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 The existing proprietary platform had become outdated and needed replacement by a solution capable of supporting growth and the ever-changing regulatory environment.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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And Then There Was One: Consolidating Trade Booking and Lifecycle Management Systems for a Global Bank

Engagement Summary

Banks with high volumes of capital markets transactions maintain a wide range of product-specific trade booking and life-cycle management systems. For example, equity trading divisions will typically have separate systems for their cash equities, equity derivatives and stock lending/borrowing activities. Similarly, fixed income, FX and commodity trading divisions will have their own asset class and instrument-specific systems. This results in an unwieldy and highly complex IT infrastructure that requires vast quantities of human and financial resources to maintain. It also creates significant dependency and reliance on vendors for any major system changes, upgrades and ongoing product support. In 2018, the capital markets technology division of a global US banking institution retained Monticello Consulting Group (MCG) to assist with a large-scale transformation program to address these challenges.

Monticello’s client embarked on a multi-year initiative to build a centralized platform to accommodate a wide range of capital markets asset classes and instruments. The ultimate goal was to migrate all of the bank’s financial instruments onto this single system, yielding significant cost savings through the elimination of vendor fees and a reduction in overhead costs. In addition, a single centralized data model will reduce the efforts to meet regulatory reporting requirements and fulfill the reporting needs of internal stakeholders. The centralized platform has the added benefit of adhering to the ISDA Common Domain Model for derivatives products, which facilitates automation of back-office and reconciliation processes by using a standard representation of derivatives trade life-cycle events.

The implementation of a universal transaction platform is an ambitious undertaking that requires close collaboration between multiple technology groups, front office users, operational groups, risk management and finance partners. MCG consultants support our client’s executive leadership team with key program management and application integration expertise.

Project Background

Maintaining a large number of front-end trade booking and life-cycle management systems is both costly and inefficient. Consolidating disparate systems into a single platform will enable our client to stay competitive and to reduce inflated capital markets transaction processing costs. This program was initiated as a result of a cost analysis exercise which identified that our client’s per-transaction costs were significantly above those of peer institutions. In response, the bank developed a compelling business case which demonstrated the direct savings and operational efficiencies that could be gained through system integration and consolidation. Given the scale and complexity of the program, the client requested expertise from MCG to support several key efforts.

Engagement Objectives

Program Management:

MCG revised and streamlined the program governance structure for the client’s technology organization. We implemented an automated project management and reporting framework based on the bank’s existing Program Management Office (PMO) infrastructure. In addition, MCG developed the materials and framework used to communicate to the governance groups and the technology initiative oversight teams.

Testing Governance:

MCG partnered with the client to manage the development and implementation of the testing and reconciliation framework required to validate pre-production releases vs. conditions in legacy environments. The team created a streamlined and coordinated release playbook to manage activities across a large group of stakeholders within the various lines of business. MCG consultants obtained stakeholder sign-offs, oversaw software releases and maintained a documentation archive to capture all relevant supporting artifacts.

Client Value

MCG is a specialized service provider with knowledge and expertise delivering large-scale transformation programs. Our deep understanding of the competitive forces reshaping business models in capital markets, lending, payments, and digital banking are proven enablers that support our clients to remain competitive and gain market share in new and existing businesses. By leveraging our core practice areas covering Agile transformation, program management, and integration governance for complex change, MCG positioned its client for success by delivering the initial build-out of its proprietary booking and life-cycle technology solution. Our innovative program management approach allowed client stakeholders to drastically reduce the time spent updating multiple project plans and coordinating status updates. Instead, the client focused its time on meeting the milestones required to achieve the program’s rigorous schedule.

Leading Change for a Global Bank: Consolidated Audit Trail (CAT)

Engagement Summary

Monticello Consulting Group (MCG) partnered with the Non-Financial Regulatory Reporting (NFRR) team at a tier 1 global bank to help lead the transition of Order Audit Trail System (OATS) reporting to a new technology platform while also leading the planning and implementation of upcoming CAT reporting requirements. MCG’s rigorous program management and testing governance methodologies, prior experience in the OATS space, end-to-end process understanding, and timely execution helped achieve the business objectives for our client and prepared them for CAT reporting obligations.    

Specifically, MCG was brought on-board to manage the following:

Successful implementation was critical for the bank to fulfill a regulatory commitment and launch the new reporting engine which will also support CAT. MCG continues to support the operations team for the upcoming CAT requirements through planning, stakeholder management and program leadership. The MCG team recently developed an operations stability plan establishing end-to-end controls from data sourcing and aggregation, transmission and post submission to better manage increased CAT reporting requirements and stabilize BAU. MCG has partnered with the client from the start by planning and structuring the program, setting up testing best practices and ensuring the build per CAT regulatory requirements.

CAT Reporting Timeline (as of June 2019):

Project Background

The SEC rule 613, CAT, aims to track lifecycle activity throughout the U.S. markets in National Market System securities and identify the broker-dealers handling them, thus “creating a comprehensive consolidated audit trail.” CAT’s primary objective is to enhance the ability of the SEC and Self-Regulatory Organizations (SROs) to oversee trading in the US equity and listed options markets. CAT greatly expands on the requirements of the Order Audit Trail System (OATS) regulation, which was adopted in 1998. Firms who have processes and controls in place for OATS will need to conduct gap analysis and extensive planning in order to ensure a smooth transition to CAT, which requires significantly increased data reporting requirements.

Engagement Objectives

Program Management:

The MCG team planned and managed execution of OATS UAT involving various Order Management Systems (OMS) and a reporting system while partnering with IT for defect resolution and production roll-out. Authored CAT BRD ensuring each OMS complies with the latest data dictionary requirements and planned for CAT testing. Established controls and escalation points for the various systems and support teams listing out the processes as part of the operations stability plan.

Testing Governance:

Created a detailed UAT plan highlighting scope, approach, and execution strategy of OATS and CAT UAT. Created UAT test scripts ensuring full scenario coverage for each order management system. Validate testing results, identify defects, perform root cause analysis and coordinate with IT to manage defect resolution. Managed all UAT cycles, engaging the OMS responsible for OATS generation and obtaining signoffs for production release.

Business Value

MCG assists clients across the financial services industry in implementing the necessary infrastructure to ensure compliance and reduce regulatory risks. The MCG team through its planning and approach formed a strong partnership with the OATS operations, technology and change management teams, and gained the trust of the stakeholders early on to ensure that the new platform is fully verified and tested before accepting it as the BAU reporting engine. MCG’s comprehensive testing techniques and governance, strong project management practices and expertise in this area helped the client achieve regulatory commitments, compliance and business objectives.