Agile Empowerment: Enhancing BPM Systems for Organizational Transformation

BIP.Monticello was engaged by one of the top four U.S. banks to assist in enhancing their business process management (BPM) system through Agile methodologies. BIP.Monticello’s focus was on practical implementations, emphasizing streamlined customizations alongside their preexisting capabilities. Leveraging our expertise in agile management, we aimed to standardize approaches to product management and optimize their team’s potential to deliver under an aggressive timeline.  Key highlights of our engagement centered around:

  • Team Collaboration and Delivery Risk Mitigation:

    • Establishing guardrails and processes to minimize delivery risk amid team expansion and scope growth.

  • Performance-Oriented Agile Culture:

    • Implementing Agile methodologies and metrics to foster a performance-driven culture within the organization.

 

PROJECT BACKGROUND:

Our client had stagnated in their agile journey, in figuring out where they could improve next. As a result, the overall product quality began to drop and team morale was beginning to drop in tandem. They needed a fresh perspective on how they can move forward in their agile journey while maintaining their unique work culture. BIP.Monticello applied their novel agile expertise and found improved performance and communication outcomes among development and business teams, resulting in a more cohesive workflow.

ENGAGEMENT OBJECTIVES:

Team Collaboration and Delivery Risk Mitigation:

Our initial objective focused on managing the client's expanding team structure as the initial project has exceeded twice its initial scope. The client was going to increase the team’s resource count by 75% and new communication channels and cadences needed to be implemented. BIP.Monticello instituted new reporting and communication channels through their project hub for business and development leadership communication. BIP.Monticello then introduced SAFe best practices, facilitating cross-team collaboration as a response to mitigate the rising delivery risk. BIP.Monticello introduced SAFe ceremonies to enact feasibility assessments and eliminate workflow impediments as they came up. As an immediate result, these meetings replaced several meetings from developers and managers at all levels and deferred out of scope features for mission critical features.

 

Performance-Oriented Agile Culture:

BIP.Monticello advised on the implementation of best practice agile metrics and methodologies to identify bottlenecks and identify key performance factors of high output teams as well as inform business leaders on when to pivot. Cycle time and flow velocity as Key Performance Indicators (KPIs) enhanced the teams' accuracy in estimating project completion to 98% assurance. BIP.Monticello implemented the agile refinement meeting to clarify requirements within the business day. As a result, feature development was completed 30% faster than their previous release.

 

BUSINESS VALUE

This engagement underscored the transformational impact of Agile methodologies in enhancing processes, empowering teams, and leveraging technology for organizational success, aligning with strategic business objectives.

  • Post implementation, the reduction of redundant meetings led to increased focus, saving 2-4 weekly meetings per team member by consolidating discussions into the Scrum of Scrums sessions.  This resulted in an additional 1-2 hours daily for focused work.

  • Introduction of flow velocity metrics enabled leadership to make confident decisions about project scope and timelines, enhancing agility in prioritizing urgent features.

 

SKILLS AND KNOWLEDGE

Technical Skills Needed: 2/5
Agile Project Management: 5/5
Scale of Project: 3/5
Program Management: 4/5

Lending Transformation Program Management

ENGAGEMENT SUMMARY

 Bip.Monticello partnered with the operations team of a top 4 U.S. bank by assets to manage its institutional lending transformation program. The program spanned the wholesale lending line of business and was executed in response to the company’s regulatory commitments. The BIP.Monticello team advised on the design of a PMO to execute the transformation program to eliminate backlogs of loans requiring remediation, reducing tactical risk, and implementing long-term strategic technology and operating model enhancements.

CASE STUDY DETAIL

PROJECT BACKGROUND:

BIP.Monticello worked in tandem with client stakeholders to manage the Lending Transformation Program Management Office (PMO). The PMO was created in response to a regulatory mandate, requiring the implementation of structured governance to manage numerous transformation initiatives. Responsibilities included:

  • Developing a streamlined and standardized reporting process to improve efficiency and the quality of key management reports and metrics

  • Implementing PMO governance standards, ensuring buy-in from client stakeholders

  • Producing materials for stakeholder engagement and review sessions, key content to track progress across the program

  • Hosting weekly internal working group meetings and monthly review sessions with key stakeholders for escalations, accountability, and resolving blockers and high priority issues

  • Managing and escalating risk and issues across the book of work which could impact program, project or individual (regulatory and self-identified) deliverables

ENGAGEMENT OBJECTIVES:

The engagement involved eight workstreams, each with a specific focus, that collectively delivered a transformational journey across the division:

  1. Governance – Establish a robust governance structure capable of managing the transformation program by initiating standing committees, defining escalation paths for issues management, and standing up a PMO structure to manage large scale business critical initiatives

  2. Tactical Operating Model (Implementation) – Assess the current state and implemented fixes to address regulatory concerns while developing the Target Operating Model

  3. Backlog Remediation – Identify and ring fence a population of deals across Wholesale Lending which meet the past due criteria and implement a plan to remediate these items

  4. Data & Technology – Assess the data and technology used to support the business and develop a plan to enhance and replace existing systems to meet future needs

  5. Issues Management – Develop a framework and policies and procedures, outlining the process for tracking, managing and escalating issues to the appropriate forums and senior management

  6. Balance Sheet Controls – Implement internal controls to prevent and detect errors and frau

  7. Resource Management – Develop a program to address resourcing issues such as retention, training and development

  8. Target Operating Model – Develop and implement the long-term target operating model, positioning the business for sustainable success and efficiency, while resolving and reducing the potential to repeat regulatory concerns

BUSINESS VALUE:

Leveraging our expertise in change management, BIP.Monticello partnered with the client to successfully stand-up the Lending Transformation Program (LTP), designed to fulfill the banks regulatory commitments. This PMO satisfies a portion of the company’s response to implement a governance program and bring its operation in compliance with regulatory commitments, as well as to enhance the competitiveness of the business in the markets it operates. The LTP program is a multiyear global initiative, designed to transform how the bank operates by streamlining operations, enhancing business critical technology, developing better data management practices and resource development.

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Booking Control Framework Enhancements

ENGAGEMENT SUMMARY

 A leading global investment bank engaged BIP.Monticello Consulting Group to oversee the design, development, and implementation of new trade booking controls across their Global Markets Business.  Specifically, BIP.Monticello was asked to implement a series of controls within the client’s trade booking control framework, including firm account validation and trader legal entity authorization.

Monticello was responsible for the end-to-end implementation of the project, including data analysis, requirements development, and full lifecycle project and stakeholder management.

CASE STUDY DETAIL

PROJECT BACKGROUND

 

Within the client’s trade booking control framework, the Individual Trader Mandate (ITM) defines trader booking authorizations across four dimensions:

 

1.       Authorized Volcker Desks

2.       Authorized Products

3.       Authorized Legal Entities

4.       Firm Account Ownership

 

To oversee authorization entitlements for global traders across multiple trade capture platforms, the client developed a control framework for ensuring trade bookings are duly authorized. Preventative trade controls validate trade bookings in real time against a series of predefined validation rules, using a centralized rules engine.  The rules engine digests trade details and runs a series of validations to detect violations before the trade can be committed. Preventative control framework supports three types of trade violation blocks: 

 

1.    Hard Blocks prevent trade bookings unless the issue is remediated.  Such blocks provide traders with violation detail and give them the opportunity to correct the errors before committing the trade.

2.    Hard Blocks with Overrides prevent trades from processing.  Trading supervisor can approve an override to permit the trade to proceed.

3.    Soft Blocks, picked up in the second line detective controls, warn trade bookers to review the trade for a specific violation condition.  

 

Detective controls identify post trade violations within minutes of trade booking. Such violations are picked up through the monitoring of a central data bus.  They are fed into a workflow that routes the violation and underlying details to a queue for review and resolution.

