Founder & CTO of Plastic Bank
From Outside In | 27
Plastic Bank aims to solve two problems at once, namely environmental pollution and poverty. How do you go about this?
We look at our solution as a metaphor. Let’s imagine that you
«Social Plastic» for multinational corporations to
walk into your kitchen and the sink is overflowing. What
use in manufacturing. Purchasers include Shell
would you do first? The answer is you turn off the tap. So
Oil, Marks & Spencer and Henkel and the bank
when we looked at ocean plastic, we said we must turn off
continues to build partnerships with other Fortu-
the tap flowing into the ocean. We discovered that in devel-
ne 500 brands. Plastic Bank was founded in 2013
oping countries, where 80 per cent of ocean plastic origi-
by David Katz and Shaun Frankson in Vancouver,
nates, there is an opportunity to develop «social plastic».
Plastic Bank created a supply of ethically-sourced
The model puts a price on plastic that is collected and recycled by the local community. The goal must be to increase the rewards for collecting in these countries, so our price is
centers and for those operating the processing plants to get
above the market rate for the plastic. That enables us to deal
the plastic ready for shipping to clients. With blockchain, we
with the root cause of ocean plastic and improve people’s
can bring this supply chain onto one platform.
lives as the same time.
How are the collectors paid? Your use of blockchain technology is fascinating. How does it work exactly?
We have our own asset-backed tokens, which means that
We needed a way to ensure that those in poorer countries
tokens created. The tokens allow collectors without a bank
would receive the value of the plastic they collect and recy-
account to save the amount they receive digitally and spend
cle. There is a lot of corruption in these countries, so the
it within our ecosystem. For example, they can spend their
money earned from waste recycling doesn’t always go to the
savings on solar-powered smartphone charging, cooking
right people. This is where blockchain technology comes in.
fuel or even school tuition. Or they can cash out and set up
We partnered with IBM, which helped us design our back-end
a banking account on their mobile phone. We use our block-
blockchain solutions. These solutions allow us to track the
chain application to keep track of all participants in the col-
entire process of that recycling supply chain. Our application
lection and recycling system. In that way, we ensure that the
has a feature for collectors, for those running our collection
rewards go where they should.
there is money in the account to match the value of the
Benefits in figures
We understand that you have persuaded some companies to use your social plastic. Who are they?
Since its founding in 2013, Plastic Bank
German household goods firm Henkel and oil giant Shell were our first customers. Marks & Spencers is another client,
h as established 35 Social Plastic collection
using our plastic for a reusable bag. The US household goods
firm S.C. Johnson has also just announced that it will spon-
2‘000 collectors who have
sor our entry into Indonesia. We are helping companies
retrieved eight million pounds of plastic waste,
understand that if they have to use a plastic, it should be
which is the
e quivalent to 144 million plastic bottles kept out t urned them into Social Plastic for reuse by
In what other countries beyond Indonesia are you doing business?
We started our first project in Haiti where we got our collec-
of the ocean and
tion model right. We then went to the Philippines and now
28 | From Outside In
we’re also in Brazil and Indonesia. We aim to sell out all the
ity. This can only happen when plastic has so much value
plastic that can be collected in a target country and then
that discarding it would not be an option. The convenience
move on from there. The more we have of those supply
would also be such that you would have to go out of your way
chains, the more we can expand. To get our message out, we
not to recycle.
recently held a TED1 Talk.
How can banks and insurers support your business?
What are some of the challenges related to using blockchain?
Banks can play an important role in our model, if you just
You see a lot of case studies, prototypes and white papers
consider the different methods of cashing out our tokens.
regarding blockchain but very slow adoption of it on behalf
Examples include savings accounts on mobile phones,
of companies. As the CTO of Plastic Bank, I see a need to
access to automated bank tellers and prepaid credit cards.
explain the technology simply. Too many people overem-
It’s also one of our goals to provide insurance to collectors.
phasize its relation to crypto currency and that can be off-
The types of cover we are thinking of are health insurance
putting to some. We need to simplify the definition and say
as well as that for farmers and businesses. We would like to
that blockchain is just a method of coding an exchange of
enable our participants to pay their premiums with the plas-
value on a shared digital ledger.
tic they collect.
What are some of your company’s long-term goals?
How can technologies like artificial intelligence (AI) help your business and humanity generally?
One of them is to prevent one billion kilograms of plastic
I’m quite optimistic about what AI can unlock. For example,
from getting to the ocean by 2025. That of course is the same
our program has lead to the introduction of cell phones in
amount of value transferred to the hands of the collector and
a community for the first time. The cell phone and the AI that
the same amount of new plastic not created. Ultimately,
goes with it are a beautiful way to put education in the hands
however, we want to stop ocean plastic from being a possibil-
of anybody. I just imagine that anyone with a family can have
Learn more about Plastic Bank and experience Shaun Frankson in the following videos.
Plastic Bank wins 2018
Plastic Bank in Haiti
Nature Inspiration Award
The Plastic Bank Extruder
About Plastic Bank &
Social Plastic (8 minutes)
Interview at IBM think
United Nation about
plastic in oceans
TED is a nonprofit devoted to spreading ideas, usually in the form of short, powerful talks (18 minutes or less). TED began in 1984 as a conference where Technology, Entertainment and Design converged and today covers almost all topics – from science to business to global issues – more than 100 languages.
