Enhancing Business Controls for Surveillance Data at a Leading US Bank

Engagement Summary

As a result of an internal audit, our client’s equities and fixed income technology groups recognized that their applications that send trade data to surveillance systems lacked data completeness, defined SLAs, and sufficient monitoring and escalation protocols. As a result, first and second line of defense trade alerts were at risk of delay and not aligned with internal policies or external regulations. Monticello’s Financial Services Advisory and Change Management practice areas were brought in to lead the program and eliminate the gaps that existed in the legacy controls to ensure compliance.

The Monticello team performed an assessment of the current state and developed a strategic roadmap that aligned people, process, and technology. The team provided project governance and implementation support that allowed the client to meet regulatory and internal deadlines for the complex global stakeholder initiative. A key factor in the project’s success was the team’s prior experience collaborating with project partners across multiple geographies and their experience with the complex system landscape. By leveraging their capital markets, trade surveillance, and technological domain knowledge, Monticello was able to quickly assess the situation and make recommendations based on industry accepted best practices. In conjunction with the client’s SMEs, Monticello was also able to define and implement solutions on time, on budget, and in a manner that considered the future state landscape – ensuring that the solution was able to handle new systems and products as they are rolled out in the years to come.

Case Study Detail

PROJECT BACKGROUND

In today’s data driven world, financial institutions are monitoring trading activities on more markets than ever before, which in turn requires enhanced visibility across multiple trading venues, sources, and asset classes as the pool of data grows exponentially. Along with this growth comes greater scrutiny from regulatory authorities who apply systematic controls and surveillance procedures to ensure compliance.

As a result of an internal audit, our client identified an issue centered around data completeness within their surveillance data repository during periods of enhanced trade volume which was initially uncovered during the Covid-19 pandemic induced trading craze. Given the vast number of systems, geographies, and jurisdictions involved, it was determined that a current state assessment was required.  This would include a review of the fixed income, currencies, commodities and equities applications that send trade data to internal supervision and surveillance systems to clearly map the existing controls, review for adequacy, identify areas of weakness, and define enhancements and solutions.  Once implemented, the bank could ensure confidence that their surveillance monitoring models are complete, accurate, and future-proof.  

ENGAGEMENT OBJECTIVES

Program Management

Actively engaged stakeholders from 50+ teams and implemented a scope management plan and associated work breakdown structure for applications within the realm of the asset classes outlined for this program.

• Managed and communicated overall project goals and objectives with the technology owners of the 50+ applications in scope.  Collaborated on the timelines, benefits, and format of the program rollout to ensure stakeholder engagement.

• Developed KPIs and reporting metrics for executive management communications.

• Addressed and escalated risks at the earliest possible point while attaining necessary sign-offs required for completion of audit remediation.

Data Management & Analytics

Designed application analysis templates to capture the current state of the client’s system architecture.

• Documented data flows utilizing Visio to illustrate the data journey from source/origination, enrichment, and through to the surveillance applications along with each associated hand off point along the way.

• Created matrices to easily provide visual summaries of gaps identified and trends across the system landscape.

• Created a centralized SharePoint to manage the document store, reporting process, and to provide automated program and workstream level RAG status.

BUSINESS VALUE

Monticello Consulting Group is a trusted partner serving the financial services industry with a consistent track record of helping clients reduce their regulatory risks while improving operational efficiencies. By working with our client to successfully translate complex regulatory requirements into effective business solutions, the Monticello team implemented the risk management and technical controls to ensure trading and system of record applications were robust. The Monticello team partnered with the owners of approximately 50 applications across 5 business areas to identify issues for remediation.  Monticello utilized our proven Agile project management and project governance approach that allowed the client to roll out solutions faster and with quality resulting in significant time and cost savings.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Transforming the Software Delivery Lifecycle through Agile

Engagement Summary

In mid-2020, Monticello Consulting Group (Monticello) partnered with a front-office trading technology team at a leading U.S. financial institution to devise and implement a change management strategy to facilitate the adoption of Agile and transform the overall software delivery process. The goal of the program was to create an efficient and centralized software delivery approach and transform the software lifecycle to meet critical and immediate business requirements set forth by the front-office.

The Monticello team developed the strategy and brought the necessary expertise, program management, and leadership to meet global stakeholder needs and an ambitious timeline for a successful implementation. The Monticello team, along with Agile project management coaches and automation experts partnered cross-functionally with business and technology groups to strategically prioritize high-impact areas for improvements. Monticello created a new strategic roadmap and established best practices taking into consideration existing challenges faced by the development teams, ongoing resource constraints, and changing business needs. By identifying bottlenecks and remediating roadblocks, Monticello was able to reduce turnaround time and improve implementation quality.

Finally, the team ensured that the strategy also incorporated automated data management to provide clear and insightful KPIs to all stakeholders including the senior leadership team in order to monitor progress and facilitate more efficient decision making. The team leveraged the Jira platform to streamline the end-to-end software delivery process, reduce routines and cycle times, eliminate redundancy, and improve the development team’s employee satisfaction. Additionally, Monticello redesigned the client’s software delivery progress reporting. By defining robust Jira labeling standards, the team was able to create a dashboard within Jira to provide real-time insights and periodic business intelligence needed to spot trends, mitigate risks, and make informed decisions.

Agile Transformation using Jira Software

Case Study Detail

PROJECT BACKGROUND

Managing and maintaining a fluid software delivery lifecycle enables clients to optimize resource allocation, reduce costs, align strategic priorities, and accurately forecast future business needs. Over time, our client’s project management approach had become less Agile and the software delivery lifecycle was ineffective due to the manual, inconsistent, and disjointed processes. There was a clear business need to centralize and streamline the development process, establish Agile best practices, and obtain timely and critical insights via a robust and automated reporting dashboard to enable effective leadership decision making. By incorporating Scrum Agile in the software delivery lifecycle, Monticello helped eliminate inefficiency, reduce costs, and accelerate product delivery by removing complexity and providing a standardized approach in line with the industry’s best practices.