 

During the resolution process, the business management teams research the issues and take appropriate actions to resolve and document the resolution as a condition of closeout.  Each violation type has a Service Level Agreement (SLA), defining the required review and remediation timeframe before the issue is escalated. Additionally, serious booking violations can be escalated to a supervisor.

 

Metrics form both controls are reported along various dimensions.   In cases where validations are not determinable, reference data issues are logged and routed to appropriate teams for investigation.

 

ENGAGEMENT OBJECTIVES:

This engagement involved multiple work streams to develop new Preventative and Detective booking controls related to firm accounts and legal entity validations.  BIP. Monticello was responsible for conducting analysis, documenting requirements, and managing the technical implementation and operational adoption of the new controls. 

 

Analysis:

·         Prepared a business impact analysis of the new control framework

·         Facilitated stakeholder buy-in required for control implementation

·         Developed a legal entity authorization matrix across global entities

 

Requirements:

·         Developed the business requirements for control integration across trade platforms, rules engines and reference data platforms

·         Documented legal entity authorization requirements for the algorithm used to evaluate trader authorizations

·         Created test plan, test scripts and acceptance criteria

·         Developed desk procedures; and walked through control management



 Project Management:

·         Defined the integrated project plan across multiple functional and technical teams

·         Hosted weekly working group calls to facilitate project communications

·         Prepared project status and management reports

 BUSINESS VALUE

BIP. Monticello partnered with client’s Business, Compliance and Technology teams to implement enhancements to our client’s end-to-end booking control framework. By leveraging our expertise in data analytics, trading operations, and project management.  BIP. Monticello played a critical role in successfully delivering a technological solution, helping our client meet regulatory commitments for operational risk reduction to the trade booking processes.



Financial Data Operating Model Transformation Program

Engagement Summary

In 2021, a leading global bank engaged Monticello Consulting Group (Monticello) to support a bank-wide remediation effort surrounding its data standardization process.  The goal of the remediation program was to improve the bank’s data quality, data governance, and internal controls, ensuring operational resilience and regulatory compliance.

Monticello responded to the client’s needs by setting up a remediation program governance structure to better facilitate program meetings, drive alignment, manage milestones, forecast resource allocation, and track deliverables. Monticello also helped to design and implement a comprehensive Data Operating Model. The model has three activity groups and 10 steps: Consumer Activities (steps 1-4), Provider Activities (steps 5-9), and Consumption of Data Requirements (step 10).

Case Study Detail

PROJECT BACKGROUND

Our client set up a risk remediation program in direct response to data governance and internal control gaps found in its systems and operations.  Several stakeholder groups were involved, including Finance, Risk & Controls, Compliance, and HR. Monticello was brought on to assist the Finance group in their response to Phase 1 of the four-phase remediation action plan.

The objectives were to improve data quality & governance and reduce regulatory reporting risks by focusing on known data & system issues, processes and controls surrounding manual adjustments, and end-user computing applications The comprehensive Data Operating Model was created to provide an appropriate level of risk data capture and aggregation on the bank’s balance sheet across their products such as Wholesale Loans, FX Derivatives, Retail Deposits and Branded Cards. It provided a step-by-step process to identify and fix the known systems, data, and operational issues.

ENGAGEMENT OBJECTIVES

Program Management & Governance: Assisted the PMO to engage program stakeholders, manage dependencies and maintain management reports

  • Facilitated workshops and meetings, driving alignment on milestones and deliverables

  • Produced weekly status reports, monitored RAID logs, and updated project plan  

  • Maintained a consistent line of communications, ensuring agreements were met for audit review

  • Packaged deliverables, meeting minutes, approvals, and working group materials for submission to Internal Audit

Resource Management: Created the resource plan to forecast cost, utilization, and headcount on the program

  • Created resource scenarios and costing models

  • Forecasted headcount and resource utilization, ensuring a sustainable workload allocation

  • Provided periodic resources & financial updates to program sponsors

BUSINESS VALUE

As a result of Monticello’s expertise in program and change management, our client saw an improvement in program decision making, stakeholder communications, and adoption of the new Data Operating Model. Most importantly, the client saw a substantial reduction of risk around data transformation, manual touchpoints, adjustments, and reconciliation breaks. This reduction of risk allowed our client to successfully close many data and control gaps.

SKILLS & KNOWLEDGE (Level of Difficulty)

 

Optimizing a Bank’s Prime Brokerage Business to Achieve Cost Savings and Accelerate Services Innovation – Test Strategy

Engagement Summary

As part of a large-scale restructuring in 2020, a market-leading investment bank’s Prime Brokerage division approached Monticello Consulting Group to support the design and implementation of a merger of their two key business entities. The goal of this ambitious effort is to optimize redundant and inefficient processes to achieve significant operational costs savings and accelerate services innovation. The strategic aim of the merged entities is to offer its clients a set of unique and differentiated services that better that of the competition.

Following the development of the target state infrastructure, Monticello Consulting Group was trusted to support integrated testing. To facilitate this effort, the team developed an agile test framework through a comprehensive understanding of test strategy and test schedule, and with guidance from a strong Test Governance Office (TGO). In doing so, MCG was able to de-risk the project at an early stage and allow the client to meet its ambitious testing milestones.

Case Study Detail

TESTING GOVERNANCE OFFICE (TGO)

Prior to test planning, it was important to establish an agile Test Governance Office with clearly defined roles and responsibilities for central coordination of integrated testing, issue resolution, and escalation. An agile framework ensures each deliverable is mapped back to business goals, thus promoting a higher level of visibility into not only testing progress but the incremental business value-add. A set of well-defined test strategies, grounded policies, principles, and controls are integral to the successful operation of any testing governance framework. The TGO established standard project templates, tools, reporting, and terminology to enable effective and consistent insights, and to foster clarity and transparency across integrated testing. Further, this approach allowed the team to better manage critical defects, risks, and dependencies from the outset and more easily respond to change in real-time.

TEST PLANNING

With direction from the Test Governance Office, each sub-project was responsible for developing respective test planning documents. Sub-projects first defined the testing universe by leveraging the business requirements document (BRD) developed during the project’s planning phase. As with most projects, the testing scope should be grounded in a project’s requirements. More specifically, utilizing the templates provided by the TGO, the team identified the scope of systems impacted and considered all the merger’s relevant tech and non-tech activities to aid the development of functional testing scenarios. We further cataloged systems to delineate between functional testing and regression testing to help sequence activities, which would be beneficial when creating the test schedule. For each scenario, we subsequently detailed high-level steps test orchestration steps, expected results, and provided validation criteria. To mitigate the challenges of end-to-end testing in lower-level environments, and to facilitate early integrated testing of critical functionality, each sub-project also identified test neighborhoods. These neighborhoods, or key change areas, along with testing dependencies, including test data needs, test environments, and any sub-project interdependencies, were added to our testing models and ultimately fed back into the Test Governance Office for aggregation.

After the comprehensive testing models were formulated, the sub-projects were then ready to develop robust testing timelines. Through close collaboration with our technology partners, the team began to set build start and end dates for each sub-project deliverable. From there, we extrapolated testing timelines factoring in our testing management office’s four primary testing dependencies:

  1. Test Environment availability

  2. Test Data needs

  3. Sub-project interdependencies

  4. Resource Availability

We first had to be cognizant of the various test environments required and when each could be utilized. As it pertains to test data, we needed to understand how the data was being sourced and when the data would be available. To account for resourcing, we developed resource plans, which considered the availability and allocation of different parties in all facets of testing. As the merger was a large-scale project, we also had to factor in cross-workstream dependencies that were prerequisites to testing. Furthermore, the team had to consider how the bank’s competing initiatives impacted the test environment and resource availability and, in turn, our project’s test schedules. Each sub-project submitted its test plans to the test management office, which were reviewed to ensure alignment across the project and aggregated to formulate a comprehensive test plan for the merger.

