Effective Product Control

CHAPTER 22New Product Proposals

Banks, like any firm that provides goods and services to clients, are constantly aware of the need to enhance their product offering in order to meet their clients’ needs. Sharia bonds, Chinese Renminbi denominated products and CDOs are just some of the new products I have seen come to life over my career.

When the business wants to introduce a new product, there needs to be a period of due diligence undertaken by both the business and their stakeholders before the product can be traded or marketed. This period of due diligence is usually undertaken within the governance framework known as the New Product Proposal (NPP). It is important that this process has a strong level of engagement from the business's stakeholders as it will need the support of all stakeholders to get the products introduced in a cohesive and controlled manner.

Not every idea that the business conceives will make its way into the NPP, as banks run lean operations and don't want staff, capital and assets being allocated to initiatives which are not going to maximize shareholder value. Consequently, before the NPP is communicated to stakeholders, the proposal will need to meet indicative financial hurdles. These financial hurdles will focus on the key performance indicators for the bank, like profit, balance sheet and capital usage and their returns. It is common for these forecasts to be provided on an annual basis out to three to five years.

If the product is subsequently ...