ENGAGEMENT OBJECTIVES

Agile

Implemented a standardized project management approach to align with Scrum Agile project management best practices for software delivery, project execution, and enhanced metric development for transparent and effective communication and decision-making.

1. Worked with technology partners, developers, and business users to develop a strategy for implementing Scrum Agile project management along with its best practices to deliver new product features

2. Liaised with Agile coaches for gap analysis to streamline and automate processes

3. Supported development team through effective communication and feedback loops for execution

Data Management & Analytics

Drove tangible business outcomes through intelligent capture, analysis, and reporting of Key Performance Indicators (KPIs).

1. Established Scrum Agile routines such as Product Backlog grooming for development teams as per industry best practices

2. Defined structure & labeling standards for Jira tickets to provide clear insights in development work and accelerate defect resolution

3. Created a centralized Jira reporting dashboard to provide an automated program and workstream level metrics for accurate planning

4. Developed KPIs such as burn-up charts, burn-down charts, velocity charts, and other reporting metrics for management communications

5. Addressed and escalated risks and issues while attaining necessary sign-offs required for completion of documentation and processes

BUSINESS VALUE

Monticello collaborated to induce an Agile mindset and develop an efficient software delivery lifecycle to enhance and transform the client’s experience. By leveraging our subject matter expertise, program and project management toolkit, and data management and visualization capabilities, Monticello ensured the strategy was adopted across all the technology teams while simultaneously providing more robust insights reflecting increased efficiency and overall developer satisfaction to the senior leadership team.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Remediation of Trade Recordkeeping related OCC MRA for a major US bank

Engagement Summary

Monticello Consulting Group (Monticello) partnered with a leading US bank to resolve a Matter Requiring Attention (MRA) issued by the Office of the Comptroller of the Currency related to incomplete trade reporting on US Government securities. The MRA was in relation of the SEC CFR § 12.3 – Recordkeeping requirements[1]. The goal of this engagement was to:

• Assess the trading activities in scope of this MRA

• Perform forensic data analysis for three-year trading activity

• Identify any trade recordkeeping shortcomings in the trade booking systems and related business operations

• Partner with bank’s risk, legal, and compliance team to provide remediation plan to OCC

• Oversee gap remediation and validate trade recordkeeping to achieve MRA compliance

Monticello was tasked to assist our client to demonstrate to regulators that all recordkeeping gaps were identified and remediated in a timely fashion. Monticello consultants leveraged their deep regulatory and change management expertise to lead the operations and technology enhancements required to comply with the regulatory requirements ahead of the compliance deadline.

The Monticello team designed a program governance structure that supported multiple workstreams comprised of legal and compliance leads, agile scrum delivery teams, developers, testing teams, and operational and business process owners. Additionally, Monticello supported senior leadership and program sponsors by providing continuous program status updates to the program’s Steering Committee and other critical stakeholders and decision makers.

Case Study Detail

PROJECT BACKGROUND

SEC CFR § 12.3 – Recordkeeping requires a government security dealer to maintain a chronological reporting of all cash and derivatives trading activity, including all economic trade details, over a three-year period. The dealer should also provide trade confirms, affirmation, customer accounts and all affiliate dealers as required in compliance with the rule. In this particular case, the large US bank had grown significantly through mergers and acquisitions over many years, and had multiple trade capture systems and operational processes that lacked the central controls to ensure record keeping and data quality standards expected by the regulatory agencies.

ENGAGEMENT OBJECTIVES

Data Forensics, Program Management & Governance

Built and managed OCC MRA program governance under Corporate Compliance and Fixed Income Trade Control group for the Global Banking Organization. Monticello contributed towards the design of the Program Management Office (PMO) to ensure all transformation and changes delivered as per the regulatory MRA mandates. The PMO structure included the following:

• Define program workstreams, reporting routines, and ongoing program governance based on regulatory requirements and alignment with business needs.

• Identify and manage program assumptions, key issues/risks and internal/external critical dependencies.

• Data forensic analysis to identify all gaps in existing processes/operations and systems, and build a strategy for gap remediation.

• Ensure adherence to overall enterprise change management standards.

• Ensure stakeholder engagement and buy-in

Management Communications & Reporting

Developed a strategic communications plan to provide critical updates to stakeholders in a timely fashion. The communication plan established audience, communication objective, and channel of delivery. Critical information was summarized in a dashboard that communicated regulatory updates, program status and key risks, issues and dependencies. In addition, the PMO defined key program metrics to facilitate the decision-making process of senior program executives.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to ensure compliance and reduce regulatory risks. By working with clients to successfully translate complex regulatory requirements into effective business solutions, Monticello enables clients to implement the necessary risk and control framework to ensure industry challenges are turned into opportunities. Our team partners with cross-organizational client teams and oversees the end-to-end execution for MRA remediation. By leveraging our regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensures global trading activity is not disrupted while undergoing a business-critical regulatory change.

SKILLS & KNOWLEDGE (Level of Difficulty)

[1] 12 CFR § Recordkeeping for National Banks effecting securities transactions for customers.

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Raising the Bar for Broker-Dealer Standards of Conduct Through Regulation Best Interest

Engagement Summary

In early 2020, Monticello Consulting Group partnered with the regulatory compliance function within the capital markets unit at a leading bank on their Regulation Best Interest (Reg BI) program. The goal of the engagement was to enhance the standard of conduct for investment recommendations to retail customers by broker-dealers and their registered representatives ensuring that broker dealers act in the “best interest” of their retail customers.  Monticello were tasked with demonstrating to the regulator that the bank’s broker-dealer function has a reasonable basis to believe that recommendations are made in the retail customer’s best interest. In order to satisfy this regulator’s request, the broker-dealer was to comply with this overarching obligation and its four component parts:

Disclosure Obligation - Prior to or at the time of a recommendation, the broker-dealer must provide the retail customer, in writing, with a full and fair disclosure of the scope and terms of the relationship, the capacity in which the broker dealer is acting, the fees and costs associated with the services provided, as well as all material facts relating to conflicts of interest associated with the recommendation.

