David Pettersson

Enterprise Architect. I help teams turn strategy into execution.

6 minute read

Introduction

In the previous post, we introduced a Level 1 (L1) capability map for financial institutions, providing an enterprise-wide view of what a financial organization must be able to do.

The natural next step is to decompose these high-level domains into Level 2 (L2) capabilities.

L2 capabilities describe distinct, stable business abilities that sit below enterprise domains and above detailed processes and systems. This level is often the most useful for transformation planning, regulatory analysis, application mapping, and portfolio prioritization.

This post presents a pragmatic L2 capability decomposition aligned with the previously defined L1 capability map.

L1 – Strategy & Governance (L2 Capabilities)

  • Strategic Management
    Defines the long-term direction of the institution, aligning mission, vision, and strategic priorities with ownership and regulatory expectations.

  • Business Planning & Objectives
    Translates strategy into measurable business objectives and enterprise-level plans.

  • Capital & Funding Strategy
    Ensures a sustainable capital structure and funding model aligned with regulatory capital requirements.

  • Sustainability & ESG Governance
    Establishes governance, targets, and accountability for sustainability and ESG commitments.

  • Corporate Governance
    Defines ownership structures, board governance, and executive accountability.

  • Policy Management
    Creates, maintains, and governs internal policies across the enterprise.

  • Regulatory Framework Management
    Interprets external regulations and translates them into enterprise-wide requirements.

  • Decision Governance & Mandates
    Defines decision rights, mandates, escalation paths, and accountability structures.

  • External Reporting & Ownership Dialogue
    Manages structured reporting and communication towards owners, state authorities, and key stakeholders.

  • Business Architecture Management
    Maintains a coherent business capability and operating model aligned with strategy.

  • Target Architecture Management
    Defines and governs future-state business, data, application, and technology architectures.

  • Change & Transformation Governance
    Ensures change initiatives are aligned with strategy and architectural principles.

  • Portfolio Management
    Manages and prioritizes the portfolio of initiatives and investments.

  • Initiative & Program Management
    Provides governance and coordination across programs and major initiatives.

  • Roadmap Management
    Maintains time-based plans linking strategy, capabilities, and initiatives.

  • Benefits & Value Realization
    Tracks and ensures realization of expected business and strategic benefits.

L1 – Core Business Operations (L2 Capabilities)

Customer & Relationship Management

  • Customer Segmentation
    Defines and manages customer segments based on business, risk, and strategic criteria.

  • Relationship Management
    Manages ongoing customer relationships across the full lifecycle.

  • Customer Communication
    Ensures consistent, compliant, and effective communication with customers.

Contract & Onboarding

  • Contract Management
    Manages contractual agreements throughout their lifecycle.

  • Customer & Deal Onboarding
    Ensures compliant and efficient onboarding of customers and transactions.

Credit & Business Decisioning

  • Credit Assessment
    Assesses creditworthiness and risk exposure of customers and transactions.

  • Risk-Based Pricing
    Determines pricing based on credit risk, capital usage, and strategic considerations.

  • Decision Support & Delegation
    Supports operational credit and business decisions within defined mandates.

Loans & Financing

  • Loan Origination
    Manages the creation and structuring of loans and financing products.

  • Financing Structures
    Defines and manages different financing models and structures.

  • Credit Administration
    Handles administrative activities related to credits and loans.

Disbursement & Lifecycle Management

  • Disbursement Management
    Manages controlled release of funds according to contractual conditions.

  • Repayment & Amortization
    Manages repayment schedules and amortization over the credit lifecycle.

  • Terms & Conditions Management
    Maintains and enforces contractual terms throughout the lifecycle.

Guarantees & Structured Finance

  • Guarantees Management
    Manages guarantees and risk-sharing instruments.

  • Export Finance
    Supports export-related financing in line with the institutional mandate.

  • Deal Structuring
    Structures complex transactions involving multiple parties and instruments.

  • Collaboration with Banks & Guarantee Institutions
    Coordinates with external financial partners and guarantee providers.

Contract Monitoring

  • Contract Performance Monitoring
    Monitors compliance with contractual obligations and performance criteria.

  • Covenant & Condition Follow-up
    Ensures contractual covenants and conditions are fulfilled.

L1 – Risk, Compliance & Control (L2 Capabilities)

Risk Management

  • Enterprise Risk Framework
    Defines the overall risk management framework and risk appetite.

  • Credit Risk Management
    Identifies, measures, and manages credit risk exposure.

  • Market Risk Management
    Manages risks related to market movements and valuation.

  • Liquidity Risk Management
    Ensures sufficient liquidity under normal and stressed conditions.

  • Operational Risk Management
    Manages risks arising from processes, systems, people, and external events.

