BES – the decay of intelligent BPM

Yesterday it was announced that Banco Espírito Santo (BES) was going to be broken into two. One, a bad bank, that will have only toxic assets and will continue to use the same bank name, with the same shareholders just before the bank be broken, meaning that they will face a huge loss, and other brand new, with the name Novobanco (literally new bank) with capital injected by a rescue fund created to support the sins of Portuguese banks, at the time when the IMF and the European Union bail out the country.

BES was a case study among the BPM community, by the sum of awards that collected over the years. More than that, it was a bank with huge societal influence and lobbing, that passed decades thought independently of the type of political orientation of the Portuguese government. For example, ruled before and during the dictatorial years and after the revolution, with the family leaders that were the main shareholders being put in prison under the “new” communist political orientation, that decided in 1975, banks, bankers were evil and should give all it’s fortune that was taken from the oppressed people. In the middle of the 90’s the bank was privatised and the Espírito Santo family took over and got back the control of the bank. BES was the only and single bank to achieve such status quo. It was until yesterday, the biggest private bank.

During the press conference given by the regulator, it was stated that the BES administration, did not comply with direct orders from the regulator with acts like: assuring premature reimbursement of creditors that bought bonds, like for example the government of Venezuela (lucky them, because others starting today, have a hand full of nothing); lend or warrant Ponzi borrowing operations from the organisations that belonged to the bank’s holding (meaning that they were making reimbursements or borrowing money using as collateral the bank’s currents and savings accounts). The regulator stated clearly, twice, for the record, that some acts raised questions related with criminal activity and were going to be investigated by the Portuguese prosecutors.

Having said that, based on facts, not on the vested interests and bubble gum hype, that in the last couple of years we read from the leading BPM and architects mavens, I would like to raise a question (that I assume that will have no answer, once it is inconvenient).

If under architecture principles a bank consumer it is not allowed to produce acts that can put the bank in jeopardy, independently , but mainly, in these new interaction channels (mobile) where the consumer have the power to solely and by himself execute such acts, why there is not a reverse architecture from the bank to the regulator that makes the bank to force compliance with acts that cannot be executed?

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2 thoughts on “BES – the decay of intelligent BPM

  1. Seems to me that good processes can’t help much for an organization with a bad business model and poor policies. These models and policies may be a result of poor scenario planning. I wouldn’t blame the processes for poor business practices. The bank sputtered because of strategy; not operational processes supporting the strategy.

    • Hi Jim:

      I do not concur entirely with your argumentation taking into consideration that processes should be a reflection of business strategy, should have results that are the same results to be achieved by strategy, should have embedded rules that make operations compliant with legislation and regulation … Such components can be and should be designed and implemented with Techology . Hence, where is the intelligent Techology that everybody talks about, but it have little use when it’s needed?

      Some interesting facts about the case:
      “Banco Espírito Santo, S.A. ceased to comply with the minimum solvency ratios in force (Common Equity Tier 1 ratio of 5 per cent, i.e. 3 percentage points below the minimum regulatory level)”. This was discovered after an audit, because the regulator was suspicious the black hole was bigger. I ask, where is the algedonic channel that automatically and without human intervention (hellas) alerts key stakeholders when the viability of the organ action is in danger (and in this case the customers savings).

      “The regulator ordered to cease trading of financial instruments Banco Espírito Santo (BES). The list includes about 50 bonds and structured products issued by BES, BES Finance, Tranquillidade and Banco Espírito Santo de Investimento (BESI).” The bank did not comply with ruling and continued to sell such products with other names, but basically they are the same products and can be traced. Again, I ask, being a process mining expert and having the regulator the power of inspect without the need of any “warrant” like it happens in civil law, why such selling processes continue to exist? For the record, the small investors where deceived when they bought bonds for garbage.

      “The results disclosed on 30 July 2014 reflect the practice of management acts seriously detrimental to the interests of Banco Espírito Santo, S.A. and the violation of determinations of Banco de Portugal that prohibited an increase in the exposure to other entities of the Grupo Espírito Santo. These facts occurred under the former management of Banco Espírito Santo, S.A.. Acts committed when the replacement of the former management had already been announced, led to an additional loss of around 1.5 billion euros compared with the losses that were to be expected after Banco Espírito Santo, S.A. communication to the market on 10 July 2014. “. This is headed to the not so rhetorical question that I wrote in the blog post. If you as a clerk of the bank cannot, let’s assume, to be the single underwriter of a loan above X €, because there are rules in the system that prevents such kind of actions to occur, or, in order words, it have Responsibility (By virtue of the values, culture and policies of the organization one represents, is expected to exert the granted authority in a responsible way) and, Authority: (The actor can perform a particular activity on behalf of an organization in a process); why is the reason that such approach can only be applied to the underwriter, but it cannot be implemented to a board member, by intelligent Techology ? I think that everybody knows the uncomfortable answer, but that it should be the real aim of what is being announced as intelligent technology.

      One thing is an error in a risk evaluation to lend money to someone to buy a house, other are fraudulent and criminal acts that takes all the effort, sweat and tears of your entire life.

      Regards
      Alberto

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