Duty of Care Obligation - The broker-dealer must understand the risks, rewards, and costs associated with the recommendation and exercise reasonable diligence, care, and skill when making the recommendation. In an enhancement to FINRA’s Suitability Rule, which only considers the ‘suitability’ of a given recommendation, the care obligation goes further and ensures that the recommendation is made in the customer’s best interest and the broker-dealer does not place their own interests ahead of the retail investor. If the implementation of this obligation proves successful, FINRA’s Suitability Rule may soon become redundant.

Conflict of Interest Obligation - A conflict of interest is defined as an interest that might incline a broker-dealer, consciously or unconsciously, to make a recommendation that is not disinterested. The Conflict of Interest Obligation requires the establishment of policies and procedures designed to mitigate, prevent, or eliminate conflicts of interest that may create an incentive for a broker-dealer to place their interest above that of the retail customer.

Compliance Obligation - Tackling Reg BI as a whole, the broker-dealer has an obligation to establish, maintain, and enforce policies and procedures that address all components of the regulation and aid compliance with the rule.

Case Study Detail

PROJECT BACKGROUND

The establishment of Regulation Best Interest marked a major milestone for the SEC in their efforts to raise the standard of conduct for broker-dealers. Reg BI was adopted by the SEC on June 5, 2019 (and went into effect starting on June 30, 2020) and will significantly enhance protection for U.S. retail customers, or “two-legged individuals”, who receive recommendations from broker-dealers for the purposes of managing personal, family, or household wealth. Reg BI was designed to place investor interests ahead of the profit motivation of broker-dealers and registered investment advisers. As simple as that principle may sound, there is ample evidence to suggest that broker-dealers and those in investment advisory roles are not fully aware of the obligations they owe retail investors. At the same time, many retail investors are not sufficiently familiar with the standards, conduct, and fiduciary responsibilities their investment advisors are required to follow to protect their interests. Reg BI is centered on fairness and transparency for individual investors, which continues to be an ongoing priority for the SEC.

ENGAGEMENT OBJECTIVES

Change Management

In preparation for a go-live just five months after Monticello started on the engagement, the Monticello team created and managed the overall implementation plan, scope, deliverables, and timeline for the Reg BI program. Partnering cross-functionally with business and technology groups to create a set of new and revised policies and procedures that met the four component obligations of the rule, Monticello ensured the client successfully met its compliance requirements.

Financial Services Advisory

Monticello’s wealth of regulatory and compliance experience combined with its deep technical expertise facilitated the fast-paced development of reports to systematically capture in-scope clients and target counterparty remediation in line with guidance from the SEC. In parallel, the team worked closely with the bank’s FICC and Equities Client Onboarding function to develop a brand new Customer Relationship Summary (CRS) that the SEC required each broker dealer to deliver to retail customers, disclosing summary information about the firm: a “Form CRS”. 

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to ensure compliance and reduce regulatory risks. By working with clients to successfully translate complex regulatory requirements into effective business solutions, Monticello enables clients to implement the necessary risk and control framework to ensure industry challenges are turned into opportunities. Our team partnered with Business, Legal, Technology, and Sales & Trading to develop business requirements and oversee the end-to-end execution of a policy and procedure revision and a client onboarding enhancement for the Reg BI program. By leveraging our regulatory knowledge, project management expertise, and proven governance standards, Monticello successfully ensured global trading activity was undisrupted while undergoing a business-critical regulatory initiative.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Achieving Operational Readiness for a Large-Scale Technology Transformation

Engagement Summary

In late 2019, Monticello Consulting Group partnered with the collateral unit at a leading global bank on the operational readiness portion of their OTC bilateral client migration project. The engagement aimed to address the key issues around achieving operational readiness for a global technology transformation. Monticello had multiple responsibilities on this project including: 1) provide program and project management on multiple workstreams, including creation and coordination of end-to-end testing 2) rewrite global procedures, and 3) develop and implement a new cross-region training platform.  Through sound planning, testing, and training, Monticello ensured that users across the globe were operationally ready for the transition to their new global platform.

Case Study Detail

PROJECT BACKGROUND

In early 2019, a leading bank planned to transform the technology used by their global OTC Collateral Operations unit. The plan was to migrate all core collateral functionalities that supported the OTC client population from the legacy platform onto a new proprietary system. The existing proprietary platform had become outdated and needed replacement by a solution capable of supporting growth and the ever-changing regulatory environment.

To prepare a global team across multiple regions and time zones, the client needed to set up an end-to-end testing plan that would ensure all scenarios are covered, regardless of geography. To stay compliant with internal Operational Risk and Control standards, all procedures needed to be updated to reflect the detailed workflows in the target state. Making sure that the procedures are applicable on a global level, without unique regional procedures, was a priority. To distribute the knowledge of the new system, a training program needed to be developed and rolled out globally to more than one hundred users.

ENGAGEMENT OBJECTIVES

E2E Testing:

The end-to-end testing plan validated scenarios from margin call calculation though issuance, settlement, and next day.

1. All relevant scenarios were documented, accounting for exception handling, and test scripts written

2. Testing included regression testing of legacy platform

3. Day over day testing to validate call and pledge status and that balances are accurate from EOD to SOD

Procedures Documentation:

Created procedures documentation for hundreds of new processes being completed out of the target system.

1. Reduced volume of OTC Collateral procedures and eliminated regional procedures

2. Followed firmwide procedures guidelines implemented by internal Operational Risk and Control team

3. Centralized documentation and made available to all users to be used as a resource and training supplement

Training Platform & Plan:

Developed new training process to ensure a smooth transition from legacy workflow applications to the target workflow.

