Challenge - Reducing CLM Cost
Many banks try to reduce CLM cost by adding people, moving work offshore, or automating individual tasks. These measures may help at the margin, but they rarely address the real causes of cost. In practice, CLM becomes expensive when the operating model creates too much duplication, too much waiting, too much rework, and too little control over how work flows.
Reducing cost in CLM is therefore not mainly a labour exercise. It is an operating model exercise. The greatest savings usually come from better structure, better flow, better quality, and better service discipline.
CLM cost is determined by design, not effort.
Why CLM cost escalates
CLM cost tends to rise for predictable reasons. Work is often fragmented across teams, jurisdictions, platforms, and handoffs. The same information is collected more than once. Cases remain open too long. Maintenance activity accumulates without proper closure. Periodic reviews collide with unresolved in-flight work. Exceptions multiply. Skilled staff spend time chasing, correcting, and reworking issues that should have been prevented earlier.
The result is not only a higher cost base, but a less stable one. Cost becomes volatile because throughput is unstable, queues build unpredictably, and urgent work displaces planned work. This is why many CLM functions feel permanently busy while still struggling to deliver efficiently.
Cost from an operational science perspective
From an operational science perspective, CLM cost is shaped by the behaviour of the system.
Where work in progress is too high, queues form. Where queues form, cycle times lengthen. As cycle times lengthen, more cases remain open at any one time, creating more inventory to manage, more follow-up effort, and more operational drag. Variability then makes matters worse. A small amount of disruption can create a disproportionate increase in delay, ageing, and rework.
This is why cost cannot be understood only through headcount or budgets. A CLM process with poor flow control will consume more effort even if individual staff are highly capable. Conversely, a better-designed process can reduce cost without sacrificing control, because less effort is wasted on waiting, chasing, duplication, and avoidable exception handling.
In practical terms, the cost of CLM is driven by:
how much work enters the system
how smoothly that work is released
how much work is held open
how often work loops back for correction
how much coordination is required to complete each case.
The hidden waste inside CLM
Lean thinking is useful here because it makes visible the forms of waste that are often normalised in CLM operations.
A large share of CLM cost sits in:
defects — poor data, incomplete files, inconsistent decisions, failed first pass outcomes
waiting — client delays, internal queues, unworked cases, dependency bottlenecks
over-processing — repeated outreach, duplicate reviews, unnecessary case restarts, excessive evidence collection
handoffs — avoidable movement between RM, case manager, operations, compliance, and technology
inventory — open cases, ageing maintenance items, overdue reviews, unresolved exceptions
underutilisation — experienced staff spending time on low-value correction and administration rather than judgement and control
Seen this way, CLM cost is not just the cost of doing necessary work. Much of it is the cost of compensating for poor system design.
Structural cost drivers
The largest cost drivers are often structural rather than procedural.
The underlying data model matters. Where entity, role, and relationship structures are weak, work is duplicated and information cannot be reused effectively. Where identifiers are fragmented across systems, reconciliation and manual interpretation increase. Where service boundaries are unclear, work types overlap and case volumes become harder to control.
Platform structure also matters. A poorly engineered platform can lock in unnecessary case complexity, fragmented workflows, and rework-heavy operating patterns. In these environments, cost reduction becomes difficult because the technology itself reinforces bad behaviour.
Service design is equally important. Onboarding, periodic review, maintenance, targeted review, and trigger-led activity should work as a controlled service set. If they do not, work accumulates in parallel, collisions increase, and teams spend more time resolving inventory problems than serving clients well.
Organisational cost drivers
Organisation design can either reduce cost or quietly multiply it.
A fragmented model with weak ownership often creates duplicated control activity, inconsistent standards, and too many coordination points. Front office, case managers, operations, risk, and compliance may all be involved, but without a disciplined design of roles and handoffs the cost of coordination becomes excessive.
This is where many firms misread the problem. They see labour cost and conclude that cheaper labour is the answer. But if the process itself is unstable, offshoring only relocates the work. It does not remove the causes of rework, delay, or duplication.
The same is true of consolidation. Consolidation can reduce duplication and simplify management, but only if supported by clearer service design, common standards, and stronger orchestration. Otherwise it can simply create larger queues and more complex dependencies.
Accounting perspective: what should actually be managed
From an accounting perspective, CLM cost needs to be understood in a more structured way than simple departmental spend.
A useful view is to separate:
fixed and variable cost
run and change cost
cost per lifecycle event
cost of control failure and rework
This matters because some CLM costs are built into the structure of the capability, while others are created by unstable operations. A function may appear expensive because it is carrying too much change remediation, too much defect correction, or too much avoidable manual effort. Without separating these effects, cost programmes can target the wrong things.
For management purposes, the more meaningful measures are often:
cost per onboarding
cost per periodic review
cost per maintenance event
cost of aged open inventory
cost of rework and repeat touches
trend in effort required to complete similar work over time
This gives a clearer view of whether cost is improving because the system is performing better, rather than simply because spend has been constrained.
Why automation is not enough
Automation can help, but it should not be mistaken for a primary cost strategy.
Automating a poorly designed process often means automating waste. If inputs are inconsistent, policies unclear, or work types poorly defined, automation may increase throughput of low-quality work or create new forms of exception handling. The labour line may improve temporarily, but total cost does not improve in a durable way.
AI has broader potential than task automation alone. It can support quality, prioritisation, triage, and orchestration. But even here the same principle applies: AI performs best within a coherent operating model. It can enhance good design, but it does not substitute for it.
What better cost performance looks like
A lower-cost CLM capability is not simply smaller. It is better engineered.
It has clearer service boundaries, better reuse of client and relationship data, stronger control over work entry, lower levels of open inventory, fewer unnecessary handoffs, and better first-pass quality. Periodic review demand is smoothed rather than allowed to spike. Maintenance work is controlled and closed properly. Cases are prioritised with discipline. Exceptions are managed deliberately rather than becoming a hidden parallel operating model.
In that environment, cost becomes more predictable because the system behaves more predictably. Work is completed with fewer touches, less rework, and less coordination overhead. Control improves at the same time because the process is more stable and more visible.
The real lesson
Reducing CLM cost is not mainly about asking people to work harder, or moving the work somewhere cheaper. It is about removing the conditions that make the work unnecessarily expensive in the first place.
That means addressing cost at its source:
in the structure of the capability
in the design of the services
in the flow of the work
in the quality of the data
in the discipline of the operating model
When CLM is designed to perform, cost improves as a consequence. When it is not, cost reduction efforts usually become another layer of activity on top of an already inefficient system.