BUSINESS VALUE

Applying an agile test governance framework can significantly streamline test execution through the deployment of the following:

  1. Rapid Decision Making: Swift and decentralized decision making at the sub-project level

  2. Adaptive Model: Testing models provide flexibility for continuous improvement and constant adaptability

  3. Responsiveness to Change: Since the testing models feed on the BRDs, it is easy for sub-project leads to showcase the deliverables to stakeholders and receive expedited feedback, ensuring continuous improvement

  4. “Just enough” Documentation: Straightforward testing documentation, considering full testing universe and key inputs

  5. Visibility to the Stakeholders: Close collaboration with technology partners to promote their input into testing models and test schedules

  6. Key Metrics and Continuous Improvement: Testing documents have clearly defined metrics and expected results, providing visibility for management about constraints and impediments

Further, the client was able to identify risks as early as feasible and meet its ambitious testing timelines.

SKILLS & KNOWLEDGE (Level of Difficulty)

 

Implementing Trade Monitoring Controls for a Leading Financial Institution

Engagement Summary

Monticello Consulting Group (Monticello) recently partnered with a leading financial institution to support the delivery of a large-scale data remediation and controls program. The goal of the program was to 1) transform the list of external trading venues into a digital platform 2) build detective controls to discover broker and electronic activities being placed on an external trading venue that is not recorded on the inventory list, and 3) develop an escalation management process for the exceptions. These deliverables enhanced the client’s transaction monitoring and trade surveillance capabilities while ensuring regulatory compliance.

The Monticello team combined their proven project management toolkit and effective stakeholder communication to ensure key program risks and dependencies were successfully mitigated and delivered. By leveraging strong data analytics skills and capital markets knowledge, Monticello was able to quickly identify data quality issues and provide sound data remediation plans to eliminate the gaps identified across dozens of source systems and multiple asset classes globally. By applying an Agile methodology and working closely with the client’s SMEs from various functional groups, Monticello successfully implemented the solutions on time, on budget, and with the highest quality.

Figure 1 – Project Workflow

Case Study Detail

PROJECT BACKGROUND

Monticello’s client was looking to implement a digital platform for their trading venues inventory and establish appropriate controls within the year. Given the immense amount of data across various asset classes, systems, geographies and jurisdictions, numerous critical dependencies were required to be completed within a tight timeframe before the controls could begin to be built out:

  • Assess accuracy and completeness of critical data elements in the trading source databases and remediate data gaps.

  • Verify and document pre and post-trade data flow via multiple channels: portal, electronic, and voice/chat.

  • Create mapping tables to accommodate various internal and external product taxonomies used by the institution.

  • Build a relational data model to demonstrate data hierarchy in the new system.

  • Provide evidence of data alignment and demonstrate the concept of controls between the trading venues inventory system and trade repository system.

Upon delivering the key dependencies, the technology solution for the trading venues inventory system and detective controls needed to be completed in eight weeks, thus proving the effectiveness of the controls.

ENGAGEMENT OBJECTIVES

Program Management

Implemented a project management structure to facilitate effective communications across key project teams, manage project scope and track project progress.

  1. Communicated project goals and objectives with key global stakeholders across sales & trading, the first line of defense, the second line of defense, technology, and operations.

  2. Tracked project risks, issues, and dependencies and held weekly project working sessions to ensure stakeholder engagement and early escalations.

  3. Developed KPIs and reporting metrics for executive management communications.

Data Management & Analytics

Collaborated with the development team to deliver system solutions of the trading venues inventory and build automated control processes to detect any circumvented activities.

  1. Identified the key data points to locate global markets trading activities such as trading venues, Volcker desks, and traded products from dozens of source systems.

  2. Designed and tested data queries in coordination with technology and operations teams to facilitate complex trading flows across multiple asset classes: equities, rates, spreads, commodities, and financing.

  3. Conducted a 5-week “proof of concept” exercise before development started to demonstrate the logic and the effectiveness of the detective controls by using data analytics tools such as SQL, Tableau, and Python.

  4. Supported User Acceptance Testing by creating test plans, remediating data quality issues, and creating matrices for SLA verification.

  5. Created a centralized SharePoint to manage documents and store data records to suffice audit requirements.

Agile

Improved the delivery capability of the technology team by following an Agile methodology through multiple iterations.

  1. Managed the progress of the code delivery and incorporated end users’ feedback to the working code on a daily basis.

  2. Tracked data quality issues through Jira to ensure the transparency of data remediation progress.

  3. Organized daily stand-up meetings to address development issues and highlight delivery priorities.

  4. Created burn down charts to present weekly development progress to key stakeholders.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to establish compliance and reduce regulatory risks. By applying expertise in project management, data analytics, Agile methodologies and strong stakeholder communication, the Monticello team successfully implemented a sustainable solution for this large-scale global data controls project to successfully enhance its client’s trade monitoring and surveillance processes. By working collaboratively across sales & trading, first line of defense, second line of defense, technology, operations and audit, Monticello aligned all stakeholders to ensure the timely delivery – ultimately allowing the client to maintain competitive advantage over industry peers while exhibiting sound market conduct and compliance practices.

SKILLS & KNOWLEDGE (Level of Difficulty)

 

Addressing a need for transparency in the security-based swaps (SBS) market

Engagement Summary

The Fall of 2020 saw Monticello called in to support a leading bank’s Regulatory Cross GBAM Initiatives team implement a newly introduced U.S. Securities and Exchange Commission (“SEC”) regulation for Uncleared Security-Based Swaps (“SBS”) and Security-Based Swap Dealers (“SBSDs”) with a Nov ember 1st, 2021 compliance date. As part of G20 reforms to the OTC (over-the-counter) derivatives market, national regulators implemented rules requiring the exchange of margin for all derivatives not cleared through a central counterparty. While the CFTC (Commodity Futures Trading Commission) completed its rulemaking and implementation process a number of years ago, the SEC only recently fully finalized its ruleset. The directive for participants in a previously opaque swap market was to increase transparency, and the various actions to achieve that directive include, but are not limited to, the following client documentation requirements

1) Information Exchange

Security-based swap dealers (SBSDs) can exchange a new ISDA-produced U.S. Self-Disclosure Letter, amongst other related disclosures, with clients in order to understand whether the regulation’s rules apply to their relationship. Furthermore, SBSDs have some disclosing to do on their end. SBSDs, for example, are required to stress their clients’ right to segregate the initial margin for the Uncleared SBS transactions. These are clear examples of the SEC’s efforts to increase transparency in the swap market.

2) ISDA SBS Protocol Adherence

ISDA Protocols have been adding immense value to the industry for decades and the SBS Protocols are the latest installment in their efforts to eliminate the necessity for costly and time-consuming bilateral negotiations. As part of the SEC implementation, ISDA launched the SBS Protocol which is intended to be completed by parties who have not entered into the earlier Dodd-Frank protocols ISDA launched in August 2012 and March 2013. The SBS Protocol enables parties to efficiently amend and/or supplement their trading documentation by incorporating relevant portions of the new SBS rules and regulations

As part of the CFTC implementation, ISDA launched two protocols in August 2012 and March 2013. If a client had adhered to those earlier protocols, their terms were included in their ISDA Master Agreement. The Top-Up Protocol amends the ISDA Master to address regulatory and documentation requirements applicable to SBSDs relating to SBS transactions, allowing terms previously included in the CFTC Protocols for CFTC compliance to be “topped up” for SEC compliance

3) SBS Margin Adherence

These new regulations have their sights set on uncleared SBS trades and ensuring that a mandatory requirement for the exchange of margin is now imposed. In a nutshell, clients must collect IM from an SBS counterparty when breaching the $50 million dollars initial margin threshold and must also exchange VM. As previously mentioned, the CFTC published an analogous regulation many years prior, yet this SEC regulation has a number of nuances that have not only resulted in ISDA providing brand new margin documentation[1] but have market participants exploring the applicability of “substituted compliance.” This mechanism, which became affectionately known as “sub-camp” within the industry is discussed later in this case study and was integral to the evolution of this regulation and how t impacted Day 1 requirements for SBSDs and SBS counterparties.