1. Goal - to get users comfortable with the new system before go-live dates and to minimize the learning curve

2. Video software simulations were created to walk a user through various parts of the margin call workflow

3. Plan included live training sessions, self-guided sessions, as well as an attestation of competency

BUSINESS VALUE

Monticello Consulting Group’s Change Management team partnered with the client’s operations experts and development resources to build a well thought out plan to ensure operational readiness for an exceptionally large technology transformation. Monticello’s Change Management expertise helped all stakeholders understand and implement the complex business requirements that encompassed the entire OTC margin workflow including call issuance, pledge booking, approvals, settlements, and internal and client reporting. End-to-end testing ensured that all workflow issues were identified prior to go-live. By creating updated global procedures and a comprehensive training plan, the users across the globe were ready for the change to a new target workflow and Monticello’s client achieved operational readiness for the transition to their new global platform.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Enabling Transformation & Change: Technology Change Standards and Communications

Engagement Summary

Monticello Consulting Group was engaged by a Fortune 500 banking institution to streamline the adoption of technology change standards, improve internal communications, and facilitate external reporting. Financial market participants must adhere to high quality standards when executing critical technology programs. Regulatory agencies are not only concerned with operational risk in the adoption of new technologies, but also want to ensure that critical legacy applications are changed following a strict and controlled process.

The Monticello team was tasked with the development of best-practice change standards. The standards provide change program teams with guidelines in three fundamental pillars: Adoption, Reporting and Training, as illustrated in Exhibit 1. Monticello started this engagement by establishing adoption metrics that drive high quality deliverable standards. As a next step, our team established a robust reporting framework that supported the monitoring and communication of program conditions and status. Many of the reports were automated to improve overall program efficiency. Lastly, the team assembled a knowledge base of reusable job aids and reference documentation to ensure that change teams adhere to consistent implementation standards.

Exhibit 1

Case Study Detail

PROJECT BACKGROUND

The OCC (Office of the Comptroller of the Currency) ensures banks regulated in the United States operate in a safe and sound manner. Our client, subject to a Matters Requiring Attention (MRA) notice from the OCC regarding technology processes and delivery controls, established enhanced technology change policies and standards. Monticello’s Change Management and Financial Services Advisory Team was brought in to support multiple technology teams within fixed income sales and trading. Our clients include technology leaders and executives who are working very closely with their front office business partners. Our mandate was to empower and upskill their program managers and technology team leaders to arm them with the capabilities to efficiently plan and execute while adhering to critical standards.

ENGAGEMENT OBJECTIVES

Change Standards Adoption:

• Monticello developed a change standards tracker containing over 1,500 data points spanning 10 delivery programs, and 50 sub-projects representing over $55M in technology investments. Automated tool helped eliminate delivery delays and compliance breaches.

• Internal quality assurance reviews and audits were conducted regularly.  Weekly Readiness Reports served as an early indicator of success or failure by grading over 80 controls per program.

Communications & Reporting:

• Monticello developed technology performance reports and standardized the output with intuitive metrics that allowed traders to quickly evaluate overnight processes and completion status.

• Monticello automated management reporting by using code to transform raw data into summary decks for daily and weekly executive reviews. Additional reports aimed at improving planning accuracy were semi-automated into emails directed towards technology leaders on a weekly basis to accelerate planning decision making.

• Using Tableau™ software, Monticello’s Data Visualization Team developed and released strategic and actionable reports to technology leaders and executives pertaining to code releases success rates.

Training & Skill Building:

• Paramount to our services is Monticello’s deep understanding of change standards and our ability to transfer that knowledge to program and project managers in a consumable way. We created job aids through SharePoint™, Wikis, artifacts such as templates and samples, and led weekly touchpoints to provide timely and clear guidance.

• Additionally, Monticello’s team helped prepare the organization for external audits.

BUSINESS VALUE

Monticello Consulting Group is a leader in change management and digital transformation. Our team of highly skilled consultants has extensive experience introducing change to organizations through the use of technology. By leveraging our proven methodologies, we successfully supported the adoption of enterprise technology change standards that ensure compliance, lowered operational risk, and achieved 98% on-time deliveries.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Leading Transformation: IBOR Portfolio Transition and Go-to-Market Readiness

Engagement Summary

The Interbank Offered Rates (IBOR) underpin the vast majority of derivative and cash loan product contracts in the financial markets. As a result, the IBOR transition is likely to be one of the biggest transformation programs many global financial institutions undertake. Given the current focus on the COVID-19 pandemic, this transformation is even more challenging prompting the need for strong program leadership. The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group in late 2019 to spearhead and manage the IBOR Transition Program. The massive transformation to be prepared for IBOR cessation can be broken into two distinct areas: 1) Portfolio Transition Readiness and 2) Go-to-Market Readiness. Portfolio Readiness is achieved by understanding all existing IBOR exposures and having vetted processes in place to shepherd every exposed facility to an approved risk-free rate (RFR), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Sterling Overnight Index Average (SONIA) in the U.K.. Go-to-Market Readiness is achieved by the enhancement and testing of all pricing, underwriting, fulfillment, accounting, and data repositories that will need to onboard and service new facilities referencing the RFRs. Accounting system enhancements have been deemed the most critical and complex to support new RFRs and billing conventions.

Monticello was brought in to advise on key areas related to both Portfolio Transition and Go-to-Market Readiness:

Wholesale Credit Portfolio Transition Tools and Process:

In preparation for the IBOR cessation, Monticello was asked to review the current business-as-usual processes (credit, operations, technology, and fulfillment) that were in place and determine the scalability and stability. In addition, Monticello also evaluated the ability of existing processes to handle large volumes of transactions in an abbreviated timeframe. During the review, gaps were identified and Monticello designed an end-to-end process to guide the client engagement and facility transition activity of the internal partners. In support of the end-to-end process redesign, Monticello identified the need for, and managed the development of, new internal tools that would enable the bank to systemically intervene in the repricing process thereby reducing the time required for migration. This enhanced process ensured that the bank: (1) engaged and communicated with all clients (2) maintained all legal requirements of each agreement and (3) the ability to demonstrate each step taken to management, clients, and regulators.

