Financial Services Ireland

What does Agile Transformation mean for Financial Services?

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With rising technology advancements, new market entrants and evolving regulatory requirements, financial services firms need to deliver upon and switch their transformation priorities faster than ever. Technology innovation, digitalisation & resilience are required.

When we think of the term “Agile”, we may associate it with technology companies such as Spotify or Netflix. However, increasingly we are seeing Financial Services firms in Ireland apply these frameworks to tackle their complex transformation challenges.

Financial Services Organisations are complex; one size will not fit all

Every organization is unique: each has its own technology landscapes, processes, goals, and corporate values. Within Agile, there are multiple frameworks available to help firms transition from traditional hierarchies to more adaptive delivery methods. For example, Scrum and Kanban models, which are typically used by small teams to develop products and new features. For larger enterprises, frameworks such as Large Scaled Scrum (LeSS), the Scaled Agile Framework (SAFe) and Disciplined Agile Delivery (DAD) define how to implement Agile practices on a larger scale. Each can work well in evolving traditional governance models, coordinating cross-functional workstreams of activity and delivering outcomes sooner.

With over 2,000 IT systems enabling their business operations, Standard Bank in South Africa required significant coordination to deliver on their business goals. However, their historically rigid structures were seen as a barrier to achieving this. In 2012, they adopted the SAFe framework, rolling out a program focused on re-skilling employees as software engineers, quality engineers, or user experience analysts. These people were then organised into goal-driven ‘feature’ teams and unleashed to deliver value. This change led to an increase in engineering focus and a reduction in management overhead. More value-add, less waste.

Dutch bank ING underwent a similar transformation with their ‘ING Way of Working (WoW)’. This was inspired by Agile approaches used at Google and Spotify. Essentially, ING looked at the entire transformation goal and organised their people into ‘squads’ of high performing teams; each of which was accountable and empowered to achieve their assigned elements of a larger plan. This meant that marketers, software developers, coders and security experts were all aligned in the same team, working to the same objective. Each squad worked autonomously, but delivered simultaneously; synchronising only for key events and decisions. ING applied this model to great effect with the launch of their “Forward Planning” app that helped private banking customers control their finances.

CEO Shayne Elliot revolutionised ANZ bank in Australia by galvanizing his employees to move to an Agile model. With seven or eight layers of hierarchy, his goal was to implement a flatter management structure. He wanted to empower cross-functional teams to come together and collaborate, breaking down business silos and eliminating the bureaucratic approval culture which had been blocking the speedy delivery of customer outcomes. Already, more than 40% of ANZ’s workforce (15, 000 employees) are working in this more adaptive, flexible way.

For financial services firms, including those in the Irish market, there is no one-size-fits-all ‘Agile Playbook’ that can be easily plugged into the company ethos. Given the organisational complexity, a “lift and shift” exercise, copying directly from another company, will not necessarily work. Each organisation will need to adapt and implement the aspects of an Agile framework that will work best for their unique culture and values.

Agile is about culture

According to a recent EY survey, 75% of EY employees believe that clients are open and willing to adopt Agile and Design Thinking practices. This is hugely positive, and shows that with proper guidance, leadership, and commitment, Agile transformation can become a reality.

An Agile mindset requires time, effort and commitment from leadership to focus on customer value, to eliminate silos, and to create a culture of shared ownership. In theory an Agile transformation should never end, it is continuous and iterative. Most of the financial services firms in Ireland have sprawling IT estates with a mix of legacy systems and new technologies, managed by different owners with complex reporting lines. For example, if a bank was launching a new lending product this would involve changing and testing various systems such as customer and agent channels, integration services, core banking, loan origination, warehouse, reporting, communication, and arrears systems. In many cases, these applications are built on disparate technology stacks, and owned by separate teams. Dependencies will always need to be managed. Design and architectural governance will always be required. Developing a culture of continuous improvement is important. This culture can help to eliminate unnecessary steps, and increase productivity and efficiency. And this can also provide a quicker sense of accomplishment- invaluable for team morale.

Agile is customer-centric and increases innovation

With more efficient teams, more projects can be delivered, allowing the organization to then bring more value to customers. It keeps teams focused on delivering what customers want without getting weighed down by unnecessary documentation and meetings. Teams that use Agile thinking are getting a steady stream of feedback during development, uncovering valuable insights much more quickly. Customer needs can be met based on objective data points, eliminating human error and potential bias.

