IC University Blog

Community Banking: Containing Costs and Investing Strategically

Posted by Kevin Fread on Aug 10, 2022 1:34:43 PM
Kevin Fread

Cutting costs is an easy process, right? You pick a target, assess what it will take to get there, and make a plan to close the gap. Here’s the reality: The world of community banking is constantly and rapidly evolving, meaning you can no longer rely on a static vision of where you need to go. Moreover, if your cost-cutting initiative doesn’t start with your company mission as the guiding principle, it’s destined to fail.

Following are three key attributes of an effective cost-containment plan:

  1. Balances cuts with strategic investments in information assets, customer service improvements, and administrative systems
  2. Has built-in flexibility, enabling you to quickly update the plan in response to changing conditions
  3. Addresses company culture issues, including managers with conflicting objectives and employees who may be so resistant to change that they seek workarounds

Above all, I believe it’s important to approach cost containment in a holistic manner. This quote from strategy consultant Bruce Brodie sums it up nicely: “The current conversation is much less about ‘how do I get on a diet’ and more of ‘how do I get the spend in the right place to get the most bang for the buck.’”

The road ahead

Conversations around shutting down entire lines of business will likely continue. While this is always a difficult decision, many community banks have few other options — they’ve already trimmed expenses, and they may have outsourced costly services. “Are there some parts of our business that no longer make sense?” must be on your radar.

On a positive note, many banks will expand their use of digital tools to reduce costs and improve decision-making. Examples include artificial intelligence (AI), advanced analytics, machine learning, and robotic process automation (RPA). Already we’re seeing companies use these tools to improve efficiency in front-, middle-, and back-office functions.

Questions to consider

A proactive vs. reactive approach to cost containment starts with asking the right questions, including:

  • Do you have a mission-guided, forward-looking plan for cutting costs?
  • Will these cuts support your ability to make smart strategic investments?
  • Does your cost-containment plan give you the flexibility to adjust on the fly?
  • Have you addressed company culture issues that may present barriers to your efforts?
  • Are you taking advantage of digital tools to reduce costs and improve decision-making?

Kevin Fread serves as CIO and CFO of Ironcore, Inc. He possesses more than 40 years of banking and technology experience in a variety of settings, including a community bank, a data services firm, and a global FinTech and payments company. Kevin works closely with Ironcore clients to assist with technology, integration, and strategic planning. You can reach him at kevin.fread@ironcore-inc.com.


Topics: Community Banking, Costs, Cutting Costs, Invest