Wholesale Credit Loan and Lease Accounting Enhancements:

Monticello was tasked with managing and delivering the end-to-end implementation of enhancements to all loan and lease accounting system of records. This included the ability to support the new risk-free rates (SOFR, SONIA, ESTR, SARON, TONAR), a ‘spread adjustment’ rate to those existing IBOR-referenced loans, and implementation of the new fallback language. In addition, Monticello partnered with the client’s subject-matter experts to construct an integrated project plan to transition all existing loans (legacy loans) and prepare new loans (“Go-to-Market Readiness”) before the industry-wide deadline of December 31st, 2021. Monticello advised the clients on new industry-wide requirements as consultative papers, rules, and regulations continue to emerge. As the IBOR transition impacts many different people, processes, and technology, Monticello reinforced strong governance and control practices. This included a detailed RACI (responsible, accountable, consulted, informed) matrix and an Integrated Communication Plan across the various teams. Additionally, Monticello ensured all sign offs were requested and received before completing all milestones ensuring completeness throughout each stage of the program.

Case Study Detail

PROJECT BACKGROUND

Global regulatory standards published in 2018 require all financial institutions to discontinue issuing IBOR-based loans and derivative contracts by December 31st, 2021. To stay competitive in the wholesale lending market and maintain market share, our client is making significant technology and operational investments to be prepared to support RFRs across multiple currencies. Banks and sell-side firms will lead issuance of RFR-linked products, providing critical liquidity to the market which will enable an industry-wide migration from IBOR-linked derivatives and cash loan products. This program was initiated as a result of a combination of pending regulatory requirements and business efforts to remain competitive.

ENGAGEMENT OBJECTIVES

LIBOR Transition Monitoring Tool Design:

Redesigned the end-to-end rate change, credit documentation, and approval processes to ensure stability and scalability. Additionally, repricing tasks were automated to allow for the most efficient transition possible. Developed new technology tools for use by stakeholders to transition facilities and provide the necessary data for monitoring. Designed interface and user actions within the technology tools to minimize the time frame needed during the transition. Designed and implemented new credit processes to allow for large scale approvals and documentations. Conducted multiple user group reviews to enhance the tool and identify existing process gaps. Created solutions to address the internal gaps utilizing existing tools as well as identifying new processes to close gaps. Tested end-to-end processes and solutions to ensure completeness and accuracy.

Loan and Lease Accounting System Program Management:

Developed an integrated project plan, covering all loan and lease accounting system of records, to successfully track and report the progress to ensure both Portfolio and Go-to-Market Readiness. Developed both industry and enterprise-wide IBOR requirements to ensure alignment with up-to-date regulatory announcements. Constructed an integrated communication plan, which includes a roles and responsibilities and RACI matrix. Coordinated and managed multiple different releases, engaging application owners and downstream testing partners to ensure operational readiness. Collated market data sources to advise client on industry recommended sourcing methodologies to support RFRs. Obtained stakeholder sign offs to allow software releases and new operational processes enablement.

BUSINESS VALUE

Monticello Consulting Group, through a continuous partnership with wholesale banking technology, operations, product management, and enterprise-wide credit teams, positioned our client to offer new RFRs in wholesale lending agreements and transition existing agreements to new RFRs. Our rigorous program management and testing governance methodologies, end-to-end process understanding, aptitude for risk-sharing, and timely execution supported the tangible business outcomes for our client to ensure readiness for this monumental shift in interest rate benchmark reform.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Managing the Implementation of SEC Security-Based Swaps Rules

Engagement Summary

The Global Banking Organization of a top 10 global investment bank engaged Monticello Consulting Group in late 2019 to lead a change management program and help implement the Security Exchange Commissions (SEC) regulatory requirements for Security-Based Swaps (SBS). The rule establishes recordkeeping, capital and reporting requirements for security-based swap dealers and improve the recordkeeping and reporting requirements for broker-dealers. For Monticello’s client, the rule is expected to impact between 2,000 – 3,000 client relationships, requiring infrastructure updates and the establishment of new business processes. Monticello consultants, with their deep regulatory and change management expertise, were brought in to lead the operations and technology transition to meet the SEC SBS rule and related reporting requirements by the compliance deadline of October 6, 2021.

The Monticello team designed a program governance structure to support multiple workstreams comprised of legal and compliance leads, agile scrum delivery teams, developers and testing teams, as well as operational and business process owners. In addition, Monticello supports senior leadership teams and program sponsors by providing ongoing management communications along with key risks and issues and overall program updates for steering committee decision-makers. The structure below summarizes the program governance implemented by Monticello:

Case Study Detail

PROJECT BACKGROUND

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act addresses the comprehensive framework for the U.S. financial regulation of derivative products. Under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has regulatory authority over security-based swaps (SBS) and issued the finalized rule (Rule 135d) on January 5th 2018, with a Federal Register effective date of January 16, 2018. The SEC SBS rule addresses requirements around: Security-Based Swap Dealer (SBSD) registration, business conduct, risk mitigation, recordkeeping, transaction reporting, margin, segregation, and capital. Product scope is single-name and narrow index Credit Default Swaps (CDS), single-name and narrow swaps based on securities or loans (e.g., equity swaps, Total Return Swaps on loans). Given that the breadth and complexity of the SEC SBSD rule and corporate transformation that would need to be undertaken, an overarching program governance was initiated to oversee underlying work streams.

ENGAGEMENT OBJECTIVES

Program Management (PM) & Change Management (CM):

Designed and stood up the SEC SBS program governance structure under Corporate Transformation and Change for the Global Banking Organization. Monticello contributed towards the design of the Program Management Office (PMO) to ensure all transformation and changes to the client’s systems and processes were delivered as required by the business, operations, and regulatory mandates. The PMO structure included the following:

• Define program workstreams, reporting routines, and ongoing program governance based on regulatory requirements and alignment with business needs.