 Monticello deployed experts from its Change Management and Financial Services practice areas to project manage four of the program’s seven individual workstreams. Monticello’s proven track record in this space resulted in the client equipping Monticello’s team with the authority to centrally manage the governance structure across program workstreams and to effectively hold stakeholders accountable. Given the public nature of SEC Regulations, compounded by the change at the helm of the securities watchdog midway through the program[2], there was heavy scrutiny on program health from senior management up to the Board and C-suite executives. Being in a position to implement a clear communication strategy, which resulted in sound risks and issues management, was intrinsic to maintaining program momentum towards the timely completion of the SEC’s regulatory requirements and satisfying the added senior stakeholder scrutiny.

Case Study Detail

PROJECT BACKGROUND

A brief history on the authority of the CFTC versus the SEC and how that feeds into traditional swaps versus SBS adds some much-needed context to why this regulation has only just been introduced. 2010 saw the declaration of President Obama’s Dodd-Frank Wall Street Reform and Consumer Protection Act, with the CFTC being one of the various regulators tasked with embedding the Act’s rules into the financial services industry. Title VII of the Act focused on swap and derivatives regulation. The CFTC, generally charged with regulating swaps, began to accordingly impose their regulations soon after 2021 but the SEC, generally charged with regulating security-based swaps, have only just begun to impose theirs. The SEC broadly defines “security-based swaps” as swaps based on (1) single security or (2) a loan or (3) a narrow-based group or index of securities or (4) events relating to a single issuer or issuers of securities in a narrow-based security index.[3] Accurately identifying which of our client’s traded products fit these definitions formed the backdrop to the rest of the SEC SBS Program, which was focused on adherence to the rules enabling compliant trading of these products post-November 1st, 2021.

ENGAGEMENT OBJECTIVES

Program Management & Governance

Implemented a project management structure to facilitate effective communication across what were very interdependent program workstreams. Monticello established weekly workstream-specific governance routines within each of its workstreams that seamlessly bubbled up to monthly Executive Council meetings, ensuring senior stakeholders were provided with the most accurate and up-to-date program health updates. The program was educated to consider Executive Council forums as an opportunity to not only keep senior stakeholders engaged but to have decisions and proposals formally approved to remove any obstacles that stood in the way of project momentum. Some more specific examples of workstream program management and governance included:

  • Gathering and defining business requirements in bi-weekly sessions, throughout the program's planning phase, that encouraged active stakeholder participation across the Business, Operations, Legal, Compliance, and Technology. These collaborative sessions focused on mapping the requirements of the rule to tangible business outcomes and, in turn, mapping these outcomes to technological enhancement to the client's trading systems that would facilitate the uninterrupted and compliant booking of SBS trades once the rule took effect.

  • Supporting release management including end-to-end go-live planning, testing, and execution, with the aid of experts from Monticello's testing governance capability.

However, paramount to the success of all program management and governance is the manner in which one chooses to communicate with stakeholders. The chosen communication methodology can make or break a program’s ability to meet its objectives

Stakeholder Communication & Reporting

Leveraged a strategic communication structure to provide tailored updates to stakeholders at varying levels of seniority and accountability for program deliverables. Material program updates were communicated through a weekly 4-blocker that highlighted program status, key accomplishments, upcoming milestones, the path to green plans, and key risks, issues, and dependencies. As Monticello resources began to build relationships with various stakeholders, communication styles were tailored to ensure both the client and Monticello worked together in the most productive manner.

SUBSTITUTED COMPLIANCE AND NO-ACTION RELIEF

Firms looking to establish substituted compliance were largely successful in their applications to the SEC, with the SEC’s final publications of sub-camp orders slightly moving the goalposts for such firms. Our client was one of those firms. Taking a step back, the SEC defines substituted compliance as a “mechanism that allows the Commission to determine that certain participants in U.S. security-based swap markets may satisfy certain requirements under the Securities Exchange Act of 1934 (“Exchange Act”) and the rules and regulations thereunder by complying with comparable non-U.S. requirements.”[4]Our client’s two European entities benefitted from substituted compliance granted in the spring and summer for the UK[5] and France[6], respectively, in which it was accepted that these entities had complied with foreign requirements that the Commission had found to be comparable. This relieved a significant amount of pressure on margin and capital requirements, particularly in terms of complex and time-consuming margin IM and VM CSA documentation that would otherwise have had to be negotiated with clients by November 1, 2021. Unsurprisingly, there were a number of conditions attached to the 200+ page orders that our Monticello Teams pored through with a fine-tooth comb to understand the margin requirements that endured but the fact remained that the documentation burden was reduced. Furthermore, the SEC granted a request from ISDA and SIFMA to issue no-action relief for SBSDs, articulating the fact that they do not need to collect initial margin from certain counterparties in connection with an uncleared SBS until September 1, 2022. This 11-month relief from the initial compliance date for such margin requirements was a welcome respite for not only our client but the swap market writ large.

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 of regulatory compliance implementation. By leveraging our regulatory knowledge, testing governance methodologies, and end-to-end process understanding, Monticello supported the tangible business outcomes for our client to ensure readiness for this significant shift in the oversight and transparency of SBS trades in the financial services industry.

[1] https://www.isda.org/book/sec-initial-margin-bolt-on-supplements/

[2] https://www.sec.gov/news/press-release/2021-65

[3] https://www.sec.gov/opa/Article/press-release-2012-67---related-materials.html

[4] https://www.sec.gov/page/exchange-act-substituted-compliance-and-listed-jurisdiction-applications-security-based-swap

[5] https://www.sec.gov/news/press-release/2021-57

[6] https://www.sec.gov/news/press-release/2021-138

SKILLS & KNOWLEDGE (Level of Difficulty)

Driving Effective Program Governance & Management for Uncleared Margin Rules Phase 5 & 6

Engagement Summary

A top global investment bank engaged Monticello Consulting Group in early 2021 to lead the change management program and help implement the Basel Committee of Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO) requirements for Uncleared Margin Rules (UMR) Phase 5 and Phase 6. In April 2020, the regulators announced their revised final policy framework that provided a one-year delay for Phase 5 and Phase 6 firms. Phase 5 (>$50B notional) Initial Margin compliance went live on September 1, 2021, and Phase 6 (>$8B notional) compliance will be due on September 1, 2022. Monticello’s client has taken this opportunity to look holistically at their collateral management processes and operational strategies to meet their governance and infrastructure needs.

The last two phases of UMR introduced more buy-side firms to the world of Regulatory Initial Margin (Reg IM). The number of counterparties brought into scope for UMR increased from a few dozen large banks and broker-dealers under Phase 4 to thousands of trading counterparties under Phase 5. International Swaps and Derivatives Association’s (ISDA) estimates in the table below highlight the fact that Phase 6 is expected to phase in almost 2.5x the number of clients currently caught by Phase 5’s Aggregated Annual Notional Amount (AANA) range.

Monticello stood up and led the Program Management Office, managing individual workstream deliverables, tracking key program-level milestones, and identifying and managing risks and issues through sound governance practices. Additionally, Monticello established an effective stakeholder communication and training plan. Thus, by implementing a dedicated Program Management Office to centrally manage the governance structure across program workstreams, Monticello’s client was successfully able to meet Phase 5’s regulatory compliance deadline. Since October 2021, Phase 6 planning has focused on lessons learned and best practices from Phase 5 in order to set the program up for success as the program embarks upon implementing a regime for a set of in-scope clients on a much larger and more diverse scale.

