OPERATIONS IN FINANCIAL SERVICES

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REQUIREMENTS: "Creating Value in Financial Services'' edited by Melnick, Nayyar, Pinedo, Seshadri. (In what follows this text is abbreviated as MNPS). There is a case packet that you can buy at the bookstore. There is a course packet with additional materials that will be handed out in class. This course consists of (5) sessions. SESSION I     Overview of Financial Services and Forces of Change Session 1a (January 27, Morning): Overview of the types of companies: retail banks investment banks brokerage houses insurance companies mutual fund companies Overview of types of products and services (consumer products, commercial products).Overview of types of processes. Product-Process Matrix: where do the financial services companies fit in within this matrix. Discussion on the forces of Change in the financial services industry. The following transparencies are from a McKinsey presentation: Operations in Financial Institutions The following paper comes from IBM Business Consulting Services: From Banks to Banking II: The Journey Has Begun Session 1b: Recent trends in financial services: Mergers and Acquisitions. Objectives of recent mergers and acquisitions: diversification of product offerings, cross-sales, global reach, operational synergy. Success of mergers depends often on the succesful integration of operations. Importance of Operational Due Diligence. Read Chapters 3 and 4 in MNPS (by Ingo Walter and David Rogers). Read from the Casebook: Economics of Retail Banking Note. Prepare case for discussion: Retail Financial Services in 1998: Schwab Session 1c: Service Strategies Selection of products and niches (consumer products, commercial products, scale, scope) Service Strategies Customer Relationship Management (CRM) Read Chapter 5 in MNPS (Monahan on relationship management) Read Sections 2, 3, 4 in the Course Packet Prepare case for discussion: Commerce Bank Link: Bank Deposits gets Interesting SESSION II Session 2a (January 27, Afternoon): Process Designs Process design (selection of distribution channels). Discussion on potential of cross selling. Discussion on separation versus integration (chinese walls). Read Chapter 23 in MNPS (Wayne Cutler) Read Chapter 22 in MNPS (Harker Frei) Prepare case for discussion: FleetBoston Financial - On line banking Links: Could Mobile Banking go Global? Will the Banks Control On-Line Banking? On-Line Banking Report Session 2b: Overview of Distribution Channels Service Process Design matrix (video) channel choice (branches, mini-branch, kiosks, ATMs, call centers, www, sales force) points of access convenience Read Chapter 14 in MNPS (Karmarkar paper) Section 6 in Course Packet Optimizing Distribution Channels (IBM) Optimizing Distribution Channels II Free White Paper: Four Strategies for Fixing Distribution Impact of E-Commerce on Financial Services Electronic commerce and financial services Applications of queueing in financial services Read Chapter 11 in MNPS Link: Banking: The IT Paradox Session 2c: Channel Capacity and Pricing Setting capacity and prices in various channels Read Chapter 11 in MNPS (Dewan-Mendelson paper) Read Section 7 in Course Packet (Pricing Analysis for Merrill Lynch) Prepare case for discussion: Charles Schwab Inc. (A) (Harvard) SESSION III    Distribution Channel Operations (Front-Office Operations) Session 3a (February 3): Applications of Queuing in Financial Services Queueing Theory Networks of queues and call center applications Simulation Prepare First City National Bank Case Queueing Analysis of the FCN Bank Read Sections 8 and 9 in Course Packet by Kolesar (on ATMs) and Larsen (on psychology of queues) Session 3b: Queuing in Call Center and Call Center Management Call centers and priority queuing Skills-based routing Read Chapters 18 and 19 in MNPS (Pinedo, Seshadri and Shanthikumar paper) Read Sections 10 and 11 in Course Packet (on call center management and skills based routing) Links: Bank of Montreal Managing the Bank of Tomorrow Skills Based Routing: A Challenge for Call Centers Skills Based Routing: A Challenge for Call Centers Session 3c: Call Center Case Study Prepare case for discussion the Nationsbank case (Insead). Categorization of Customers Taking advantage of cross sales opportunities SESSION IV   Productivity Measurements and Performance Measurement Session 4a (February 17): Data Envelopment Analysis Read the DEA treatise, Section 14 in the Course Packet Read the Harker-Zenios paper, Section 15 in the Course Packet Session 4b: Productivity of Bank Branches Read Section 16 in the Course Packet (the Oral Yolalan paper on Bank branches in Turkey) Links: 1. Cutler Presentation SESSION V     Operational Risk Analysis Session 5a (March 3): Operational Risk factors Read Sections 18 and 19 in the Course Packet Links: 1. Report of the Operational Risk Committee of the International Association of Financial Engineering 2. Goldman Sachs Presentation Session 5b: Statistical Analysis Read Sections 20 and 21 in the Course Packet Distributions for frequency of losses (poisson) Distributions for severity of losses (lognormal) Link: A Case for Quantification