07 NovThe Bankers’ Plumber on Banking: Learning from the Toyota Way

Great minds think alike. So the saying goes. For a long time I have preached that in Financial Services for those who work in Operations a key skill is to understand what is ‘normal for their business”. The earliest posts to the 3C Advisory Blog covered just these cases. Last week, somewhere on LinkedIn I saw a post relating to Toyota, quoting Taiichi Ohno, who is considered to be the father of the Toyota Production System:

One of the worst things in a production facility is not to be able to tell whether things are standard or out of standard (normal or abnormal).

A man after my own head. And I can genuinely say, I had not seen this proclamation before I starting preaching the gospel of understanding normal.

From the archives:

These three posts are from early Jan 2012, where they appeared in the 3C Advisory Blog. Each tale is 100% true.

Moving so much movement from the segregated cash account for client’s funds (CASS in the UK or 15c3 / Seg in the USA) that you trigger an alarm at the SEC See the case of the doing the right thing, but not thinking that moving $6.3 billion would attract attention.

What is a normal activity pattern for the business you are supporting? See the case of the Lamborghini Diablo driving trader setting off red flags.

What is happening in the usual suspect list of  “hiding places”? i) Cancel / Corrects, ii) Wash or Suspense Accounts and iii) Long dated trades and the confirmations that go with them. See: first set of thoughts on UBS’s $2.3 billion loss.

Lessons Learned: We can write policies, we can write procedures, we can offer some training. All good. But we can cannot legislate for every eventuality. We must be prepared to rely on the common sense of those in the team; that reliance will work if every member of the team has an understanding of, a feel for, what is normal for the business they are in and the work that they do.

Previous Posts 

Are available on the 3C Advisory website, click here.

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The Bankers’ Plumber’s Handbook

How to do Operations in an Investment Bank, or not! Includes many of the Blog Posts, with the benefit of context and detailed explanations of the issues. True stories about where things go wrong in the world of banking. Available in hard copy only.

Cash & Liquidity Management

An up to date view of the latest issues and how BCBS guidance that comes into force from Jan 1 2015 will affect this area of banking. Kindle and hard copy.

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