Case Study Detail

PROJECT BACKGROUND

UMR is a set of rules that apply to the exchange of margin (collateral) between counterparties trading over-the-counter (OTC) derivatives. The rules were developed in response to the 2008 financial crisis. OTC derivatives are traded under the legal framework provided by ISDA, with the associated collateral terms defined in that ISDA’s Credit Support Annex (CSA). The Rules apply to variation margin (VM) and initial margin (IM). The VM rules went into effect in 2017, whereas the IM rules have continued to be phased in since 2016. Since the first 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 clearinghouses. To stay relevant in the OTC business, our clients have invested significantly in program governance, legal and client outreach resources along with technology solutions aimed at streamlining client onboarding and enhancing trade monitoring controls for IM utilization.

ENGAGEMENT OBJECTIVES

Program Management & Change Management

Monticello led the Program Management Office (PMO) with the bank’s Markets and Transformation Organization to ensure all transformation and changes related to the client’s systems and processes were delivered in line with business, operations, and regulatory mandates. The PMO’s roles and responsibilities for this program included the following:

  • Managing and guiding workstreams project plans, executive management reporting routines, and ongoing program governance based on regulatory requirements and alignment with business needs.

  • Identifying and managing program assumptions, key issues/risks, and internal/external critical dependencies.

  • Managing adherence to overall enterprise project management standards.

  • Leading daily stand-ups with the Client Outreach Team and Workstream Project Managers to successfully meet critical milestones in a timely manner.

Training & Resource Allocation

  • Coordinating efforts to create a training manual and Phase 5 lessons learned in preparation for Phase 6.

  • Creating a template and building metrics for client outreach resource allocation between Phase 5 and Phase 6.

BUSINESS VALUE

With UMR’s six-year extensive implementation journey approaching its last leg, Monticello continued to leverage its project management toolkit and effective stakeholder communication practices to help our client successfully navigate the complex regulatory directives and turn challenges into opportunities to build effective business solutions. Our consultants partnered with cross-organizational client teams and governed the end-to-end execution for the UMR Phase 5 regulatory rules. With deep regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensured our client could maintain competitive advantage over industry peers while exhibiting sound market conduct and compliance within the regulatory landscape.

SKILLS & KNOWLEDGE (Level of Difficulty)

Deploying Program Governance & Issue Management for a Large-Scale Regulatory Program Reset and Review

Engagement Summary

In mid-2021, Monticello Consulting Group (Monticello) partnered with the Global Markets Transformation team at a leading financial institution to support the delivery reset and replanning of a large-scale regulatory program. This reset was initiated by the client in response to an internal review that found the original delivery timeline at risk of missing the key regulatory implementation dates and minimal internal processes around change management and issue remediation. Monticello’s Financial Services Advisory and Change Management Practice Areas were brought in to help lead the program and provide additional support in preparation for an upcoming Office of the Comptroller of the Currency (OCC) regulatory audit focusing on these key areas.

Monticello deployed resources across numerous program work streams to support the Transformation Program Management Office (PMO) to track project plans, key milestones, risks, issues, and dependencies. The Monticello team combined their proven program governance toolkit and effective stakeholder communication to ensure key program risks and issues were successfully mitigated and resolved through sound governance. Additionally, Monticello managed all program reporting obligations and supported senior leadership and program sponsors through bi-weekly program status updates to the program’s working groups and Steering Committee to present progress made against the firm’s regulatory commitments.

Monticello’s Approach:

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Case Study Detail

PROJECT BACKGROUND

The Global Markets Transformation executive team initiated a program reset on the key FRTB regulatory initiative that required a dedicated team of resources to assist with a cross-domain, business, and technology replanning effort to ensure successful delivery and completion by the required regulatory dates.  Additional emphasis to improve change management and issue remediation practices in preparation for an external OCC examination was also required.

ENGAGEMENT OBJECTIVES

Program Management & Governance

Managed program governance under the change management function for the Global Markets business. Monticello supported the FRTB Program Management Office to drive the replanning effort and delivery of the regulatory program through stringent execution of project plans, timely risk, and issue management, and robust governance standards. The PMO function included the following Monticello team responsibilities:

  • Drove FRTB program re-planning efforts and built go-to-green plans for cross-program and workstream-specific deliverables and dependencies.

  • Integrated with existing governance routines and recommended the creation of new forums to ensure executive-level visibility of critical deliverables and effective monitoring of cross-program dependencies.

  • Coordinated workstream-level planning and agreement on FRTB scope, the timeline for delivery, RACI matrix, and key RAID items.

  • Created and managed a central repository to track all FRTB requirements. Created requirements governance standards and ran gap analysis process to identify missing requirements or insufficient level of required detail.

  • Ensured adherence to enterprise-wide program management standards.

Stakeholder Communication & Reporting

  • Leveraged a strategic communication structure to provide tailored updates to stakeholders at varying levels of seniority and accountability for program deliverables.

  • Chaired program-wide meetings to liaise with workstream PMOs on project statuses.

  • Led individual workstreams and project working groups from identifying requirements through production release and signoff.

  • Defined reporting routines and effective program governance processes to satisfy requirements and align with business needs. Critical program information was communicated through a dashboard that highlighted program status, path to green plans, and key risks, issues, and dependencies.

  • Formalized agile framework methodology and introduced new reporting metrics based on utilization of new fields for reporting purposes.

Change Management

  • Reviewed current project documentation and provided recommendations for enhancements; especially around test strategy documentation.

  • Initiated the creation of a Data Dictionary for the FRTB Program to be presented as part of the OCC Review.

Issue Management

  • Raised and tracked JIRA tickets for Front Office Technology teams to investigate and resolve gaps around identified differences between sensitivities generated for Basel 2.5 requirements vs. FRTB.

Data Management

  • Advised client on the best path forward given current state infrastructure & hardware challenges to support all data requirements needed for full-reval HVaR and FRTB.

  • Facilitated meetings between Front Office Technology, Risk Technology, and the Business to understand reference data systems and identify trade flows with capital charge spikes requiring remediation.

  • Developed roadmap for building formal FRTB data governance across the organization including defining critical data elements, along with mapping existing and new architecture and data flows.

  • Identified existing and new reconciliations and controls.

FRTB Standardized Approach (SA)

  • Maintained and adjusted where needed the global plan for EMEA CCR2 to respond to UK and US regulations.

  • Incorporated regulatory interpretations and documented business requirements for the design, build, and release of risk technology to collect Front Office trade data, calculate risk sensitivities, enrich data, and where required calculate capital charges.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to establish compliance and reduce regulatory risks. By leveraging our program governance toolkit and strong stakeholder communication, Monticello enables clients to successfully navigate complex regulatory directives and turn challenges into opportunities to build effective business solutions. Our team partners with cross-organizational client teams and oversees the end-to-end execution for Consent Order remediation. With deep regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensures global financial institutions can maintain a competitive advantage over industry peers while exhibiting sound market conduct and compliance within the regulatory landscape

SKILLS & KNOWLEDGE (Level of Difficulty)

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Enterprise Change Standards Implementation for IBOR Transition

Engagement Summary

In mid-2019, Monticello Consulting Group (Monticello) partnered with the Global Markets Technology team at a leading financial institution to support the delivery of a large-scale transition from IBOR-based interest rates to Alternative Reference Rates (ARRs) as mandated by the British Banking Authority. This program was initiated by the client in response to the need to change the core technology for Global Markets that supported pricing, trading, and risk management of products that utilized the IBOR interest rates. The goal of the program was to transform and enhance frameworks and capabilities through:

  • Development and update of core technology changes for analytics, pricing, trading, and risk platforms to use the new ARRs

  • The transition of the discounting methodology to ARRs for the transactions that have been cleared at the Central Clearing Counterparties

  • Creation of an end-to-end testing framework for financial products that use the new ARRs

  • Remediation efforts for ISDA client agreements that reference IBOR as the interest rate noted to govern those documents.  The agreements were updated with language to stipulate the fallback protocol to use ARRs when IBOR is no longer in use.

