Major retail bank

Diligence of cost reduction plan impacting head office and customer service

Major retail bank needed to make cuts to head office and customer service costs, without taking undue risks that could impact to revenue streams or customer relationships. Assurance was that plans were reasonable in terms of the ambition in the quantum of cost cuts and whether risks were fully addressed

David’s role was to review systematically the proposed initiatives, using a simple, practical framework we commonly use when evaluating cost reduction projections encountered in business plans during M&A due diligence work.

David found that RBS managers had identified and understood well the value creating rationales for the cost savings and evidence that the rationales were applicable in the RBS situation. However, in terms of estimating the specific quantum of savings, the plans were based on conservative assumptions, there was evidence to support the use of more ambitious assumption, hence there was significant upside potential to savings projections.

Most dependencies had been identified well by the bank’s team, and little of the quantum of savings was reliant on high risk dependencies, for example on IT developments. However, there was little explicit consideration of potential customer experience impact, thus no explicit measure to manage such risks.

David’s work enabled senior managers at major bank to provide challenge to the team responsible for designing the cost savings initiatives and provided practical recommendations on how to reduce risk to customer experience and revenues.