From Outside In | 29
Plastic dump in our oceans
Bank expanded into poor countries like Haiti, Brazil,
According to Plastic Bank every minute of every day,
Ethiopia, Philippines, Indonesia and India.
the equivalent of one truck full of plastic dumps into the ocean worldwide, adding up to eight million ton-
The value in plastic is revealed with the help of block-
nes annually. There will be more plastic than fish in the
chain technology. An app gamifies the collection and
oceans by 2050 if we continue like this, killing our mari-
exchange of plastic for incentives. The collectors can
ne wildlife and contaminating our seafood. In order to
get medical insurance, pay for school, obtain Wi-Fi and
turn off the faucet and to monetize waste, the Plastic
a cellphone, access clean water through their work.
a complete education thanks to the smartphone. AI can also improve decision-making at companies by providing better reporting on the social or environmental impact of one’s business.
How did you and your partner David Katz get the idea for Plastic Bank? When I was 22, I had a near-death car accident. I could barely move but I thought about what I wanted to do with my life. I realized that while I had played in a rock band, I wasn’t going to be a rock star. When I recovered, I decided to get involved with micro-businesses and gained lots of experience. I joined David at a GPS tracking company that he had founded. There, I was first vice president of marketing and later vice president of the company. After we sold the business, we asked ourselves if we could create a business that would really affect people’s lives. One day at Singularity University, where David was taking a technology course, he had an idea: We could build a business based on the premise that plastic is too valuable to be thrown in the ocean. He called me up that day and said: «Shaun, I’ve figured it out. It’s called the Plastic Bank.» David and I launched the company a month or so after then and have been figuring it out since. Finally, a personal question: How do you stay fit to deal with
Shaun Frankson (31) is Co-Founder and CTO of
the task of running the company?
Plastic Bank, based in Vancouver, Canada. He
If you’re stressed and not taking care of yourself even while
coined the term Social Plastic and created the
doing a dream job, you won’t be very productive and can
brand strategies to launch a Social Plastic mo-
even get depressed. So we’re big on meditation and most of
vement that gained over one million supporters
our employees are either vegans or pescetarians. I personal-
and well over 250 media features before expan-
ly find myself on the phone for four hours sometimes.
So what I then do is just go out on a hike while on the phone. I want to be out in nature yet still doing the same thing I’d be
doing at a desk. You have to be mentally and physically fit to
keep up with the workload, the long hours and the travel.
Meditation and hiking help me with this.
30 | Operational Excellence
Bringing Discipline and Expertise to M&A Many executives think that M&A transactions automatically add value to a company when organic growth is limited. However, in more than half of all cases, value is destroyed due to missteps made during deal preparation, execution, or post-merger integration. We explore critical points and reveal a systematic approach. Authors: Daniele Concari | Dr. Alexander Cassar
It is a well-known fact in the industry that 70% of all mergers
magnitude of the success fee typically eclipses them all.
& acquisitions (M&A) fail. This knowledge has become like
Below we briefly examine the accepted approach to manag-
a badge of honor for those brave enough to pursue daring
ing M&A projects in terms of process, planning and rewards.
M&A deals. Corporate finance specialists have often analyzed the «Why?» behind the high percentage of flops. Many
M&A projects start with C-level support, priority execution
M&A deals are normally driven by strategic considerations
and plenty of funding. How could it be that so many of them
that affect the future of a business. But they also can disrupt
entire industry sectors. It is therefore surprising to find that in terms of effort spent, strategic consulting is the smallest
«It is a well-known fact in the industry that 70% of all mergers & acquisitions (M&A) fail.»
component of an M&A project. Furthermore, the typical M&A process does not comprise a strategic step, as the thinking behind the decision is supposed to have already been done. Under these circumstances, the risk of entering an M&A transaction without a concrete or appropriate strategic rationale is high.
An «M&A deal» typically involves a seller, a buyer and their advisors. The latter includes investment bankers, auditors,
On the other hand, the mechanics of an M&A transaction
lawyers, domain experts, introducers and influencers. The
tend to absorb top management focus, with a risk of lessen-
term «M&A transaction» refers to the actual M&A process
ing the determination to complete a strategically compel-
itself, from inception to closure. The prize for the advisors
ling deal. We believe that no M&A deal should be started
is a commission on the purchase price if the transaction
before having an agreed and documented strategic objec-
happens, also known as the «success fee». Other fees are
tive. Checkpoints should then be established alongside the
paid along the way to advisors in various capacities. But the
transaction process to ensure that the strategic aims remain
Operational Excellence | 31
valid and achievable as the deal progresses. Such an approach requires the appointment of strategic advisors with
significant expertise of the industry concerned. These stra-
This entails due diligence activities to arrive at a binding offer for the asset on sale.
tegic advisors should be separate from the financial and Execution
legal advisors, so that they can supervise the M&A transaction process without incurring conflicts of interest.
These are the commercial and legal negotiations that will lead to the «signing» and, eventually, the «closing»
The M&A process
of the deal.
