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Look Before You Leap – 4 Key Factors to Consider at the Start of a Capital Markets Business Transformation Programme

How can you be confident that your process improvement, cost saving initiative, or regulatory programme will deliver the outcome you expect? Large organisations are notoriously complex so the law of unintended consequences can undermine benefit realisation even very late in the delivery.

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Time spent understanding how things work today should not be regarded as time wasted – you may think you already know how your business operates, but in the majority of cases we find that reality is more nuanced. In our white paper, “5 steps to a successful trade migration programme”, Citihub Consulting emphasises the need for a sound business case based on an honest view of the current state and a realistic target state on which to deliver the business benefits.

A comprehensive analysis of a business transformation programme would ideally consider

  1. Business Operating Model (front-to-back)
  2. Trade Booking Models
  3. Systems Architecture
  4. Cost Discovery (IT and business operation)

The approach developed at Citihub Consulting combines empirical and theoretical: what we can discover is validated against what we already know, and it doesn’t have to take too long or cost too much to build this comprehensive picture.

1. Business Operating Model

The front-to-back operating model is a good place to start, typically aligned along a product dimension. Armed with a tried-and-tested conceptual model of the processes to run a trading business, and the experience of having documented these in a wide variety of institutions, we can quickly trace the operational and control processes. Incumbent teams may fail to see the context of their roles, and so fail to provide a complete picture of the tasks they perform: we know the inputs and outputs to key processes and will identify when that picture is not complete. This view should include Front Office, Operations and relevant control and oversight functions.

2. Trade Booking Models

This is another area which typically holds surprises. As an external party making an unbiased appraisal of the current state, our approach is to understand the theoretical model from the Front Office trading mandate and test it by looking at the trade inventory itself. Inevitably, this will reveal anomalies: products in unexpected places, risk being booked/managed across systems, evidence of legacy booking models, splits between operational and risk bookings, etc. Understanding this is critical to achieving a replatforming, decommissioning or regulatory strategy: it impacts the operating model, the architecture, and your ability to understand 100% of your business bookings. For example, IT systems (and associated costs) cannot be removed until the last trade is taken away.

3. Systems Architecture

IT System documentation is often patchy and usually takes a parochial perspective – a detailed front-to-back view is rarely available. We capture from the source documentation, or interviews if required, and generate a comprehensive view aligned with the operating model and booking model dimensions. This allows us to identify gaps based on the functions we know must exist and must be supported. Real insight begins to emerge when you can see products, business functions and systems all in the same context: do you have duplication of functions, of products (which may be significant for FRTB comparability), or inappropriate separation (e.g. business split across sub-ledgers or risk platforms)?

4. Cost Discovery

Of course, cost is a major driver in the current climate. A rich and detailed picture of the business operation emerges when cost figures are aligned with the operating model and IT architecture. Citihub Consulting’s experience in understanding and analysing the Total Cost of Ownership of business and IT costs enables a consistency check can be performed.

This analysis is powerful: for example, we can see cost by function, the systems implicated in a business line, or the trade type/ownership distribution around the client’s IT estate. It is based on actual data and evidence, and aligned against business process and product. With this transparency, the team is in a much better position to –

  • understand the real scope of the change being contemplated
  • to better estimate the cost to deliver
  • have greater confidence that the benefit will be realised

Citihub Consulting has successfully used this process to inform IT strategy creation, application simplification, business innovation and IT cost reduction – all useful aspects to consider when preparing for your next big business transformation programme.


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The author

Tim Jennings

Tim Jennings

Associate Partner, London

Tim works in Citihub Consulting’s FinTech and Digital Enterprise practices, focusing on setting and executing strategic business and technology change for Financial Services firms. He has 20+ years’ experience in Financial Services, with practical experience of business transformation, developing strategic IT and data architecture, and leading adoption for Front Office, Operations and Control functions.

tim.jennings@citihub.com