• Identify and manage program assumptions, key issues/risks and internal/external critical dependencies.

• Ensure adherence to overall enterprise change management standards.

• Ensure stakeholder engagement and buy-in.

Communications & Training:

Developed a strategic communications plan to provide critical updates to stakeholders in a timely fashion. The communication plan established audience, communication objective, and channel of delivery. Critical information was summarized in a dashboard that communicated regulatory updates, program status and key risks, issues and dependencies. In addition, the PMO defined key program metrics to facilitate the decision making process of senior program executives.

BUSINESS VALUE

Monticello’s team, through a continuous partnership with Global Banking technology and operations teams, positioned our client for success in developing the operational and technological capabilities to efficiently meet the SEC regulatory requirements. Monticello brought structure to this complex initiative by leveraging Monticello’s program management frameworks. Our team conveyed strong governance standards, regulatory knowledge and end-to-end process understanding to ensure effective change management while meeting the client’s strategic objectives. This partnership has enabled our clients to retain market share of security-based swaps.

SKILLS & KNOWLEDGE (Level of Difficulty)

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The Future of Project Management: Automated Reporting

Engagement Summary

A common problem many program and project managers (PMs) face today is the constant need to update and maintain status reports for executive leadership.  Although these reports are critical, they should not consume so much of a PM’s time that it negatively impacts the timeline of the underlying program itself.  By streamlining and automating the reporting process, PMs will then be able to focus on delivery while still focusing on reporting quality and accuracy. Additionally, senior executives would have access to a centralized location where status reports are available on demand.

Monticello Consulting Group partnered with a Fortune 500 bank to lead the implementation of an in-house project management system. This complex system spanned across multiple teams with the intent of centralizing and standardizing program and project management work in a single location. The executive level status reports could then be automatically generated in real time. The adoption of this application greatly reduced the amount of time a PM would typically spend making manual updates to various reports on an on-going basis.

The Monticello team was responsible for constructing the overall implementation project plan, delivering the necessary training material, conducting live training sessions, and governing user adoption. Additionally, Monticello supported senior leadership teams and program sponsors by providing continuous project updates including any key risks or issues discussed in weekly steering committees.

Case Study Detail

Senior executives found it increasingly difficult to assess program health on a real-time consistent basis. They found themselves in a multitude of meetings with a lot of wasted time spent reviewing status reports. These status reports were in different formats and produced manually by program managers. To lessen the burden on PMs and streamline the process for senior executives, the concept of a centralized tool with automated reporting capabilities was proposed. With this concept, PMs would no longer track their progress offline, but rather, all of their reporting would be managed on a centralized online tool. The use of this tool was easily accessible by senior executives and had the ability to produce real time status reports at the click of a button. This would significantly cut back the amount of time spent producing reports as well as provide senior executives with consistent real-time reporting.

MOBILIZE TEAMS FOR SUCCESSFUL GO-LIVE

Program Management (PM):

Created and managed the overall implementation plan, scope, deliverables, and timeline. Coordinated with key stakeholders and users across business and technology to conduct live user training sessions. Addressed and escalated any relevant risks or issues while attaining necessary sign offs required for completion.

Change Management (CM):

Led the user adoption effort by conducting multiple live training sessions across the organization.  Actively collected and documented user feedback by utilizing online surveys in order to better communicate future changes for all relevant teams

Communications:

Developed a strategic communications plan to provide critical information to stakeholders.  Determined and implemented how, when, and how often communications would be received.

Training:

Designed the training curriculum as well as materials required for all users. Conducted live training sessions supplemented with on-demand recorded sessions to ensure users developed the knowledge and skills needed to use the tool.

BUSINESS VALUE

Monticello Consulting Group is a strategic partner in digital transformation and change management. Our team of highly qualified consultants has extensive experience introducing change to organizations through the use of technology. By using our proven approach to project and change management, we successfully delivered a customized solution resulting in reduced manual efforts, greater efficiencies, and cost reduction across functional areas of the client.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Effective Program Management for Structured Notes Markets

Engagement Summary

In 2019, the structured notes technology organization of a leading investment bank engaged Monticello Consulting Group (MCG) to advise on their existing program management structure, define the tangible target program outcomes, create a tighter link between technology and business, and provide ongoing governance for managing projects. The client’s ultimate goal was to leverage technology to enable the business to expand its trade capture and risk management capabilities.

The MCG team analyzed the program’s current processes and defined a program governance structure to enhance how the technology organization engages with the business to provide more viable solutions for trading efficiencies. In addition, MCG supported senior leadership teams and program sponsors by providing ongoing management communications including managing the technology application roadmap and product and release management reporting. The major challenge for the client was the need for stronger processes to enable large scale business growth while maintaining predictability and transparency between the business and technology teams. Year to date, the structured notes team has achieved many of their desired business and technology goals and have gained significant market share since 2018.

Project Background

The structured notes issuance and risk management organization has begun to expand its business beyond the wholesale industry and into the retail and secondary markets. As competition to sell structured notes has grown significantly throughout the banking industry, our client looked to improve its operations to better position itself for continued growth. Our client made significant technological and operational advances to better support the expansion of more complex business needs.  Improved leadership communications and coordination between the front office business and technology organizations were paramount. Additionally, the critical balance between technology and business requires effective program/project management to eradicate redundancy and scope creep impacting delivery. This strategic engagement with Monticello was initiated as a result of the business’ desires to remain competitive in the structured notes market as they looked for a trusted advisor to support their business-critical change initiative.

Engagement Activities

Program Management:

Analyzed the program’s current processes and how the technology organization engages with the business. MCG advised on the design of an independent PMO to ensure all changes to the client’s systems and processes were delivered as required by the business. Designed standardized templates and test cases for the development team to use and share with the business who would perform UAT testing. Leveraged industry-leading program management methodologies to create and quantify value for the technology team as well as the front office.

