Responsible Optimization

In a world of rapidly changing variables, it might seem that banks must choose between two extremes: radical change that can veer into chaos or organizational inertia that resists progress. Both responses are reactionary – one overcorrects, the other underresponds – and both, ultimately, are irresponsible ways to approach continued growth and profitability. But banks can reject that false binary with a new framing: responsible optimization. The twofold focus of this framework can help banks choose the right things to change and choose to change them in the right way.

Technological advances are recalibrating the competitive landscape, which means banks need to act now. This dynamic, coupled with a changing regulatory landscape, creates a rare opening for banks. Banks now have the opportunity to challenge legacy operating models, retire non-value-added processes, and modernize infrastructure in ways that are both defensible and durable. Success in this environment hinges on one condition: the ability to demonstrate strong governance, disciplined risk management, and outcome-oriented oversight.

This opportunity comes with its own tensions. On one hand, current technological advances – including AI – promise to transform the human experience across society. But we’ve heard similar claims before, so can that new technology really deliver? Can banks afford to wait it out to see where the technology goes?

At the same time, the regulatory landscape has shifted. Banking has entered a moment of guarded opportunity, one shaped by a clear change in regulatory tone yet tempered by past business cycles and regulatory regimes. Supervisory focus is moving away from process-heavy oversight and back toward core financial risk, credit quality, and liquidity.

Market signals reinforce this tension. Regional bank equities continue to trade at roughly half the price-to-earnings multiples of broader market indices, which reflects persistent skepticism about the sector’s ability to translate scale, growth, and regulatory relief into sustainable earnings performance. The opportunity is real, but so is the burden of proof.

Now is the moment for responsible optimization: a deliberate, data-driven approach that balances efficiency with resilience, modernization with trust, and near-term performance with long-term credibility.

Core tenets of responsible optimization

Responsible optimization is an organizational mindset that applies across a bank’s entire business model, from strategy and governance to technology and operations. Since every organization is different, responsible optimization is not a one-size-fits-all approach. Rather, a set of tenets defines its core.

Focus on the long game

In an environment where market conditions and technology are rapidly evolving, it can be tempting to pursue strategies that promise quick gains with minimal effort. But optimization that is untethered from purpose risks delivering short-term metrics at the expense of long-term value.

A responsible approach requires banks to design optimization models that reinforce who they are, how they serve, and where they are going. Just as importantly, these choices require durable governance so that optimization decisions are not episodic responses to external pressures of the day and instead remain consistent over time.

Responsible optimization recognizes that there is no universal playbook, only strategies that are right for a specific organization and grounded in its mission, vision, and values.

How this plays out: Banks make deliberate, repeatable choices – guided by strategy and risk appetite rather than short-term cycles – about where to invest, simplify, or exit so performance improvements compound over time instead of unraveling with the next market or regulatory shift. In practice, responsible optimization becomes a source of durable enterprise value, not a one-time efficiency event.

Balance efficiency and resilience

While efficiency and resilience are not mutually exclusive, responsible optimization emphasizes that any efforts to increase efficiency should fortify, not compromise, resilience. This principle is especially important as banks face mounting competitive pressures, rapidly emerging technologies, and increasing stakeholder scrutiny. Banks must determine how to implement optimizations that balance productivity, profitability, and efficiency with the implications to both customers and employees and then create streamlined processes that allow for adaptability.

Preserving and enhancing the customer experience is paramount. Customers generally do not care how their experience and pricing improved, but employees often are the ones most affected throughout the process, which means banks need to find ways to keep employees and other internal stakeholders engaged throughout the optimization process and focused on the long game.

Especially with a more relaxed regulatory environment, some banks might be tempted to go overboard with cost-saving initiatives such as abrupt workforce reductions. However, this approach can create downstream risks and inefficiencies that require expensive remediation.

How this plays out: Banks sequence optimization initiatives in ways that strengthen control, continuity, and talent retention – using process redesign, technology, and role redefinition before blunt cost actions – so savings are sustainable and risk posture improves alongside performance. By actively engaging employees through transparent governance and change management, organizations avoid short-term disruption and build an operating model that is lean and resilient through future cycles.

Evaluate optimizations holistically

Legacy structures, policies, and technologies often can obscure inefficiencies. A holistic evaluation framework helps banks uncover hidden friction by assessing products, processes, infrastructure, and people as a complete picture.