The typical stages of an M&A transaction are: If we are to «wrap-up» the transaction process with a stra Origination
tegic advisory oversight, then we should add an additional
The deal is promoted to potential sellers and buyers
stage before origination. We call it «shaping». This is an ini-
to obtain one or more non-binding manifestations of
tial phase during which strategic and financial objectives
are debated and agreed. One of the possible outcomes of
Shaping Input from Client:
Financial due diligence
IT due diligence
Head of terms
HR due diligence
Target profiling Output:
1: The «SOLVE» Approach for the M&A process
32 | Operational Excellence
the shaping stage is to cancel the M&A deal. This could be
office (PMO) professional. Indeed, this is a delicate area.
the case if the proposed strategic rationale is found wan-
While we have found that firms understand the argument for
ting. At Synpulse we have adopted the four stages of the
a professional PMO, most fail to appreciate the full benefit of
«SOLVE methodology» for M&A projects (see
it versus the cost of additional resources for the M&A deal. It
is therefore essential for an M&A PMO to have an end-to-end
The M&A project
understanding of the M&A transaction process and a basic
Coming from a traditional management consulting back-
grasp of corporate finance. Such a consultant can provide
ground, the initial contact with the world of M&A can be
the best of both worlds: expertise and project management
disorienting. Meticulous and rigorous time and resource
planning are not paramount. Instead, time-keeping is not that important and everything is event-driven. For instance,
«I advise therefore I am»
either a buyer will decide to submit a purchase offer or not.
The term advisor is often misused in M&A. For instance,
If they do, the deal moves to the next stage. Little considera-
someone who double-checks detailed financial accounts is
tion is given to what could happen if the offer does not
probably an auditor by training, rather than an advisor.
A true advisor is someone who directly handles key aspects of the M&A transaction and/or directs his clients at the key
«The risk of entering an M&A transaction without a concrete or appropriate strategic rationale is high.»
junctures of the deal. The crucial difference between an advisor and a consultant is the empowerment of the advisor and his or her peer-to-peer relationship with the client. Naturally, experienced and trusted consultants often act in an «advisory» capacity for their clients. However, an advisor is expected to do so officially and by the nature of their
It is rare to find a detailed plan of an M&A transaction from
profession. It is here that our M&A PMO faces the greatest
beginning to end that considers contingencies and depend-
hurdle. The advisor mentality cannot be easily learned dur-
encies. To be precise, M&A transaction execution plans do
ing a training course. It requires people who have embraced
exist; they are just not normally written by people with
the advisor mindset per se. These are people with direct
a project management background. It is also true that the
experience of driving M&A transactions and who are accus-
event-driven approach is helpful in optimizing resource
tomed to achieving their objectives.
commitment, especially if the transaction is not progressing well or slowly. That said, the approach can lead to delays, misunderstandings and unpreparedness from one stage of the deal to the next. In any case, if a transaction is not likely to go ahead, this should be known early in the process. This is an example of where M&A would benefit from adopting
«It is a detailed plan of an M&A transaction from beginning to end that considers contingencies and dependencies.»
project management methodologies and expertise.
There is more to a PMO than meets the eye
The success fee
M&A professionals tend to come from a business adminis-
While compensation models have evolved in consulting
tration background, with a focus on corporate finance. Their
projects well beyond the classic time and material ap-
core competence is in the financial engineering of the M&A
proach, they are still skewed towards the success of an M&A
deal. They are strongly driven by macro-numerical consider-
deal. Often, M&A advisors work for a success fee only. It is
ations and place lot of emphasis on financial modelling.
evident that an M&A deal lends itself to a risk/reward value proposition for advisors. Many M&A deals do not go beyond
On the other hand, they tend to have no track record in
the initial stages and companies are reluctant to commit to
structured project management. M&A professionals typical-
substantial fees without a concrete goal in sight. An impor-
ly lack the focus and the mindset of a project management
tant consideration is that from an accounting perspective,
Operational Excellence | 33
M&A transaction costs are ideally booked against the deal.
Driven to success
For the seller, this means they are subtracted from the pur-
It is an accepted wisdom that the success fee is driven by the
chase payment received. For the buyer, they are booked as
purchase price. There are several ways of doing that, rang-
an initial cost for the business acquired. But when a deal
ing from simply applying an agreed percentage to more
fails, what should happen to the transaction costs?
complex ones with tiers of price ranges, floors and ceilings. From the seller’s point of view the case is simple: The advi-
In our experience, it is important that M&A fees other than
sors are incentivized to obtain the highest possible price.
the success fee are linked to outcomes that add value and
From the buyer’s side, this is not desirable. We have seen
that are not dependent on whether the deal goes through.
ceilings on success fees or even mechanisms for disincentiv-
For instance, the advisors could deliver a corporate strategy
ization should the purchase price rise. Our observation is
study that is helpful in any scenario.
that the more complex the success fee mechanism is, the likelier it is that it will hinder the M&A process. If the recom-
Everything has a price
mendation that a purchase price range be agreed from the
Another problem is the behavior optimized by the success
start is followed, we believe it would be best to have a fixed
fee approach. Advisors on both sides strive for the deal to
success fee for that range. A fixed success fee has the advan-
happen at any cost. There is a school of thought that main-
tage of everyone working toward the same goal without the
tains that having a deal at all will always ensure a balanced
risk of the process being «gamed».
