No other person at your bank is under so much pressure as the Chief Financial Officer. Not only are you, as the CFO, responsible for keeping your bank in business, but you have to keep your financials afloat amidst a turbulent economy and a tempestuous regulatory environment.
However, you don’t have to be troubled about these economic pressures or compliance changes if you have the right framework for addressing and overcoming challenges at your bank: the lean banking framework.
How does lean banking help you manage and monitor your bank’s financials more efficiently? Here are just three components of lean banking that help you as a Chief Financial Officer achieve your goals without being held back by banking compliance regulations or continually compressed margins:
CFO Essential #1: Maintain A Balanced Efficiency Ratio
Your bank’s efficiency ratio is one of the most important metrics in determining your future profitability and long-term financial health as an organization. This is why a low efficiency ratio is an essential component of lean banking, especially for CFOs.
Many CFOs focus too much time and energy on either one side of their bank’s efficiency ratio or another (such as reducing non-interest expenses, or increasing non-interest income). But, in order to keep your bank running most efficiently, you need a balanced methodology for efficiency ratio management.
A lean banking approach combines both cost reduction (such as streamlined workflows, process improvement and value-stream mapping) and rallying the revenue side of your ratio (through improved sales processes and growing share-of-wallet with current customers). By balancing both sides of your ratio, you ensure that new regulations or unexpected costs won’t catch your bank by surprise – or put you out of business.