Monticello deployed resources across the program workstreams to support the delivery of technology solutions, as well as the Program Management Office (PMO), to track project plans, key milestones, risks, issues, and dependencies. The Monticello team combined their proven program governance toolkit and effective stakeholder communication to ensure key program risks and issues were successfully mitigated and resolved through sound governance.  The transition away from IBOR interest rates is a high-profile change for the industry and this changeover needed to be executed flawlessly in order for the client to demonstrate to their customers they were well equipped to provide the necessary support during this period of significant transformation. Deploying a dedicated Program Management Office to centrally manage program governance enabled Monticello to effectively execute on deliverables, utilize a clear communication strategy and maintain project momentum towards meeting major milestones in a timely manner.

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Case Study Detail

PROJECT BACKGROUND

IBOR reference rates have been an integral part of the financial markets for decades and were used in a variety of financial contracts including mortgages, interest rate derivatives, and floating rate securities. After IBOR had been mired in scandal, oversight of the rate was taken over by the Financial Services Authority in 2012. By 2014, the Financial Stability Board recommended developing ARRs to replace IBOR as the core rate in financial contracts. At the time, the London Interbank Offered Rate was the benchmark for over US$350 trillion in financial contracts worldwide and the transition to a new reference rate would certainly be an arduous undertaking for any financial institution. Monticello’s client initiated the IBOR Transition Program to support the Global Markets Technology teams in their preparation for the transition to ARRs across front office and enterprise technology teams.  Monticello was engaged in 2019 to initiate the project and support the Global Markets Technology senior leadership team to drive this complex global transformation towards success.  

ENGAGEMENT OBJECTIVES

Program Management & Governance

The Monticello team provided program governance in support of the Global Markets Technology teams. Monticello also supported the PMO to drive the timely delivery of the key components of the program, inclusive of the foundational technology changes to support these changes, transition of discounting methodology at the central clearing counterparties, and new product enablement.  This was achieved through stringent execution of project plans, timely risk and issue management, and robust governance standards. The PMO function included the following responsibilities:

  • Manage and report program deliverables leveraging the JIRA platform.

  • Partner with workstream leads to identify and manage key issues, risks, and internal/external dependencies.

  • Support testing efforts to ensure completeness of test plans, track progress and ensure stakeholder sign-off.

  • Create and maintain the key artifacts for the program and store them in the central tracking repository tool for stakeholder visibility.

Enterprise Change Standards Implementation

The bank implemented a series of change standards to be fully implemented in 2021.  The goal of these standards was to ensure that organizational change would be subject to more robust oversight and supported through enhanced documentation. The Monticello team successfully embedded these enhanced standards across the bank, through the IBOR Transition program.  Major components of these change standards included:

  • The requirement for all program details, as well as any technology change, to be entered and maintained in the enterprise change management tool.

  • An enhanced permit to operate process for significant changes. This permit process included review with all directly and indirectly impacted stakeholders to ensure there were no adverse effect on the wider technology space.  Reviews included information and system architecture, business continuity, and information security.

  • The need for all documentation to support the technology change to be completed in a time manner and stored, in a central repository for added review by enterprise PMO and audit teams.

BUSINESS VALUE

Monticello recognizes that there is no single approach to address the complex issues facing business leaders today and we worked closely with our client to implement solutions that were optimal for their business and to their stakeholders. By leveraging our governance toolkit, and strong stakeholder communication, Monticello helped our client successfully navigate complex regulatory directives and turn challenges into opportunities by building effective business solutions. Our team partnered with cross-functional teams to oversee the end-to-end execution for the IBOR transition. With deep regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensured that our client was in a position to maintain their competitive advantage over industry peers while exhibiting sound market conduct and compliance within the regulatory landscape.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Regulatory Reporting Compliance & Data Transformation Program

Engagement Summary

In 2021 Monticello Consulting Group (Monticello) partnered with the Data Management & Technology team at a leading financial institution to support the delivery of a large-scale regulatory risk remediation program to resolve shortcomings identified in a Matter Requiring Attention (MRA) notice raised by the Federal Reserve Bank (FRB). This multi-year program was initiated by our client in response to bank’s deficient firm-wide governance, systems, internal controls, and data quality measures that hindered its ability to submit accurate quarterly regulatory reports. The objective of this program was to automate key processes and improve data analysis standards in support of the operational and risk management functions tasked with producing the monthly reports. By successfully implementing these requirements, the Monticello team greatly contributed towards our client’s resolution of a pending MRA while minimizing a range of related regulatory risks.

  • Regulatory Compliance Reporting

  • Data Remediation

  • Data Management

  • Centralized Data Platform Build-out  

  • Change Enablement

  • Enhanced Validation of Internal Controls

  • Risk Management

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The Monticello team was responsible for designing, building, and operating the client’s Program Management Office (PMO), and facilitating integrated delivery across four program workstreams and several external service providers. By setting up a PMO to centrally manage the governance structure across program workstreams, the Monticello team effectively held stakeholders accountable to program deliverables and timelines and facilitated transparent program communications. Close tracking of milestones and prompt escalation procedures allowed the project to maintain strong momentum throughout the engagement.

Additionally, the Monticello team supported senior leadership teams and program sponsors with regular program updates including identification of key risks and issues. The Monticello team also developed and managed budgets and funding updates discussed in the monthly Steering Committee meetings.

Case Study Detail

PROJECT BACKGROUND

Financial institutions are frequently under regulatory scrutiny and remaining compliant with regulations is paramount always a top priority for C-suite executives and their Board. The Federal Reserve Bank issued an MRA and found our client lacks adequate firm-wide governance, systems, internal controls, and data quality measures to produce the necessary regulatory reports. Failure to resolve the MRA in a timely fashion could result in a public legal violation, enforcement action, fines, and damage to a bank’s reputation. To remediate the MRA risk and improve the bank’s data quality, regulatory reporting, internal controls, and technology systems, a multiple-year program was set up to plan and execute the action plan and roadmap.

ENGAGEMENT OBJECTIVES

Program Management & Governance:  Set up a program management structure and provided oversight to program stakeholders.  Facilitated decision-making and resolution of escalated risks and issues.

  • Designed, built, and operated a Program Management Office (PMO)

  • Drove ownership, stakeholder commitment, and adherence to deliverable dates on the plan

  • Managed program issues, risks, and internal/external dependencies

Stakeholder Communication & Reporting:  Engaged internal and external stakeholders and informed of the program progress through formal and informal conversations that build mutual trust.  Assisted the stakeholders to tackle both expected and unexpected challenges of the program.

  • Identified program stakeholders and engagement plan through a weekly and monthly program meeting cadence

  • Facilitated program and deep-dive meetings to drive stakeholder engagement and decision-making

  • Provided regular and proactive program update in program meetings, SteerCo, and Town Hall meetings

Financial Management: Managed the program’s multi-million budget to ensure program financial health was monitored and actions are taken promptly to address variances.

  • Provided a monthly program financial update to program sponsors

  • Monitored financials of the 3rd party internal and external service providers to the program

  • Assisted Finance to re-balance program financials by adjusting resource allocation and using other measures

BUSINESS VALUE

Given the potential impact of an MRA to the bank, our client’s senior management, including C-suite executives, placed heavy scrutiny and oversight on this program to ensure a successful outcome. By leveraging Monticello’s extensive program management experience and strong stakeholder communication practices our team enabled our client to successfully deliver against a complex set of regulatory directives and internal obstacles. Our deep regulatory knowledge, change management expertise, and proven program management skills, allowed the Monticello team to provide seamless integration into our clients’ efforts to mitigate risks from MRAs and other adverse regulatory findings.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Providing Regulatory Guidance and Testing Governance for IBOR Discounting

Engagement Summary

In late-2019, Monticello Consulting Group (Monticello) partnered with the Global Markets organization at a leading U.S. financial institution to support a front office technology program for changes related to IBOR cessation. The client initiated this program in order to successfully implement the large-scale changes necessary to meet 1) business growth objectives and 2) multi-year IBOR regulatory milestone requirements. The Monticello team was brought in to devise a project plan once the regulatory changes were proposed in anticipation of their formal publication. Next, the Monticello team provided the client with the necessary leadership and change management implementation capabilities to meet global stakeholder requirements for a successful multi-year IBOR migration. The Monticello team worked across an ambitious timeline with the client to define requirements, design a test strategy, formulate an execution plan, and manage development and testing teams - using Scrum methodologies - to drive the program towards successful completion.