outcome. It is assumed that the advisors will converge towards a median price that is acceptable to the seller and
buyer. However, in most M&A scenarios, imperfect informa-
M&A projects often suffer from the lack of strategic oversight
tion, personality plays and pressure to close the deal will
coupled with actual industry expertise. Best practice in
lead to a purchase price that is skewed toward one side or
project management is also not widespread. Both issues can
be addressed by an independent strategic advisor with strong project management credentials and industry exper-
Naturally, a relatively high price will make it harder for the
tise. Finally, the M&A mechanism of incentives could lead to
buyer to deliver the M&A business case. Conversely, under-
unintended consequences. This is an extremely complicated
selling the asset will leave the seller vulnerable to criticism
issue to tackle, as the entire M&A advisory industry is built
going forward. Our view is that the best approach is to deter-
around the success fee model. That said, we believe that an
mine a purchase price range that is acceptable to the buyer
innovative value proposition increases the chance of an M&A
and seller at the start of the M&A process.
deal delivering shareholder value over medium to long term.
Daniele Concari Associate Partner (Synpulse United Kingdom) email@example.com
Dr. Alexander Cassar Managing Director (Synpulse United Kingdom) firstname.lastname@example.org
34 | Digital Transformation Insurance
Tackling Information Overload: Equipping the Digital Risk Professional Emerging technologies place increasing amounts of data at the fingertips of insurance risk professionals but with mixed results. To leverage the right information at the right time, an optimal mix of technologies is needed. It will allow you to analyze and price risk in a profitable manner. Authors: Marc Kirchhofer | Joel Smith
2018 will be recorded as another challenging year for proper-
volume of data available today and just over the horizon to
ty commercial insurance carriers. This is a continuation of
the Risk Professional will grow exponentially. No single tech-
the soft market experienced over the previous three years.1
nology will provide the silver bullet for delivering increased
Paradoxically, the current period of low premium growth
accuracy and efficiency in calculating risk. Instead, the suc-
coincides with natural disasters resulting in record claims.
cessful Risk Professional will require the right information at
With climate change expected to lead to increased frequency
the right time in a cost-efficient manner; and this, in turn,
and severity of such disasters, the ability of insurers to model
requires the right ecosystem of technology to collect, collate,
for such events and the resulting risks is essential.
visualize, analyze and price risk in a cost-efficient manner.
Such pressure mounting on the top and bottom lines intensi-
Tapping into the potential of data
fies the need to accurately and efficiently assess risk as key
Commercial insurers are motivated to seek better risk
to underwriting profitable business. Today’s Risk Profess
information and efficiencies in their underwriting process
ional leverages expertise, experience, gut feeling and data
to boost performance and cost savings. «Lean Underwrit-
to assess the internal and external risks facing a potential
ing», «Expedited submission handling» and «Express
client’s business. 3 Due to emerging technologies, the sheer
Quote» are some of the buzzwords that describe industry
Swiss Re, «World Insurance in 2017: Solid, but Mature Life Markets Weigh on Growth», Sigma 3/2018, 14. Munich Re, «Hurricanes cause record losses in 2017 – The year in figures», January 4, 2018 3 Risk Professional is a holistic term for the expert employed by commercial insurance carriers to assess the underlying risk associated with the insurable objects of a prospective or in force contract. In today’s industry, the risk assessment process is conducted by underwriters and risk engineers. They are responsible for specific sub-processes that vary across companies and markets. 1
Digital Transformation Insurance | 35
initiatives to improve speed to quote and hit ratio. 4 In this
These technologies do not necessarily guarantee a better
austere and competitive market, the Risk Professional
or faster understanding of the overall risk. For this, a holis-
must expedite the delivery of high-quality risk assess-
tic approach is required, combining speed and accuracy.
ments. This includes information to quantify and qualify
For an overview of the key pain points and the techno
logical solutions available to alleviate them across the risk assessment value chain, (please see
1). The ability
Much of the technology investment to date has focused
to interpret information early on and to steer the risk
on the submission process. Just a few years ago, the indus-
assessment process accordingly is key to improving under-
try standard was to process submission information by
keying it manually. This was often conducted by relatively
With the advancement in technology, a plethora of data
low-cost workers offshore. Today, insurers increasingly
sources providing risk insights is available and this informa-
employ robotic process automatization (RPA), text mining
tion pool will continue to grow. However, such information
and other automation tools to improve data quality and
is only useful when it supports the decision-making process
value while avoiding manual and error-prone data entry.
without overwhelming the recipient. Technologists argue
This enables insurers to extract, classify, enrich and ana-
that «the difference between a modernized insurer and one
lyze client data faster than ever before. But is it enough?
