Client Situation
Our client is Qatar’s largest bank with a market share greater than 50 percent. Founded in 1964, the bank currently has subsidiaries and associates in 31 countries spanning three continents. The bank presently employs over 29000 individuals serving 20 million customers. Cedar has a rich understanding of the client through a previous initiative run for the bank. The client is keen to determine its transaction costs across its back-office operations function, and allocate them across business units – Corporate, Retail, etc. In the case of this project, Cedar undertook an Activity Based Costing exercise for the client’s Treasury and Foreign trade operations.
Cedar’s Approach
In this program, Cedar was mandated to identify transaction costs associated with back-office operations processes across treasury and foreign trade, determining the basis for allocation across business units.
- Reviewed the processes involved within the treasury and foreign trade back office function.
- Assessed the people executing the activities in these functions, the degree of automation and time consumed in each of these steps.
- Defined the total transaction cost based on unit costs across money market, capital market and FX desk.
- Conducted multiple internal interviews across the organization and identified which business units are serviced through respective processes, activities.
- Gauged how individual transactions should be costed and identified the cost-allocation model to split the overall back-office cost
Outcome
This program resulted in a successful activity-based costing of the client’s treasury and foreign trade operations.
- Designed a costing model based on foreign trade and treasury operations.
- Ensured the linkage of corporate strategy to the operational decision-making segment.
- Recommended business unit allocations based on proportionate volumes.
- Helped equip managers with cost intelligence to drive performance and determined profitability based on product segments.
- Identified expensive and non-value-added activities targeted for re-engineering.
- Improved effectiveness of budgeting by identifying cost/performance relationship of different service levels.