Using methods such as value stream mapping, organizations can identify the processes or systems that no longer serve a clear purpose and then work to realign resources with strategy. Whether optimizing an end-to-end process or modernizing specific operations, the principle remains: evaluate comprehensively, not in silos, with a focus on operational excellence.

How this plays out: Banks move beyond isolated cost or control fixes and instead diagnose performance across the full value chain, which connects front-office demand, middle-office risk activities, and back-office processing and enables technology to reveal root causes of inefficiency. Decisions are then made with enterprisewide visibility that allows leaders to simplify operating models, retire redundant capabilities, and redeploy resources toward the products, processes, and platforms that most directly support strategy and sustainable performance.

Understand product economics

True product profitability often is misunderstood or imprecisely measured. Responsible optimization calls for deeper visibility into total cost of ownership, customer lifetime value, and the operational burden of specific product offerings.

Banks that understand these dynamics can make sharper investment decisions, especially when weighing which products to scale, sunset, or redesign. With many organizations still carrying the technical debt of past acquisitions, now is the time to clarify which products are actually delivering value.

How this plays out: Banks build fact-based product and customer profit and loss statements that incorporate funding, operating, technology, risk, and servicing costs and create a clear view of which offerings generate economic value and which consume capacity. With that transparency, leadership can confidently invest in scalable, high-return products while simplifying, repricing, or exiting offerings burdened by complexity and legacy technical debt, thus aligning the portfolio with long-term strategy rather than historical inertia.

Invest with clear ROI goals

It might sound obvious, but it’s worth stating. Optimization initiatives should be anchored in defined return on investment (ROI) targets and disciplined measurement, including pre-investment modeling, stakeholder alignment, and post-implementation tracking. Whether modernizing a compliance function or upgrading infrastructure, initiatives should include key performance indicators (KPIs) that validate progress and justify continued investment. Planning also should identify where to allocate savings.

How this plays out: Banks treat optimization initiatives as capital investments, not expense exercises, by setting clear financial targets upfront, aligning sponsors across finance, risk, and operations, and funding only those efforts with a credible path to returns. Progress is tracked through defined KPIs and benefits realization routines. Leadership can course-correct quickly, redeploy capital to higher-return opportunities, and build confidence that optimization is delivering measurable, repeatable value over time.

Develop management disciplines that sustain improvement

Since responsible optimization is a mindset, not a one-time event, it requires organizations to embed performance disciplines through scorecards, accountability frameworks, and cadence-based reviews. Banks should institute a process to continually identify opportunities and develop the muscle to sustain progress. Management teams must own the outcomes, track them consistently, and have the tools to intervene when progress stalls.

Working with a third party can help accelerate these results, as external support can bring structure, cross-functional alignment, and impartial analysis that internal teams might struggle to achieve on their own.

How this plays out: Banks institutionalize optimization through clear ownership, repeatable governance, and regular performance reviews by using scorecards and executive forums so that initiatives stay on track and benefits are realized sustainably. By reinforcing accountability and supplementing internal capabilities with targeted third-party support, management builds the discipline to sustain momentum, challenge assumptions, and embed continual improvement not as a periodic transformation effort but as part of how the organization operates.

Plus: Maintain governance over responsible optimization

Governance is not an afterthought. It is central to responsible optimization. Companies must:

• Be clear on strategy and whether the external environment (for example, competitive shifts) requires any updates
• Define a risk appetite that encourages innovation without eroding oversight
• Demand clear ROI, performance metrics, and reporting cadence
• Support operating structures that reduce drag and encourage responsiveness
• Stay focused on sustained performance, not reactive cycles

Companies that incorporate the tenets of responsible optimization are better equipped to guide transformation efforts and assess performance with greater nuance. Boards that apply the tenets can more effectively guide and provide valuable, credible challenge.

The banking industry has the opportunity to capitalize on ground-breaking, transformational technology that can help them keep a competitive edge, especially in this period of regulatory calmness. Responsible optimization offers an approach to navigate this moment with clarity by focusing on the long game and aligning with each organization’s mission, vision, and values. Decisions made now will shape cost structures and margins as well as organizational trust, stability, and reputation for years to come. By aligning ROI with trust and compliance, banks can modernize without compromising the values that define them.