stuck in the last century is the ability to procure the right Critical pain points & inefficiencies
b m is
sio n Han d
Manual data population
Inefficient and inaccurate triage Insufficient Underwriting – Risk Engineering system integration Time-consuming screening of risk documentation High costs for data collection
li e n t Se r v i c i n g
Inefficient client, broker or co-insurer interaction
bindin g Risk
Speed & accuracy enablers Submission data extraction through automation Dashboard for risk triage, qualification and monitoring Integrated processes through Operational Excellence AI-driven risk report scanning and scoring AI-driven aerial imagery assessments
Integrated client interaction with self-service portal
Source: Synpulse 1: Overview of Key Pain Points and Technology Enablers Hit ratio measures the ability to convert opportunities into contracts. It is typically expressed as the number of policies in force relative to the total number of submissions. 5 PropertyCasualty360, «3 InsurTech updates to the underwriting process», May 2017 4
36 | Digital Transformation Insurance
data at the right time». 5 The Risk Professional therefore
based on proximity, occupancy or construction similarities
requires an easy-to-use solution that aggregates, categoriz-
to further refine the risk analysis.
es and filters all relevant data.
To enable data collection from external sources, the deployment of an API-oriented landscape is critical. Application
Equipping the digital Risk Professional
programming interfaces (APIs) serve as the vehicle for
What is required of an insurer to ensure that Risk Profess
obtaining a vast amount of third-party risk information.
ionals have actionable data available at the right time to
Service providers like «CatNet®», «NatCatSERVICE» and
make analytical-driven decisions while improving accuracy
«HazardHub» provide data to better understand the natural
and speed? To answer this question, we must take a close
catastrophe side of exposure. Artificial intelligence-driven
look at the ecosystem of technology that will underpin this
solutions like «Betterview’s Property Profile» transform
geospatial imaging into risk insights to better assess the type and condition of building construction. Pertinent news alerts
Enabling tools for triaging risk data:
and web browsing algorithms reveal occupancy, activity or
A variety of technologies can be leveraged to produce an
claims-history related information. For an overview of the
instantaneous overview of insurable objects based on inter-
various data source types, (see
nal and external sources. Reports submitted by the broker and carrier can be analyzed by machine learning or seman-
Enabling tools for data synthesis and analysis:
tic rule-based tools (e.g. «Cogito» by «Expert System») to
While APIs are the highways for delivering risk data, one
extract and score relevant text passages. This information
problem still remains: What does one do with the huge
can be considered beside claims histories and benchmarks
amount of data once it arrives? In order for a Risk Profession-
ISO reports Web research
Street view Geocoding
Sensors Public cameras
Satellite Carrier reports Weather history
News alerts Data aggregators
Benchmarking Claims history
Weather alerts Source: Synpulse 2: The Digital Risk Professional’s Information Ecosystem
Digital Transformation Insurance | 37
al to handle the data, it must be standardized and synthe-
for business interruption coverage. Data governance and
sized. Powerful, insurance industry-specific tools using
process compliance needs to be prioritized.
machine learning and big data analytics are required to
An additional challenge is financing such solutions, particu-
quickly sift through large amounts of data. This enables
larly in a soft market where budgets are tight. Benefits like
insurance carriers to clean, organize and present informa-
a higher hit ratio or timesaving are straightforward and,
tion to the user via an interconnected dashboard, visualizing
hence, easy to justify. However, the benefit case of
the most important indicators in a clear, condensed way.
a particular technology solution might be difficult to meas-
Having achieved this, the Risk Professional can decide how
ure. Furthermore, investments are more likely to be ques-
to proceed with the risk assessment.
tioned if the only goal is to gain a higher confidence level in the underwritten exposure. Subjectivity and uncertainty
Overcoming industry barriers
will always remain no matter how much time or resources
Industry, legal and financial issues stand in the way of
are used. Technology investment for the sake of risk
realizing benefits from advanced, automated risk assess-
assessment must be justified by identifying outliers and
ment solutions. The risk assessment and broader commer-
patterns that would not be possible through existing means.
cial insurance industry lacks standardization and a high degree of integration. Insurers use different frameworks,
The right tools for the road ahead
methodologies and guidelines to differentiate good from
Accuracy and speed are regarded as trade-offs in commer-
bad risk. Terminology, rating criteria and processes vary
cial insurance. Technology cannot fully resolve this issue,
and make transferability of risk information difficult.
but it will enable both to be achieved to a greater extent
As information can be easily obtained, one must be careful
than they are today. Having the tools and infrastructure to
not to violate contractual and/or legal agreements related
consider actionable data will be the key differentiator of
to data usage and storage. Risk assessments are often based
successful insurers in delivering superior risk analysis and
on proprietary or even confidential information, particularly
Marc Kirchhofer Manager (Synpulse United States of America) email@example.com
Joel Smith Senior Consultant (Synpulse United States of America) firstname.lastname@example.org
38 | Digital Transformation Insurance
How to Recover Gems in Reinsurance Contracts
Reinsurance contracts are a paradise for treasure hunters. They are teeming with precious data waiting to be extracted and put to good use. Reinsurance companies, therefore, need to know as much as possible about the contracts in their portfolio. Authors: Patrick Roder | Konrad Niggli
A contract is a legally binding agreement between two or more parties. While contracts can be implied or oral, in
During the underwriting process, the policy adminis-
a business setting they are most often in written form.
tration system needs to be filled with key information
Contracts affirm the rights and duties of each contracting
about the cover. Underwriters also must study the
party and form an integral part of a business transaction. In
contracts to know the extent of cover they are offering.