Business Value

Monticello’s Change Management team, through a continuous partnership with global markets technology and operations teams, helped position our client for success in developing the capability to expand structured notes issuance in new markets. Our rigorous program management governance methodology, end-to-end process understanding, and timely execution supported business transparency into technology work which allowed the business more opportunities to leverage technological capabilities. The new governance structure also allowed senior leadership to better understand and implement strategy, focus on tangible business outcomes, and engage in more business opportunities in the wholesale and retail trading of structured notes.

Enablement of Agile SAFe for a Global Bank: Intake and Capability Model Definition and Implementation

Engagement Summary

The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group (MCG) in early 2019 to analyze and improve the efficiency of Agile processes across the Treasury Data organization according to Scaled Agile Framework (SAFe) best practices. The goal was to eliminate any redundant efforts, create more controlled project intake and reporting functions, and identify opportunities to improve the existing SAFe processes. MCG spent time observing, interviewing, and understanding the Treasury Data team’s goals and challenges.  During the current state review, it was noted that most aspects of the SAFe framework were implemented and functioning adequately. However, management would gain the most benefits from 1) properly aligning their data model to known business capabilities, 2) implementing a more comprehensive project intake and prioritization process, and 3) creating an accurate metrics reporting framework to better highlight projects at risk, over/under utilized teams, and future program increment planning. 

Case Study Detail

Capability Model

MCG met with Treasury Data management and key data domain stakeholders to understand the primary consumers of treasury data and the overall data strategy of the organization. Based on those discussions, the MCG team mapped data and business domains to business capabilities supported by the Treasury Data team. The resulting capability model promotes a shared understanding of data and stakeholders and is used as a basis for how to structure teams, prioritizing data provisioning requests, and scoping work. It also aligns with the strategic goals of the organization when it comes to the availability and provisioning of data globally.

Intake and Prioritization

The team observed that due to the high volume of treasury data provisioning requests coming from across the Wholesale Banking enterprise there were opportunities for improvement regarding the management of intake, prioritization, and viability assessments of work before it even reached the product owners, development teams, and product backlog. To improve the efficiency of data request management, MCG created a project intake and prioritization model for data requests which included a detailed end-to-end process flow and supporting team structure with roles and responsibilities. The intake and prioritization model enabled the Treasury Data team to engage the right data domain experts, map it to a business capability, and prioritize it against the project backlog.

Reporting Framework

As per Agile SAFe principles, the client had organized development efforts into time-boxed sprints within defined program increments. The sprint structure was working adequately, however, there was no mechanism to report accurate project status to upper management to properly forecast for future budget cycles and monitor against current budget limitations. To address this, MCG implemented Sprint Burndown and Velocity metrics along with Program Increment level reporting to keep key stakeholders up to date on overall delivery timelines and provide an executive level view into the accomplishments of the Treasury Data team and their integral role with provisioning data across the enterprise.  

Business Value

Monticello’s team, through a continuous partnership with Treasury Data and operations teams, positioned our client for success by identifying opportunities to create efficiencies by applying SAFe principles and eliminate weak processes. Our program management, governance and software delivery experience, end-to-end process understanding, and timely execution supported the client’s goal of continuously improving its current Agile SAFe software delivery capabilities.

Leading Change for a Global Bank: IBOR Replacement for Wholesale Banking

Engagement Summary

The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group (MCG) in late 2018 to help lead and manage the program to transition off Interbank Offered Rates (IBOR).  The business outcome being sought was a transition of the bank’s wholesale loans business from IBORs to new alternate reference rates, such as the Secured Overnight Financing Rate (SOFR) in the US and Canada and the Sterling Overnight Index Average (SONIA) in the UK.  MCG was brought in to advise on the program structure, define the target outcomes, and provide ongoing governance for the multi-year IBOR replacement program to prepare the bank to offer alternate reference rates to its wholesale lending customers in the US and European markets by the end of 2019, with other geographies to follow in 2020.

The MCG team designed a program governance structure to support multiple workstreams comprised of wholesale credit product owners, agile scrum delivery teams, developers and testing teams, as well as operational and business process owners. In addition, MCG supported senior leadership teams and program sponsors by providing ongoing management communications including the technology application roadmap, product and release management reporting, along with key risks and issues and overall program updates for steering committee decision-makers. The structure below summarizes the program governance implemented by MCG:

Project Background

Global regulatory standards published in 2018 require all financial institutions to discontinue issuing IBOR-based loans and derivative contracts by 2021 and replace these products with alternative reference rates based on regional requirements. To stay competitive in the wholesale lending market and maintain market share, our client is making significant technology and operational investments to be prepared to support SOFR and SONIA rates in lending contracts as early as Q2 of 2019. This program was initiated as a result of a combination of pending regulatory requirements and business efforts to remain competitive.

Engagement Objectives

Program Management:

Designed and stood up the IBOR replacement program governance structure for the wholesale banking technology organization. MCG advised on the design of an independent PMO to ensure all changes to the client’s systems and processes were delivered as required by the business, operations, and regulatory mandates for the IBOR replacement program. 

Testing Governance:

Developed testing plans with technology and business teams to track the effectiveness of technology enhancements being introduced as a result of this program. Conducted multiple end-to-end testing cycles engaging application owners and project working groups within the wholesale credit line of business. Obtained stakeholders signoffs to allow software releases and new operational processes enablement.

Business Value

Monticello’s team, through a continuous partnership with wholesale banking technology and operations teams, positioned our client for success in developing the capability to offer alternative reference rates in wholesale lending contracts. Our rigorous program management and testing governance methodologies, end-to-end process understanding, aptitude for risk-sharing, and timely execution supported the tangible business outcomes for our client to be ready for this monumental shift in interest rate benchmark reform for global debt instruments.

Uncleared Margin Rules: Managing a Highly Visible Global Regulatory Mandate for Readiness and Go-Live

Engagement Summary

Since the first over-the-counter (OTC) derivatives margin rules rolled out in 2016, large broker-dealers and global banks have faced increasing compliance costs, all the while competing with central counterparty clearing houses. To stay relevant in the OTC business, our clients have invested significantly in technology solutions aimed at streamlining operations and client onboarding processes. With deep experience managing regulatory compliance programs, Monticello has been selected as the choice partner to maximize return on investment for upgrading collateral platforms to keep our clients in compliance with Unclear Margin Rules (UMR).

