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:
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:
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.