the insurance industry there are numerous initiatives to Claims
simplify legal language, especially for consumers. But the review and interpretation of legal documents, especially in
The claims staff needs to thoroughly study the con-
B2B transactions, remains a difficult but important task.
tracts. This is important in order to decide whether and
Contracts are full of valuable information. Some of the legal
to what extent a claim is covered under a special policy
terms in a contract might seem unnecessary for the layman
and to analyze what the agreed payment conditions are.
but there are real gems hidden in them. Those gems can help
Whether and to what extent a claim is covered under
to improve overall company performance, which is why they
a policy and what the agreed payment conditions are.
need to be extracted. In reinsurance, where contracts worth Technical Accounting
millions are not uncommon, the systematic collection and interpretation of information contained in contracts is even
bordereaux are important for technical accountants.
The beneficiaries of contract information Almost all functions use information contained in reinsurance contracts. These are the following:
Information such as content and agreed timelines for
Pricing actuaries need to understand the extent and type of cover to be able to calculate a risk adequate technical price.
Digital Transformation Insurance | 39
ent of reports that are based on the data contained in reinsurance contracts.
Exposure monitoring is dependent on information contained in the contracts â€“ especially for non-natural catastrophe business-lines. To answer, for instance, the
Challenges in extracting information
question of the overall asbestos exposure a reinsurance
An effective contract (information) management system is
company must know the content of all contracts.
needed to tap the potential that reinsurance contracts present. To make the information available for processing by
those systems, the information must be extracted and struc-
To ensure a positive client experience, client managers
tured. However, a written contract is a form of legal text and
must quickly respond to client requests relating to in-
as such we are dealing with unstructured data that is more
formation contained in reinsurance contracts.
complex to process than structured information. This is true for the human reader and even more so for computers (
summarizes some of the challenges of this task. Legal texts
Legal staff can be tasked with quality assurance of the
use legal language, which is distinctively different than natu-
overall reinsurance contract portfolio and with provid-
ral language. This makes makes the extraction of informa-
ing guidance to underwriters by assessing the quality of
tion for the human reader and computers difficult. Moreover,
individual clauses or whole contracts.
while reinsurance is arguably one of the most globalized industries, reinsurance contracts are often drawn up in the
language spoken in the country where the cedant is located.
General management is unlikely to analyze reinsurance
This makes information extraction more complex as the per-
contracts to get insights. However, it is often the recipi-
son or computer that is tasked with the information extrac-
Heterogeneity of contracts
Optical character recognition
Source: Synpulse 1: Challenges in Information Extraction from Reinsurance Contracts
40 | Digital Transformation Insurance
tion must work with different languages. Local market stan-
deviations are sometimes necessary. A hybrid approach
dards and the local legal framework also play a crucial role.
where humans and machines work together in the con-
Whether the information is extracted by a human or by
tract creation process is also possible. Indeed, even in
a computer, optical character recognition is a precondition
a machine-based approach, some human input is nec-
for non-machine readable documents. It would be extremely
essary, because the machine cannot know everything
inefficient to ask a human to extract information from
by itself. The hybrid approach assumes human inter-
a document that is not even searchable. And computers
vention, including, for example, the drafting of certain
cannot extract information from a non-machine readable
document. Optical character recognition is not a recent technology and not always as straightforward as it sounds. One
How to extract information from contracts
of the biggest challenges in information extraction from
As mentioned, information can be manually or automatical-
reinsurance contracts is the great variety of the contracts.
ly extracted. In the former case, a human looks at the con-
A reinsurance company needs to handle hundreds of con-
tracts and fills a database with the desired information. In
tracts with differences in format and structure. There are
the latter case, computers automatically extract informa-
three reasons for the variety:
tion. There is also a hybrid approach, where a computer extracts certain attributes while humans extract other,
possibly more complex , attributes. Full automation is desir-
Unlike the retail insurance market, where each insur-
able because of efficiency gains but is, given the heterogen-
ance company produces policies according to a prede-
ity of contracts, unrealistic and probably not needed. If
fined template, reinsurers do not have this privilege.
a large portion of a contractâ€™s attributes are extracted auto-
Reinsurance contracts might be drafted by the reinsurer
matically, the person that previously did so manually can
itself, but also by the cedant, the broker or another rein-
focus on more complex tasks.
surance company. This means that contracts will vary from a portfolio point of view as there is no single mar-
The extraction method depends on the type of information
targeted. Entity extraction will, for instance, need a different approach than concept extraction. Advanced text mining
techniques are, in any event, key to successful extraction.