The first phase of the IBOR cessation program focused on front book migration and the transition from IBOR rates to Alternative Reference Rates (ARRs). The critical milestones throughout the engagement focused on curve construction. The initial steps targeted changes to the discounting curves to move from IBOR rates to ARRs, specifically for EUR and USD currencies. In 2021, the program's focus shifted to implementing fundamental changes to the base interest rate curve construction. The Monticello Change Management team provided a rigorous governance structure for the program and effectively delivered implementation to a varied and complex suite of applications within the client’s business framework.

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Monticello’s focus was to re-write and clearly define the client's delivery strategy, which involved a phased implementation approach dictated by product type, central counterparty clearing house (CCP), and currency throughout the project's lifecycle. The Monticello team's stakeholder and communication management expertise ensured goals and project status was clear, succinct, and achieved regulatory mandates.

Case Study Detail

PROJECT BACKGROUND

As part of the IBOR cessation, one major milestone was for the CCPs to migrate derivatives discounting from IBOR rates to ARRs. While the Interest Rates (IR) CCPs migrated to ESTR discounting in July 2020 and SOFR discounting in October 2020, the Credit CCPs chose to follow their own migration timeline. This digression would create some unique concerns for any business that held both IR and Credit positions, and Monticello’s client was no exception. The client decided to move to ESTR discounting at the same time as IR in July 2020 but decided to remain on EONIA for survival curve building due to its alignment with credit clearing. The client elected to remain on Fed Funds for both discounting and survival curve building while IR clearing moved to SOFR in October 2020. Soon after, the Credit CCP migration for both ESTR and SOFR (discounting and survival curve building) was completed in June 2021. Each separate change required significant and well-governed testing at different times to ensure any valuation changes aligned with expected rates. 

ENGAGEMENT OBJECTIVES

Testing Governance: Implemented a test strategy to align program and project execution with business and regulatory objectives and enhanced metric development for transparent and effective stakeholder communication and decision-making.

  1. Worked with business owners and users to develop strategy and business cases for regulatory changes

  2. Liaised with stakeholders to cement understanding of upcoming changes and obtain pre-implementation approvals

  3. Supported release management including end-to-end go-live planning, testing, and execution

Management Communications & Reporting: Developed a strategic communications plan to provide critical updates to stakeholders in a timely fashion.

  1. Established audience, communication objective, and channel of delivery

  2. Summarized critical information for regulatory reports, inclusive of program health status and communication of key risks, issues, and dependencies to senior leadership, program managers, business partners, and technology teams

  3. Provided PMO/Program teams with well-defined key program metrics to facilitate the decision-making within senior stakeholder forums

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 IBOR cessation goals. By leveraging our regulatory knowledge, testing governance methodologies, and end-to-end process understanding, Monticello 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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Leveraging Digital Tools During Process Redesign to Accelerate Large-scale Transformations

Engagement Summary

IBOR transition – it’s been an exciting 18 months – but we are not done yet.  One aspect of this transition that has been largely absent from the discussion is the need to ensure that teams executing this once-in-a-lifetime change have the technology and tools that they need to successfully transition to the alternative rates. The wholesale banking technology organization of a top 10 global commercial bank engaged Monticello Consulting Group in late 2019 to spearhead the design and development of digital tools to support the IBOR transition. Monticello kicked off the engagement with a current state assessment of functional processes (credit, technology, operations, and fulfillment) that were in place. Next, Monticello redesigned the functional processes to ensure they were comprehensive and scalable. To support this process redesign, Monticello created a new digital tool to enable systemic intervention in the repricing process to greatly accelerate the LIBOR migration. The tool captured all of the necessary data elements, created a workflow process engine to identify and track the required steps on the process, interfaced with downstream systems to change any needed data elements, and reduced the manual time required to implement change. Ultimately, the Monticello team ensured that the client: (1) effectively engaged and communicated with internal and external stakeholders regarding the transition requirement and timeline, (2) maintained legal integrity of each credit agreement, and (3) demonstrated the effectiveness of each step taken to clients and regulators.

During the process review and discovery, Monticello identified opportunities where the tool and process redesign could support initiatives beyond the IBOR transition. The client had a broad need for a portfolio tool that could be used for all portfolio review activities. As such, the tool was designed to be modular and easily changeable to allow for future workflow processes to be included while being interconnected with the entire system stream. Taking a holistic approach to a singular problem, allowed Monticello to identify a broad-based solution that met the needs of IBOR transition and beyond.

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Case Study Detail

PROJECT BACKGROUND

The cessation of IBOR rates has a broad impact on financial services. From technology, sales, internal funding operations, and beyond, this change impacts almost every functional area of a bank. The IBOR cessation is a critical global transformation that requires a bank to demonstrate robust operational readiness. To accomplish this, areas such as process redesign and data consolidation through to regulatory reporting needed to be reviewed and adjusted in order to facilitate a comprehensive end-to-end transition from IBORs to replacement rates. Monticello, in coordination with its client, was tasked to drive success across two significant workstreams. The first mandate was to capture all required data points in relation to wholesale credit exposures from the downstream accounting systems. The second mandate was to create a workflow tool designed to identify priorities and actions to be taken as well as track results while integrating with other applications and systems. Together, these mandates were necessary to streamline the process and accelerate the path to support a successful transition from IBORs to replacement rates. entities based on their overall risk and impact.  

ENGAGEMENT OBJECTIVES

Data consolidation and workflow tool creation included four components:

  • Identify all data points required to (a) locate all credit facilities that have the ability to use an IBOR rate (b) contact internal partners that work with the client to migrate away from IBOR and (c) enable a rate change process that is stable and scalable.

  • Redesign the end-to-end credit process to facilitate a mix of manual and automatic rate change activities in coordination with technology and operations. Ensure that the redesigned process is robust enough to handle the large-scale volume, approvals, and documentation. Create solutions for any gaps in the new process utilizing internal tools and activities to reduce time to market and increase adoption by end-user groups.

  • Build a tool that can aggregate the required data and present it to users in a graphical interface that is complete and user-friendly. As part of the tool development process, the Monticello team ensured that the tool was able to interface with upstream and downstream systems to reduce the manual time required to reprice the credit facilities.  Additionally, the tool needed to leverage the redesigned end-to-end credit process.

  • Ensure end-user and technology testing completeness, accuracy, and stability.

BUSINESS VALUE

Monticello Consulting Group, through a continuous partnership with our client, embarked on an ambitious process redesign and digital transformation engagement to accelerate the transition from IBOR to reference rates. By leveraging our data analysis and automation expertise, the Monticello team was able to develop a tool that supported data collection and workflow management of all transition activities. Ultimately, the tool enabled our client to complete large-scale changes to portfolios with minimal manual interventions. Our rigorous program management and testing governance methodologies, end-to-end process understanding, and timely execution helped support readiness for this monumental shift in interest rate benchmark reform.

