Costa Rican Cost Analysis

Computerworld - Wall Street isn't the only place financial institutions conduct sophisticated predictive modeling in order to improve their operations. Banco Nacional de Costa Rica in San Jose, Costa Rica, uses the Hyperion Business Modeling (HBM) tool, from Hyperion Solutions Corp. in Sunnyvale, Calif., to better understand and control its costs. It also uses it to predict the effects of changes such as adding tellers or offering new products.
In an e-mail interview, Manuel Abellan, costs director at the bank, recently told Computerworld how this works.
What do you use for predictive modeling? HBM is the solution used for modeling resources, processes, activities, demand and associated costs. The information generated by HBM is used in two ways. First, it is used to solve operational and strategic problems as an activity-based costing and management tool. Second, HBM generates the fundamental information that interoperates with Oracle Financial Services Application for profitability analysis, customer relationship management and risk management.
What are the most important underlying techniques? Most systems are based on regression techniques. HBM automatically identifies operational constraints. If there are constraints, the software won't calculate the financial flow until the user makes a decision about how the business will cope with the constraints. For example, will we hire a new cashier? Do we need more back-office personnel? Should we improve performance in processing credit card forms?
So the model will say, for example, "I can't optimize this operation unless you hire more cashiers"? In essence, it's recommending certain actions? Yes, it is. However, the activity may be optimized through other strategic options. For instance, "Should I pursue another product mix?" or "May I improve some cycle times in order to perform the same activities in less time?" or "Do I need to have my cashiers working 30 minutes' overtime per day?"
Can you give an example of a specific model you developed? A model of 150 branches includes all bank branch resources, activities and products. It allows calculating the cost of every service and activity of the bank, such as personal loans, saving accounts, credit card requests and so on. It computes resource utilization, for example, accountants at 85% and cashiers at 91%. It also evaluates the cost of different types of personnel, gives accurate detailed costs for every department and identifies inefficient use of resources or duplication of efforts.
HBM predicts resource constraints when varying volume, performance and other factors, and it predicts impacts on cost when a process changes. Knowing the cost of processes allows comparing them with outsourcing opportunities. At present,