There is a low degree of standardization for reinsurance
Machine-learning techniques are often discussed in this
contracts. Although there are some standard clauses,
context. However, to get statistically significant results the
forms and data (e.g. the market reform contract), they
data set needs to be sufficiently large. The higher the dimen-
do not cover all aspects of reinsurance contracts. While
sionality of the data, the larger the data set needs to be.
some reinsurance companies and brokers have stan-
Unfortunately, the relationship is not linear. Reinsurance con-
dard contract wordings, others do not. For those that
tracts exhibit a high dimensionality and most of the time the
have, it cannot always be taken for granted that they
number of contracts available is insufficient to make this
are consistently used. Depending on the type of infor-
approach work for all types of attributes.
mation to be extracted, the priority will either be the standardization of the contractâ€™s structure or of the
An approach that combines various techniques, one of for
instance machine learning, promises the highest chances of success, as long as the techniques are tailored to the type of
information that needs to be extracted. Even though the field
A determining factor of the degree of contract stand-
of text mining has made huge progress, the task of informa-
ardization is the creation method. Machine-created
tion extraction from reinsurance contracts still presents
contracts will inevitably follow a standardized con-
signifanct challenges. Full automation seems unrealistic. For
tract. Contracts created by humans will be less standard-
reinsurance companies that draw up wordings themselves,
ized and contain deviations. Reinsurance contracts can
the task of information extraction should be redundant if
be highly complex, especially when it comes to struc-
a contract management tool is used to store the desired
tured and bespoke reinsurance transactions. Such
attributes in a database.
Digital Transformation Insurance | 41
Advantages of automatic information extraction The advantages of automatic information extraction from reinsurance contracts are as follows:
Reduction of operational risk
Human oversight can be reduced since the computer will extract all attributes that are supposed to be extracted.
Automatic extraction can be performed 24/7 and at
a much higher speed than manual extraction.
Reinsurance contracts are like rough diamonds: You need an expert to appreciate its value and it needs to be shaped and
Increased amount of information available
polished before that value becomes obvious to others. Rein-
Because automatic information extraction is more effi-
surance contracts are full of information that is extremely
cient and scalable, more data points can be extracted.
useful to almost any department within a reinsurance com-
These data points enable additional applications.
pany. Extracting this information adds real value to the business by making risk assessment more accurate, internal
Consistency of available information
processes more efficient and the portfolio more transpa-
The attributes that are being extracted do not depend
rent. An automated extraction mechanism requires invest-
on what each individual person thinks is important.
ment, but it is likely to yield long-term returns as the amount
The computer will consistently extract those attributes
and quality of data that can be extracted in this way surpass
that have been defined.
that done by manual extraction.
Patrick Roder Associate Partne (Synpulse Switzerland) email@example.com
Konrad Niggli Managing Partner (Synpulse Switzerland) firstname.lastname@example.org
42 | Operational Excellence Insurance
Succeeding in the Millennial Insurance Market with Speed and Stability Competing with insurtech disruptors and catering to the millennial generation requires speed, while increasing oversight and compliance demands stability. By deploying a twospeed architecture, traditional insurance companies can improve both and more effectively respond to new age market dynamics. Authors: Anant Goyal | Zoe Lang
Operational Excellence Insurance | 43
Rapid disruptions and changing customer expectations are
like channels and client journeys change faster. A two-
transforming the insurance market. Large companies with
speed architecture addresses these changes and provides
proximity to the industry are venturing into the space, there-
an end-to-end view of the business.This kind of architecture
by creating new distribution channels. Digital excellence,
is a rethink of the existing enterprise architecture (EA) to
product innovation, data utilization and customer focus are
accommodate new digital capabilities, while retaining the
at the heart of the new digital-first insurance companies. This
operational base of the organization. It speeds up the exter-
has changed the rules of the game for traditional insurers.
nal facing aspects of the organization, while minimizing the impact on the daily operations and reporting structure. It
Insurers and reinsurers in the Asia-Pacific region have re-
allows the enterprise to operate at different speeds.
ported losing more market share to these disruptors than those in Europe and North America.1 For example, «Tencent»,
In a two-speed architecture, current digital trends and shifts in
the owner of the popular Chinese communication platform
customer preferences are implemented in an agile, structured
«WeChat», has launched an online insurance business that
framework. From an IT perspective, a front and/or middle lay-
has gained significant traction in the Chinese market.
er solution that can easily incorporate new ways of doing business is implemented. The solution is built to serve high fre-
By 2030, Asia is expected to represent 66% of the global mid-
quency, high performance and 24/7 sales activities. This is
dle-class population. This large underinsured population
accompanied by an organizational ability to support these
promises significant opportunities.
new channels resulting in quick responses to disruptions.
Responding to challenges effectively
It is done while maintaining operational stability at the back.
There are several options for insurers to respond to these
Continuing the IT example above, the fast-moving, front-end
challenges, while improving the organization’s ability to ex-
solution is integrated with an existing core solution. The core
ploit future opportunities. These include exploring new mar-
system serves the stable but low frequency of operational
kets by ramping up a greenfield business or via acquisition
needs. It provides business continuity, leveraging existing
and diversifying the product portfolio. Upstreaming integra-
data and reporting structures including compliance man-
tions and strategic partnerships can also bring long-term
benefits, while mitigating the impact of competitive threats. The front/middle office is, in other words, de-coupled from Another effective method to respond to the new market dy-
the back office and can move at a different level of pace.
namics is to improve the agility of the existing business. This
This is what is meant by a two-speed EA. For the IT example,
leads to an immediate and sustainable improvement in the
it allows for ongoing utilization of the established core sys-
way business is conducted. It enables it to pivot quickly,
tem while running new, agile and customer centric systems
while continuing to derive value from existing investments.