In 2020, buy-side firms such as asset managers, institutional investors, private equity firms, and hedge funds will become subject to UMR Initial Margin (IM) regulatory requirements. The number of counterparties coming into scope for Phase 5 of UMR will increase from the current count of a few dozen large banks and broker-dealers to thousands of trading counterparties by September 2020. To support this significant increase in counterparty inclusion in the regulation, global banks are upgrading their technology platforms and processes to support a monumental transition for their buy-side clients. Third-party solutions, aimed at streamlining the legal document negotiation process, are attempting to use UMR as an opportunity to digitize a historically manual negotiation process. Monticello has helped our clients identify viable third-party solutions, assess the technical and operational challenges associated with each solution, and facilitate a smooth integration with the selected vendor solution.

The table below shows threshold amounts that are gradually lowered, falling to $8 billion in notional amount in Phase 5 by September 2020. As the IM threshold is lowered, the number of counterparties that will be subject to UMR dramatically increases.

*Amounts reflect an aggregate average notional amount (AANA) for March, April and May of each phase-in year

Project Background

Since 2015, Monticello has partnered with large banks, broker-dealers, and asset managers subject to UMR for OTC derivatives.  Monticello continues to support clients with program management and testing governance services while also leading operational improvements and enhancements to trading processes. Our expertise in testing governance includes client onboarding, legal documentation negotiation leveraging new cloud-based platforms, collateral processing for prime brokerage clients, portal-based integration with buy-side clients thus offering margin pricing tools, and access to a large network of third-party custodians.

Engagement Objectives

Program Management:

Raise program awareness across OTC derivatives sales and trading desks.  Manage the execution of go-live activities detailed in a “runbook” that engages legal, operations, technology, and change teams.  A runbook contains the go-live tasks and coordinates their execution across the many departments involved in the event over a defined time period.  Typically, the time period begins several days or weeks prior to the go-live event and stretches past go-live to ensure the production environment is stable and clients are not negatively impacted by the large changes being introduced to the business processes and technology platforms.

Testing Governance:

Conduct multiple end-to-end trade and margin processing testing cycles, engage application owners within the UMR ecosystem.  Obtain stakeholders’ signoffs to allow software releases to production and enable new operational processes.

Perform reference and trade data quality checks and track the collateral processing of initial margin calls within service level agreements.  Operate a “control room” to gather critical issues and report service status to program stakeholders during the go-live period.

Service Introduction:

Business Value

Through a continuous partnership with our clients’ technology and operations teams, Monticello has been able to support the tangible business outcomes sought by our clients to achieve compliance within the new UMR regulations. Monticello’s rigorous program management and testing governance methodologies, understanding of end-to-end business processes, willingness to shoulder delivery risk, and timely execution has supported our clients’ strategic objectives.  This partnership has enabled our clients to retain market share in the competitive landscape of OTC uncleared swaps trading.

Tier 1 Global Financial Institution: Strategic Business Restructuring

Engagement Summary

Since 2015, Monticello Consulting Group (MCG) has partnered with a Tier 1 global financial institution to separate the existing broker-dealer business that provided coverage for its Retail clients and Institutional business. MCG’s regulatory and project management expertise helped distinguish the team from the competition, and that has given the customer the confidence to engage MCG across the life of the program to lead pivotal roles across major workstreams.

The existence of institutional and retail broker-dealer business activities within the same legal entity gave rise to risk that, in the event of a liquidity shortage in the institutional business, the retail business would be adversely impacted.  Further, in the event of a regulatory proceeding, retail client assets could be frozen for a significant period of time. As a result, this could cause client hardship and a systemic risk of a run on the retail banking business as a whole.

The MCG team served as a primary point of liaison across workstreams and the Executive and Technical PMOs. MCG project managers and business analysts were able to draw on their experience and expertise and work with stakeholders from all functional areas throughout the project lifecycle leveraging proven MCG methodologies and toolsets while also developing custom solutions required for this program’s success. MCG financial services SMEs provided further guidance to support regulatory and business requirements.  To minimize the risk associated with such a large program, the transition was split into multiple releases beginning in 2017 and running through 2019.

Project Background

The client aimed to separate the business into two legal entities to provide optionality of resolution strategies.  As a result, the institutional business was migrated into a newly formed broker-dealer while the retail business remained in the existing broker-dealer. Project benefits included the reduction of the company’s systemic risk profile, increased resolvability, and optimized technology and operations infrastructure for the target entity.

Engagement Objectives

Project Management:

• Served as primary point of contact with Executive PMO and Technical PMO for covered workstreams

• Managed PMO risk reporting and tracking

• Prepared regularly scheduled formal briefings including structured decks and metrics

• Developed executive briefings

• Liaised and coordinated collaborative activities with other workstreams

• Designed and implemented project management tools for reporting and metrics

• Developed Resource Plans and maintained project life-cycle for business and technology teams

Business Analysis:

• Developed Business Requirement Documents with traceability matrices for covered products

• Created test cases for covered products

Testing Governance:

• Developed test plan definition and execution management for multiple products for migration and future state end-to-end transaction flows and booking models

Service Introduction:

• Built and tested (Dress-Rehearsals) of Go-Live Run Book for covered work stream

• Managed Control Room during event execution of Dress Rehearsals and Go-Live

Business Value

Based on MCG’s long-standing and highly successful relationship, the client entrusted MCG with many key aspects of the program from start to finish. Given MCG’s ability to provide leadership, communications, project management, and proactive support, the partnership continues to flourish through execution and MCG has taken on additional roles and responsibilities to support program expansion. Today, the team continues to deliver exceptional results and the program is on track for a successful go-live in Q2 2019.