Compliance & Financial Crime

  • Regulatory Compliance
    Ensures adherence to applicable laws and regulations.

  • AML / CTF
    Prevents money laundering and terrorist financing.

  • KYC & Customer Due Diligence
    Ensures customer identity and risk profiles are properly assessed.

  • Sanctions Management
    Ensures compliance with international sanctions regimes.

  • Export Control
    Ensures compliance with export control regulations.

Control & Assurance

  • Internal Control Management
    Establishes and operates internal controls across the organization.

  • Control Framework Management
    Maintains structured control frameworks aligned with regulations.

  • Issue & Deviation Management
    Manages identified issues, breaches, and remediation actions.

  • Internal Audit
    Provides independent assurance of governance, risk, and control.

L1 – Financial Management (L2 Capabilities)

Treasury & Capital

  • Treasury Operations
    Manages daily cash, funding, and financial market operations.

  • Liquidity Management
    Ensures availability of liquidity across time horizons.

  • Funding Strategy
    Defines funding sources and instruments.

  • Capital Market Operations
    Manages issuance and interaction with capital markets.

  • Hedging & Derivatives
    Manages financial risk mitigation using derivatives.

Accounting & Reporting

  • General Ledger
    Maintains the core financial accounting records.

  • Financial Close
    Ensures timely and accurate period-end closing.

  • Financial Reporting
    Produces internal and external financial statements.

  • Regulatory & IFRS Reporting
    Ensures compliance with accounting and reporting standards.

  • Supervisory Reporting
    Reports financial information to supervisory authorities.

Financial Planning & Control

  • Budgeting
    Plans financial resources and allocations.

  • Forecasting
    Predicts future financial performance.

  • Cost Management
    Controls and optimizes operational costs.

  • Performance Management
    Measures and manages financial performance.

  • Transfer Pricing
    Manages internal pricing between entities or units.

L1 – Data, Analytics & Decision Support (L2 Capabilities)

Data Management

  • Information Governance
    Defines ownership, accountability, and governance of data assets.

  • Master Data Management
    Manages core business entities such as customers and counterparties.

  • Reference Data Management
    Maintains shared reference data used across the enterprise.

  • Data Quality Management
    Ensures accuracy, completeness, and consistency of data.

  • Metadata Management
    Manages definitions and context of data assets.

Analytics & Reporting

  • Management Reporting
    Provides insights for executive and management decision-making.

  • Risk & Credit Reporting
    Supports risk oversight and credit monitoring.

  • Regulatory Reporting
    Produces data-driven regulatory submissions.

  • ESG & Sustainability Reporting
    Supports sustainability and ESG disclosures.

Advanced Analytics

  • Decision Support
    Supports informed decision-making using analytical insights.

  • Scenario Analysis
    Evaluates outcomes under different scenarios.

  • Credit Models
    Provides quantitative models for credit assessment.

  • Risk Models
    Models financial and non-financial risk exposures.

  • AI & Advanced Analytics
    Applies advanced techniques to enhance analysis and decision-making.

L1 – Enabling Capabilities (L2 Capabilities)

IT & Architecture

  • Application Management
    Manages the application portfolio across its lifecycle.

  • Integration Management
    Ensures reliable data and process integration.

  • Platform Management
    Provides shared technology platforms.

  • Architecture Governance
    Ensures architectural consistency and compliance.

Security

  • Information Security Management
    Protects information assets and confidentiality.

  • Identity & Access Management
    Controls access to systems and data.

  • Security Risk Management
    Identifies and mitigates security risks.

Legal & Regulatory Support

  • Legal Advisory
    Provides legal guidance and interpretation.

  • Contractual Support
    Supports contract drafting and review.

  • Regulatory Analysis
    Interprets regulatory developments and impacts.

People & Organization

  • Talent Management
    Ensures access to required skills and competencies.

  • Competence Development
    Develops skills and capabilities across the organization.

  • Leadership Development
    Builds leadership capability.

  • Culture & Change Enablement
    Supports cultural alignment and adoption of change.

Procurement & Third Parties

  • Procurement Management
    Manages sourcing and procurement activities.

  • Vendor Management
    Manages supplier relationships and performance.

  • Third-Party Risk Management
    Manages risks related to external partners.

  • Contract Lifecycle Management
    Manages contracts with third parties throughout their lifecycle.

Closing Thoughts

A well-defined Level 2 capability map turns high-level strategy into something actionable and governable.

Combined with the Level 1 capability map, it provides a stable backbone for regulatory change, digital transformation, and long-term architectural planning in financial institutions.

Future follow-ups can naturally extend this work into:

  • Level 3 capability decomposition
  • capability-to-process mapping
  • capability-to-system and data alignment
  • maturity assessment and target roadmaps

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