in parallel (see
Insurtech companies, with a fully embedded digital philosophy, have increased the transparency and agility for insur-
The modern digital engagement layer acts as the enable-
ance customers. Competing with such disruptors and cater-
ment channel for sales, while the core system layer functions
ing to the millennial generation requires speed, while
as the single source of truth for the organization.
increasing oversight and compliance demands stable data sources. Deploying a two-speed enterprise architecture im-
Benefit assessment for two-speed EA
Responsiveness to market conditions, flexibility to adopt emerging distribution channels, automation and operation-
Introducing two-speed enterprise architecture
al cost reduction are among the key business objectives
Some aspects of the insurance business like coverage, con-
achieved with two-speed architecture. We analyze the
tracts and underwriting guidelines change slowly. Others
impact of the architecture as follows.
Insurance Nexus 2017
44 | Operational Excellence Insurance
Faster time to market
ensures more long-term stability for the core system
A responsive, high availability front-end coupled with
and improved data governance across the organiza-
a stable core provides the freedom to experiment with
potential disruptors while significantly reducing the Return on Investment
integration effort. This speeds up the response time. For example, a competitor may launch a new package
The upfront costs for setting up an agile digital engage-
product that is received well by the market. An agile
ment layer are lower than for a complete core system
front-end will enable the organization to quickly create
replacement. Integrations to the existing core can be
and enable the sales proposition for that package.
governed by a standardized integration framework,
Internally, it continues to be a combination of multiple
thereby reducing integration costs.
individual products. The two-speed organization is digitally enabled to pursue Additional capability
additional revenue by monetizing its services for partners
The engagement layer provides the capability to inte-
and distributors alike. For example, insights from the large
grate with new digital channels, including social media
data repository available at traditional insurers can be given
connectors. This enables new distribution mediums
to distribution partners to enable targeted propositions for
to be utilized while improving data governance. For
potential clients. If charged for, this service can provide addi-
example, WhatsApp conversations can be used to drive
tional revenues for the organization.
business and be managed within the enterprise environment. In addition, the digital channels provide
Implementing two-speed EA successfully
partner establishments the flexibility to conduct busi-
To implement two-speed EA successfully, focused effort and
ness seamlessly with the hosting organization. In fact,
effective collaboration are required. A defined action plan for
a leading Singapore insurer now allows travel claims to
the following aspects of the organization is also necessary.
be notified via WhatsApp. Leadership-driven governance Stability
Building two-speed EA is a strategic investment and
As frequent changes are isolated to the front-end, the
should be treated as a key business enabler. By
data model of the back-end changes less often. This
embracing digitalization and customer centricity, two-
Agility Front office (engagement layer) Transparrency Scalability Adaptability
System of engagement
Middle office (standardized connectivity)
Back office (stable layer)
System of records
Rapid development Source: Synpulse 1: Application of Two-Speed Architecture
Operational Excellence Insurance | 45
speed EA can help insurers reach their strategic goals.
bles a quick assessment of the impact of the new func-
To successfully deploy the new EA, a leadership-driven
tionality, thus providing the organization the flexibility
governance model should be established to provide
appropriate organizational support. DevOps for the stable back-office Driving organizational consensus
Core systems, on the other hand, do not respond very
A two-speed EA creates «fast-moving» and «stable»
well to agile development. DevOps, a software develop-
sub-organizations. To operate at two different speeds,
ment methodology, should be adopted to help the
mutual trust needs to be built by open communication
development and operations teams to work togeth-
between different stakeholder groups. The aim is to
er to achieve the business objective. DevOps helps
ensure that various teams collaborate in the most effi-
break down internal silos and fosters the organization-
cient and effective manner to drive the whole organiza-
al collaboration across multidisciplinary teams. These
tion towards meeting their strategic business objec-
two methodologies can be effectively linked together
tives. Equitable incentivization across different speeds
by a robust organizational change management pro-
is essential to the success of two-speed EA.
Agile for the fast-moving organization
The inherent need for the digital layer to be responsive
Digital innovation and customer centricity are the focus of
makes it well suited to employ an agile methodology.
a significant number of digitally aware insurance companies.
Rapid sprints enable the organization to respond effec-
Tactically, the transformation to two-speed EA can help
tively to new market dynamics while pre-empting the
insurers that want to develop a competitive advantage and
possibility of late or significant changes. This also ena-
are looking for a value-for-money proposition.
Anant Goyal Manager (Synpulse Singapore) email@example.com
Zoe Lang Consultant (Synpulse Singapore) firstname.lastname@example.org
Masthead Articles can be accessed via www.synpulse.com. Published by: Synpulse Management Consulting Editor: Stefanie Walter ASSET PR | Realization: Synpulse Management Consulting | Printer: Gremper AG | Feedback and inquiries to: Synpulse Switzerland AG, Thurgauerstrasse 32, CH-8050 Zurich, phone +41 44 802 2000, fax +41 44 802 2001, email@example.com | Copyright: The reproduction of articles is permitted with the agreement of the publisher if the source is acknowledged. Articles by guest authors do not necessarily represent the opinion of the publisher. Photos: Fotalia Llc, Shutterstock Inc | Layout/Illustration: ASSET PR
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