Strategic Cost Management and Performance Evaluation: Required

C.
11 STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION

BUSINESS PROCESS RE-ENGINEERING (BPR)
ANI is a government-owned bank. The Bank has over 2,500 branches in country ‘A’ spread over
all states/ union territories including specialized branches. These branches are controlled through
27 Zonal Offices and 4 NBG Offices. As a government owned bank it has usually been the first
preference for customers while choosing a bank. In the last six years, the Government has
permitted a number of foreign banks to operate within the country in order to solve the problem
of foreign exchange shortage and open up foreign trade as an instrument to promote economic
development. These foreign banks offer diverse range of services such as direct access to
executive management, a single point of contact to coordinate all banking needs, appointment
banking to save time, free online banking services 24/7, free unlimited ATM access etc. In
contrast, ANI has very elementary information systems, covering only for internal transaction
handling and accounting activities. Customers have to visit banks to carry out transactions like-
checking bank balance, cash deposit and withdrawals, transferring money from one account to
another in operational hours. Often customers complain about the amount of time as the
employees and clerical staff of the bank can attend only few customers at a time. Customer
service evaluation has never been undertaken by ANI. Other processes, new account
applications, are complex, requiring completion of many documents formalities. Board of
Directors were worried from growing popularity of new style banks. The Board of Directors of ANI
has recently held meeting to discuss the shortfalls in its current services and the need to re-
engineer the ANI’s business processes.
Required
ADVISE how Business Process Reengineering (BPR) can be used to improve ANI’s current
processes.
Solution
BPR is the fundamental rethinking and radical redesign of business processes to achieve
dramatic improvement in critical contemporary measures of performance, such as cost, quality,
service and speed. In other words, BPR is concerned with the result of the process (i.e., with
those activities that add value to the process). To implement BPR, firstly, each business process
of ANI needs to be divided into a series of processes. Then each business process requires to
be documented and analysed to find out whether it is essential, whether it provides support to
other valuable processes and whether it is adding value. Any process which does not add value
or does not provide essential support to the value adding activities must be removed. Those
processes that remain require to be re-engineered/re-structured so that can be as efficient as
possible. For ANI, new technology should be introduced to improve these processes. However,
ANI must ensure that the statutory compliances regarding these processes are not undermined.
ANI is facing a hyper-competitive marketplace where customers expect a superior experience.
BPR activities would help ANI in understanding those processes which ANI’s customers value
the most and remove those that are not valued. Foreign banks are offering diverse range of
services such as direct access to executive management, a single point of contact to coordinate
© The Institute of Chartered Accountants of India

CASE SCENARIO C.12
all banking needs, appointment banking to save time, free online banking services 24/7, free
unlimited ATM access etc. Clearly these are valuable business processes valued by the
customer. ANI should incorporate all these facilities in their banking processes to enhance
customer satisfaction and service level.
Opening of new accounts in ANI is complex processes since it requires multiple forms to be
complied with. Through BPR, ANI would analyse the whole process and identify the need for only
one form that contain all of the necessary customer information. Further, it is also possible to
initiate opening of new account through the development of an online application form on ANI’s
website. Online entry would remove the possibility of forms being lost or incorrect, again
enhancing customer satisfaction since customers need not to visit ANI’s branch to open account.
There should also be online processing authentications/ validations as to ensure that data fields
are correctly filled by customers that would result in error reduction. This would also remove
unnecessary staff activities in checking and re-processing forms.
It is likely that BPR may increase costs in short-term as investment in technology. However, this
would also reduce substantial levels of manual activities and processes thereby providing speedy
services to customers. In long term, this would result in high levels of efficiency, profitability and
better levels of customer satisfaction and retention.

© The Institute of Chartered Accountants of India

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C.

11 STRATEGIC COST MANAGEMENT AND PERFORMANCE EVALUATION

BUSINESS PROCESS RE-ENGINEERING (BPR)

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

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