SKILLS & KNOWLEDGE (Level of Difficulty)

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Optimizing a Bank’s Prime Brokerage Business to Achieve Cost Savings and Accelerate Services Innovation

Project Background

As part of an ambitious restructuring in 2020, a market leading investment bank’s Prime Brokerage division approached Monticello Consulting Group to support the design and build of a merger of their two key business entities.  The goal of this ambitious effort is to optimize redundant and inefficient processes to achieve significant operational costs savings and accelerate services innovation. Strategically, the merged entities aim to offer new, differentiated, and competitive services to their clients. The target state infrastructure is being developed and implemented by the Monticello team across the next two years.

A Closer Look

Operationally, Monticello’s client recognized the need for a simplified structure to better monitor business growth susceptible to market volatility and to eliminate costly and redundant processes. The client envisioned a unified entity structure with best-in-class applications, streamlined business processes and increased automation across several international business locations. These strategic investments would accelerate time to market for client services and introduce cost optimization through application landscape unification, achieving a competitive edge over other large Prime Brokers.

Culturally, the client also realized how such a change could invigorate their organization and help them to connect more closely with their clients and ultimately attract new business. From an internal operations standpoint, the client also sought to improve employee engagement by challenging the team to deliver the highest level of quality to both internal and external stakeholders throughout the process.

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How We Did It

By leveraging the Monticello Strategic Planning Playbook, the team guided the client through the initiation phase of the Prime Brokerage Simplification Initiative. Through research and analysis, the team began by evaluating all business areas impacted by the merger. Impacted business areas were then organized into sub-projects, which worked with business, operations and technology partners to define current state operating models, identify potential merger-induced risks, dependencies, and process changes.

Subsequently, as part of the planning phase, the Monticello team led stakeholder interviews and deep dive workshops to develop a two-year roadmap to roll out a new and transformed operating model for the merged entities.  The Monticello team developed the communications plan and articulating business requirements, ensuring that the target state operating model complemented the business with standardized applications and processes, and assuring that the merged entities did no harm to existing processes.  

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Working in close partnership with the client, the team from Monticello: 

  • Provided differentiated capabilities and best-in-class services for the client

  • Adopted a standardized approach to the application landscape, eliminating redundancy as part of the new independent global structure and minimizing development and integration costs

  • Leveraged existing technological solutions and enhanced capabilities that were tailored to the individual processes applicable to the business

  • Introduced a high degree of standardized and automated business processes

Stakeholder Management

Effective stakeholder management is critical to the success or failure of a project. Impacted functions included multiple teams across the front and back office and key resources from each were engaged for their knowledge of the workflow and kept involved and informed as processes were documented and milestones were achieved. Successful stakeholder management also helped to reduce risk. The more we engaged key stakeholders, the better our ability to identify potential risks and issues that would stand in the way of success.

Staying Agile

With a project of this size and complexity, our client and Monticello agreed on the importance of adopting an agile methodology in order to guarantee effective project execution and delivery.

What does that mean for the client?

  • Expertise with Agile Tools and JIRA to centralize and manage key project artifacts

  • Close partnerships with Technology to ensure that critical success factors are clearly articulated and business value is realized.

  • A deep understanding of sub-project and external dependencies, respectively

  • Neat and standardized 5 blocker status reports with a clearly articulated “path to green”

  • Rapid response to project or scope changes and practice of continuous improvement  

What’s Next?

Once the new structure is finalized, the client plans on evaluating the component processes within the new structure, with the goal being to standardize and harmonize the prime brokerage business’ end-to-end delivery chain throughout its multi-year transition/implementation. Business units are expected to realize significant cost savings through the elimination of redundancies and from the introduction of new functionality spawned by the synergies of this integrated structure. Monticello continues to provide its expertise and knowledge as it partners with the client on its journey to a successful rollout of this truly collaborative project.

About Monticello

Monticello Consulting Group is a management consulting firm supporting the financial services industry through deep knowledge and expertise in digital transformation, change management, and financial services advisory. Our understanding of the competitive forces reshaping business models in capital markets and digital banking are proven enablers that help our clients remain in compliance with regulations, innovate to be more competitive, and gain market share in new and existing businesses. By leveraging our Digital Transformation and Change Management services, Monticello will help transform your business operations and cultural mindset to one where excellence takes center stage.

Deploying Program Governance & Stakeholder Communication Toolkit to Remediate Market Conduct Risk

Engagement Summary

In early 2021, Monticello Consulting Group (Monticello) partnered with the Change Management team at a leading financial institution to support the delivery of a large-scale market conduct risk remediation program to comply with Consent Order directives from the Federal Reserve Bank of New York (FRBNY). This program was initiated by the client in response to a regulatory examination, which found the bank lacked sufficient internal controls to mitigate misconduct across designated market activities of in-scope businesses. The goal of the program was to transform and enhance the following frameworks and capabilities:

  • Conduct Risk Framework

  • First Line of Defense Controls Testing Capability

  • Transaction Monitoring Capability

  • Trade Surveillance Capability

  • Supervisory Framework

  • Accountability Framework

  • Order and Execution Data Management Solution

Monticello deployed resources across numerous program workstreams to support the delivery of control solutions, as well as the Program Management Office (PMO) to track project plans, key milestones, risks, issues, and dependencies. The Monticello team combined their proven program governance toolkit and effective stakeholder communication to ensure key program risks and issues were successfully mitigated and resolved through sound governance. Given the public nature of Consent Orders, there is heavy scrutiny and oversight from senior management up to the Board and C-suite executives. By implementing a dedicated Program Management Office to centrally manage the governance structure across program workstreams, Monticello was in a position to effectively hold stakeholders accountable, execute a clear communication strategy and maintain project momentum towards meeting major milestones in a timely manner.

Fig 1. Current State and Future State

Additionally, Monticello managed all program reporting obligations and supported senior leadership and program sponsors through bi-weekly program status updates to the program’s working groups and Steering Committee. The team also produced comprehensive reports for the bank’s compliance executives and the FRBNY on a monthly and quarterly basis, respectively, to present progress made against the firm’s regulatory commitments.

Case Study Detail

PROJECT BACKGROUND

The FRBNY assessed a substantial civil penalty to Monticello’s client, a leading financial institution. Regulators concluded that the bank lacked sufficient firm-wide governance, risk management, compliance, and audit policies and procedures to effectively mitigate misconduct across banking practices.

ENGAGEMENT OBJECTIVES

Program Management & Governance

Managed program governance under the change management function for the Global Markets business. Monticello supported the Program Management Office to drive the timely delivery of Consent Order mandates through stringent execution of project plans, timely risk and issue management, and robust governance standards. The PMO function included the following responsibilities:

  • Define reporting routines and effective program governance processes to satisfy requirements and align with business needs.

  • Chair program-wide meetings to liaise with workstream PMOs on project statuses

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

  • Ensure adherence to enterprise-wide program management standards.

  • Maintain end-to-end book of project attributes in central tracking and risk management tool for stakeholder visibility

Stakeholder Communication & Reporting

Leveraged a strategic communication structure to provide tailored updates to stakeholders at varying levels of seniority and accountability for program deliverables. Critical program information was communicated through a dashboard that highlighted program status, the path to green plans, and key risks, issues, and dependencies. In addition, the PMO tracked key performance indicators (KPIs) to measure workstream progress against books of work. The team also raised all off-track and at-risk milestones for review and guidance from senior program executives.

BUSINESS VALUE

Monticello Consulting Group provides services across the financial services industry to establish compliance and reduce regulatory risks. By leveraging our program governance toolkit and strong stakeholder communication, Monticello enables clients to successfully navigate complex regulatory directives and turn challenges into opportunities to build effective business solutions. Our team partners with cross-organizational client teams and oversees the end-to-end execution for Consent Order remediation. With deep regulatory knowledge, change management expertise, and proven governance standards, Monticello successfully ensures global financial institutions can maintain a competitive advantage over industry peers while exhibiting sound market conduct and compliance within the regulatory landscape.

SKILLS & KNOWLEDGE (Level of Difficulty)

Skills.PNG