Keeping tabs on numbers that matter

I’ve just got my little Honda Type R rally car back from Adam the engine rebuilder. I had managed to destroy the top half of my motor after snapping a cambelt in day two of the Targa North Island Rally. A small chip of rock flicked up into the rotating flywheel, punching through the supposedly indestructible Kevlar cambelt.

The car is now back on the road with a new top end and a stone guard down below to make sure history doesn’t repeat. I’m also in the process of installing a couple of additional gauges just to make sure the dashboard not only tells me what’s going on, but also warns me in advance if something is about to go wrong.

Highly strung race cars aren’t the only things that benefit from a well-planned dashboard; businesses do, as well. They began popping up after Kaplan and Norton published The Balanced Scorecard but really took off after Microsoft started promoting the idea of a digital nervous system.

In simple terms, a business dashboard provides an accessible summary of business and industry key performance indicators (KPIs) relevant to a strategic objective or result area. The beauty of business dashboards in a digital age is that they can harness live feeds from underlying data, allowing them to be both constantly updated, but able to be fettled and fine-tuned by their users.

And it’s this functionality that an institution no less august than the Reserve Bank of New Zealand (RBNZ) is using after launching its Bank Financial Strength Dashboard a few months ago (bankdashboard.rbnz.govt.nz)

The RBNZ dashboard seeks to make it easier to compare banks’ financial information, such as capital buffers, non-performing loans, and risk concentration. The stated aim is to improve the New Zealand public’s understanding of their banks, but in doing so it clearly creates an incentive for banks to operate soundly and not end on the wrong side of the graphs.

The dashboard is the RBNZ’s first native cloud application and while simple on top, has more than 100 metrics underneath.

That this innovation happened when it did is no accident. I think there’s probably two things behind it.

First, the broader context for financial services is the continued fallout from the Australian Prudential Regulation Authority inquiry into the Commonwealth Bank of Australia and the royal commission into misconduct in banking, superannuation and financial services. This in turn led to the RBNZ and the Financial Markets Authority (FMA) conducting their own review to determine whether New Zealand conduct is up to snuff.

Second, the anointing of a new RBNZ governor with a reputation for directness and not mucking about. Adrian Orr, the Pukehina surfer who until recently ran the New Zealand Super Fund, appears keen to take a closer look at banking culture and conduct.

The dashboard feels like the kind of disinfecting sunlight that Orr would think up or accelerate. Interestingly, the new interactive dashboard enjoyed more traffic to its pages in the first day of operation than its predecessor (a somewhat fusty chart known as the G1 table) received in the previous year.

The RBNZ’s tech heads are now working on building some digital plumbing that would allow analysts, bankers and financial media to take a feed of the data and plug it into their own reporting or predictive tools. Meanwhile, you might be seeing similar dashboards for other sectors such as insurance and non-bank deposit takers down the road.

The RBNZ is lucky in that most of its measures are binary, so a dashboard is very doable. Across town at the Financial Markets Authority (FMA), it’s probably a harder ask.

The FMA’s 2019 Corporate Plan makes it clear that the authority is becoming ‘‘less tolerant’’ about the lack of demonstrable progress on compliance.

It’s also got a common theme running through four of its eight strategic priority areas – namely, the primacy of putting customers’ interests at the centre of investment companies’ business and ensuring that customer needs are truly met.

Putting in place an effective measure for this is hard because the industry standard – the net promoter score methodology – doesn’t actually measure whether customer interests are met. It just quantifies customer loyalty.

So an investment firm could be doing a poor job of meeting a customer’s needs but a great job of delivering warm fuzzies, and still get a high net promoter score.

What consumers need instead is an industry measure of whether their interests are guiding investment decisions. Coming up with an industry standard to measure this would be pretty useful not just for the FMA but for the consumers making investment choices. Certainly if I was working in the regtech space at the moment, it’s something I’d be trying to crack.

All going well, the new gauges on the Honda’s dashboard will give me early warning of impeding disaster, and the time to do something about it. Doing the same for consumers when it comes to their investment funds has never been more pertinent.

You might see similar dashboards for other sectors such as insurance, down the road.

Mike ‘‘MOD’’ O’Donnell is a professional director, writer and digital adviser. His Twitter handle is @modsta. This column is MOD’s personal opinion but for full disclosure it’s noted he is a director of Kiwibank and Kiwi Wealth.