Complexity conundrum: Commerzbank and Capco’s complexity “coincidence”!
Thursday, 24 November, 2011 Leave a comment
“Complexity increases cost and decreases flexibility — often in unforeseen ways — and also tends to decrease stability,”….
“If you run IT, those are three of your most important KPIs.”
So says Peter Leukert, CIO of Commerzbank, one of the largest banks in Germany. Nice one Peter!
“Commerzbank has already seen some eye-opening results, one, a counterintuitive indicator about the need for master data management tools”
But, as it is unclear from this statement, I sincerely hope that he realises that the impact of excessive complexity is not limited to IT. Here are a few more Complexity Facts.
Of course, he could also have mentioned that unmanaged complexity increases risk and uncertainty. But I can only be grateful that, FINALLY, a major player in Financial Services is taking the message on board. Only problem being that, to the best of my knowledge, Capco don’t have a quantitative (objective) means of measuring the current or critical complexity. Or to ascertain where weaknesses, impacting the systems robustness – therefore resilience and sustainability – exist.
With access to the relevant system data, Ontonix are able to, rapidly, assess the present position and to provide a “map” for, what may already be, a pre-critical environment.
I make this last point for two reasons:
- this announcement appears now, after three years of “building the model”
- Commerzbank share value plummets:
Commerzbank plunged 15.1 per cent to €1.15 after reports emerged that it may need an extra €5bn to fulfil new capital requirements.
“If the final deficit is indeed €5bn, it could be a stretch too far and may require [Commerzbank] to raise some capital externally,” said Stefan Stalmann, banking analyst at RBS. “The appetite of private investors could be low after the large recapitalisation back in spring – and if you don’t get the money from the private sector then you’re back to the government.”
Or an attempt to present Commerzbank in a favourable light – by reducing its own complexity and to “leading” competitors, who are willing to share data, to the promised land – to divert attention from the outward signs of something deeper, darker and more dangerous?
This is a topic that I and many others have read and written extensively about and which has, largely, been ignored, despite the simple facts that as stated above and amount to a statement that:
a business that operates with an unknown and unmanaged complexity level is less profitable, less efficient, less predictable, less stable and may lack the flexibility to adapt (and survive) in a competitive and turbulent financial climate.
If that isn’t bad enough, the realisation that a business (whether Bank, Insurer, Manufacturer, Retail, etc.) is a complex system – reliant upon its ecosystem of shareholders and stakeholders – that, generates complexity through the execution of the functions that sustain it, but fails to manage the resultant, increased, risk, communicates that risk through its inter-connections to the wider economy at micro AND macro level.
Hence, Financial institutions as sources of and super-spreaders for systemic risk and global, financial, uncertainty and turbulence.
It may be too late for some but organisations that act swiftly MAY just change their destiny and contribute to systemic resilience rather than systemic risk.
- Commerzbank shares sink on worries over capital (marketwatch.com)
- Commerzbank loss on Greece debt (bbc.co.uk)
- UPDATED: Reducing complexity – should finance directors be leading the way? (fitforrandomness.wordpress.com)
- Reveal Your Hidden Profits: Looking at complexity in business? (via Get “fit for randomness” [with Ontonix UK]) (fitforrandomness.wordpress.com)
- What if “counterintuitive” is THE mark of a leader? (fitforrandomness.wordpress.com)
- Commerzbank loses $1bn on Greece (bbc.co.uk)