Does Regulation hinder or help in Agile Transformation?

For Financial Services firms, there are two ways in which Agile practices can help satisfy regulatory requirements. Firstly, Agile methods can be effectively used to provide IT delivery dates for regulatory compliance programmes. Additionally, these methods can adequately evidence adherence to required IT change controls.

With ongoing regulatory pressure to demonstrate progress on change initiatives, clients can sometimes be tempted to revert to more traditional waterfall practices and tracking methods. However, when Agile methods (e.g., SAFe Portfolio Management) are successfully used, these allow for both transparency and confidence in project delivery; both of which will more than satisfy the regulatory requirements.

The flexibility of ALM (Application Lifecycle Management) Technology has advanced significantly over the last number of years and can easily track change through IT delivery frameworks.  In addition, investment in Automated Test Frameworks, DevOps pipelines and Agile Project Management software will also improve a company’s ability to demonstrate compliance in change delivery methods in parallel with increasing customer value throughput. It’s also important to evolve and streamline these IT delivery frameworks through feedback loops and cultural changes.

In fact, regulators themselves adopt Agile practices when drafting regulation through incremental consultation and feedback approaches.

How can we measure success in Agile Transformation?

With the increasing availability of data, and intuitive analytics software, it is easier than ever to demonstrate increased return on investment at a reduced cost. However, KPIs can be both valuable and misleading. When pulling together Agile KPIs, the context is important.

For example, focusing on team efficiency KPIs i.e. focusing on team velocity, or the throughput of user stories, may not directly correlate to customer value. Maximising the amount of work not done or alternatively minimising non-value add activities to achieve customer value is just as important. It’s about having a balance between measuring outputs and measuring outcomes. In more traditional financial services firms, there tends to be multiple IT vendors and partners. A core principle of Agile is bring the decision making to where the knowledge resides so that the people close to the solutions and projects are empowered to influence resourcing and solution decisions.

Customers prefer working software over comprehensive documentation, do management / leadership?

Financial institutions are typically hierarchical and clearly structured, leading to layers of management decisions and bureaucracy. These traditional management structures can result in slow and expensive decision-making processes, a lack of trust and low levels of employee empowerment.

Significant effort goes into crafting presentation slides to illustrate that a change programme is “under control” and “well managed”. This emphasis on reporting internally won’t directly provide any customer value. Programme leadership teams need to reorient the focus towards seeking demos, customer feedback, and data-based delivery trackers (e.g., burnup charts) rather than looking at traditional project management documentation. This way, teams can provide clarity through Agile roadmaps, working technology and data driven insights which lead, empower and guide people to work together and continuously improve.

Often decisions will need appropriate input from or sit with a specialised area (e.g., Legal, Security, Risk or Architecture). To create an Agile-led and adaptive organization, it is crucial to extend Lean-Agile principles, values, and practices beyond the CTO domain into every business unit. Not doing this will result in delays and frustration for delivery teams / squads / tribes and ultimately result in poor customer experience.

Completing a comprehensive Enterprise Agile Transformation – effectively bringing Agile to the whole organisation – will take significant investment in training and communications but will result in a more engaged workforce, an attractive working culture and ultimately a better customer experience.

Agile allows leaders to balance running the business with changing the business, paving the way for growth through innovation.

How EY can help

EY has successfully led Agile transformations for some of Europe’s largest financial institutions.

Having worked with a range of clients in the Financial Services sector, our Technology Consulting team understand the unique culture and structure of Irish financial services firms. We have extensive experience working in and across key control functions such as Change Operations, Finance, Risk, Legal, Compliance and HR to deliver value on important and complex transformation programmes. Our goal is typically to help our clients bring progressive and Agile ways of working through their entire organisation.

We have helped Financial Services clients to deliver complex, difficult IT change and transformation programmes so we understand the challenges and urgency facing banks delivering IT change. Crucially, we understand Agile – not just the theory – but the actual application, and how best to integrate this into a financial services business.

For each client, we draw together professionals from both our local teams and our global network of subject matter experts, giving you the right people with the right skills for your transformation project.

This article was co-authored by Kieran Hanley, Director, Technology Transformation EY Ireland.

This article was first published in Finance Dublin.

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