Michal Ventruba, head of Business Intelligence, Komerční Banka
Case Study: Komercni Banka
Komerční Banka builds success with its EDW and vision.
Although he works for a bank, Michal Ventruba says he really manages an “information factory.” After all, it was by harnessing Komerční Banka’s information that the company was able to overcome a difficult period a decade ago to become one of the top financial institutions in Central Europe.
As head of business intelligence (BI) at the Prague-based bank, he managed his team to help drive the delivery of information to stakeholders in the most complete and transparent manner possible. As a result, Komerční has transformed itself from a company that had no systemized information flows to one that is adept at managing data—so much so that it now saves 19 million euros annually through a sophisticated regulatory solution.
Getting to this advanced state was neither easy nor quick. In fact, it took two revolutions to achieve.
Overcoming Legacy Systems
In 1989, the Velvet Revolution peacefully ushered out the communist era in Czechoslovakia—today the Czech Republic and Slovakia. Amidst it all, in 1990, a new banking institution, Komerční Banka, was demerged from the central bank.
Like many institutions emerging in that era, the new bank faced the issues that the burgeoning free market was tackling. When Ventruba joined Komerční in 1992, the organization lacked a common set of business rules and measurements. That meant branches regularly sent their data on floppy disks, each with its own metrics for subjects like the number of clients, their deposits and loans. His job entailed collecting and trying to make sense of these divergent sets of information. Naturally, this situation also reflected the general level of technological development.
“It was an early form of ETL [extract, transform and load],” he jokes. But the lack of data consistency, integrity and accuracy constrained the capability of the bank’s information systems to deliver the tools to manage costs and revenue, or assess risk.
At that time, the Czech Republic held a majority interest in Komerční through a specialized agency. At the end of the last millennium, the country’s banking sector was burdened by considerable losses, which the government had to pay. Komerční was not unaffected, and its top management was completely overhauled as a result. The key task of the new leadership was to prepare the bank for the privatization of the state’s 60% equity stake.
EDW requirements to turn a financial mess into banking success:
- Strong support from top management
- Rigorous application of metadata
- Clearly defined, business-essential, but incremental business intelligence (BI) projects
- Robust, flexible technology
New management grasped that to achieve the strategic goal of privatizing Komerční, it had to get a handle on information. Ventruba became the point person, and he concluded that an integrated approach pairing an enterprise data warehouse (EDW) with a performance management system (PMS) was the right solution. Initially, the bank used Oracle Financial Services tools for enterprise performance management (EPM), but that company’s support organization was slow to respond. So Ventruba and his team chose a step-by-step integration of this EPM functionality in an EDW from Teradata.
The resulting information revolution has encompassed three phases, he notes. The first, crisis management, began with the deployment of the EDW in 1999. The strong support of past and present CFOs and the board of directors was critical.
During this phase, members of the BI team targeted critical areas. First, they sought to develop reports to analyze sales performance, risk and revenue management. Because of this, executives began to believe the analyses because they could easily drill down into the supporting data. Mutual trust was significantly enhanced.
With that success in hand, team members developed key performance indicators (KPIs) across the organization. No longer would individual branch managers determine what data to submit about their customers. Consistent, comprehensive KPIs, backed by helpdesk support and well-understood metadata, meant managers no longer questioned the veracity of a report, eliminating disputes about who had the accurate information.
“The EDW has become central to the bank's success.”
head of Business Intelligence, Komerční Banka
Third, work by the BI team enabled potential investors to conduct due diligence of the company’s business and financial data necessary for a bank-valuation model. This last piece made it possible for Société Générale, a Paris-based financial giant, to bid for 60% of Komerční in 2001 and, ultimately, to acquire the bank.
With crisis management over, the next steps of leveraging the EDW began. Management needed analytics to succeed in a changing and competitive market. From 2002 to 2004, a newly created BI team rolled out BI applications for cost management, direct channels and sales support, winning fans with each targeted project. The efforts also earned high praise from market analysts such as Nomura and Deutsche Bank, which called Komerční’s operational efficiencies the best in the region.
Starting in 2004, the BI group turned its attention to building sophisticated tools to handle risk and further concentrated on the metadata solution, Ventruba notes. It delivered new capabilities to thwart money laundering and meet regulatory requirements like Basel II. With its EDW-powered tools, Komerční has exceeded industry standards for Basel II implementation. Its application of the Internal Ratings Based Approach has resulted in an annual savings of 19 million euros due to a reduction in the bank’s capital holding requirements.
Keys to the EDW
For Ventruba, the concept of an EDW is straightforward. It should:
- Start with robust technology that’s easy to use and operationally efficient
- Deliver information that is transparent in detail all the way to its origin
- Be highly flexible to accommodate changing business rules and management information requirements
- Have specific, tightly integrated tools for discrete tasks, such as data mining and campaign management
- Be powered by metadata to provide consistent data across all departmental functions
How it’s deployed is just as vital. Ventruba advises taking a “strictly incremental development approach based on business requirements.” Doing so at Komerční led to quick successes, increasing the interest—and financial support—from departments that sought to benefit from new EDW applications.
Komerční . . . saves 19 million euros annually through a sophisticated regulatory solution.
Position of Strength
Komerční continues to expand its use of the EDW as a business enabler. Since 2008, the priority has been consumer-focused efforts, such as analytical customer relationship management and campaign management. The organization doesn’t plan to stop there, as the EDW has become central to the bank’s success, Ventruba explains. In that view, he’s not alone.
“I believe that one of the strengths of Komerční Banka is the existence of a unified database and performance indicators, which are interconnected with financial data, which I consider to be a must, but also with business, product, risk, operating and other information,” says CFO Pavel Čejka. “My experience tells me that emphasis on ‘one version of the truth viewed from different perspectives’ and investments in this area have really paid off.”