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Doing More With Less ... and Less

Smaller staffs, smaller budgets and increased regulations have combined to make running operations at a financial institution a daunting task.

From business-continuity planning to the Patriot Act; from managing projects to central matching, this year's Security Industry Association's Operations Conference and Exhibit covered a number of challenging topics under the heading "Doing More with Less."

One reason financial-service institutions may have less this year is the lack of investor confidence brought about by last year's barrage of accounting scandals which caused many retail investors to pull their money out of the stock market and put it under the mattresses, or, at the very least, in the bond market.

"2002 was a year that many may want to forget," says Robert Hogan, SIA Operations Conference chairman and chief operations officer for the Banc of America Securities.

John Schaefer, SIA chairman and COO of the Individual Investor Group with Morgan Stanley, says that recouping some of the lost public trust and confidence is paramount. "We are in the middle of a time of intense dissatisfaction that will take some time to get through."

Recouping that public trust and confidence means complying with new rules and regulations that continue to come down the pike. Staying in line with those new regulations, in addition to coping with day-to-day duties, means operations professionals in the securities industry will have their plates full for the remainder of 2003.

Burned by GSTPA, SIA is Still a Fan of Matching

Don Kittell, SIA executive vice president, took his turn at the podium to talk about the history of the T+1 movement and the current state of the industry's move to STP.

He says that though T+1 and the GSTPA may both be out of the picture, the SIA isn't down on central matching.

Referring to the long-debated T+1 business case, he says, "The history of the business case is a rough one," because it was conceived at the peak of the economic bubble and slated for implementation when the financial markets were in dire straits.

The T+1 plan, he says, came under attack "internally. This is basically where we shot ourselves in the foot as an industry."

Kittell says among the reasons T+1 failed were insufficient buy-in from the buy side, especially small to mid-sized investment managers and the disaster that was GSTPA, partially due to the fact that its model did not match the ITPC vision, making interoperability with Omgeo a difficult proposition.

"We brought Omgeo in at one meeting and GSTPA at another, but we were unsuccessful in arriving at an accommodation between the two groups," says Kittell. "No one wants to go through the GSTPA experience again."

However, he says the concept of GSTPA was a good one. "All issues the GSTPA was formed to fix are still there. The only thing that isn't there is GSTPA."

Kittell says he still expects the Securities and Exchange Commission to offer a concept release on the industry moving to STP, which had been expected last year. He describes the new vision of STP as, "A portfolio of system projects, each of which stands or fails on its own merits."

Still a fan of matching, Kittell says that the SIA is now looking to Omgeo. "Omgeo, we're routing for. I can tell you because we have a lot riding on Omgeo."


Essentially running a "How to" class on project implementation, Joseph Guardino, a managing director with Banc of America Securities, says that the first step in any large implementation should be coming up with a project name. This is important, he says, because large projects can require the cooperation of thousands of people who need, at the very least, to associate their new responsibilities with a specific undertaking.

"We needed support from hundreds, if not thousands, of people," says Guardino. "When you give it a name, people start talking about it."

The project that Guardino is referring to was a two-and-a-half-year undertaking at the Banc of America to move from eight securities-processing platforms (brought on through acquisitions) down to one. The main system, he says, on the broker/dealers side was SunGard's Phase 3, but "that was only one of eight." Eventually, the firm decided to bring all business onto the ADP platform. "That provides us with a multi-currency, multi-product, multi-entity solution for all of our business."

The second move he suggests is clearly communicating the project's purpose. This, he says, is another move to garner sound support from everyone in the organization. "You want the associates to participate and feel accountable and know exactly why they are working through the pain and suffering," says Guardino.

Leading the project, he says, should be someone who forms the timeline of the implementation and organizes all the issues and events that tie into making the project successful. "The project's owner is the person who owns the risk," he says. Additionally, there will be stakeholders, who are the supporters within the organization and have a hand in delivering the project on time and on budget.

Oversight, he says, should consist of three layers. The aforementioned stakeholders in compliance, who meet once a week to discuss project-related issues that affect the organization as a whole; senior decision makers, who settle inter-group conflicts and set priorities; and the executive committee, which has the ability to stop the project at any time "or continue funding the project if we were meeting the desired results."

Acknowledging that he was not startling anyone in the room, Guardino says that defining a standardized process and project requirements are essential. He goes on to say that large projects, such as the one he was involve with, are better suited for a multi-phased approach as opposed to a big-bang implementation.

Allocating resources properly is also important to final success, Guardino says. He says that while Banc of America had pulled "subject-matter experts" from their jobs to tend to major projects, while still requiring them to attend to their regular responsibilities, the firm now favors the approach of taking experts "off the line and, in some cases, back-filling them with outside contractors. They participated in the project from defining the requirements to implementation and they were the best source of knowledge when they went back to their jobs."

Before things wind down, says Guardino, it's important to establish a post-conversion plan. "Everybody knows that after you go live, it's very, very difficult to get people back to the table. It's hard to get that focus back."

Banc of America, he says, created a 1-800 number hotline which was open 24 hours a day for the first month after the project was implemented. Based on the calls that came in, the operations group created an issues-tracking log that was used to check trends and ensure outstanding issues were quickly resolved.

Another step that was taken at the firm, says Guardino, is that a pre-conversion snapshot of key metrics - breaks, exceptions and fails - was taken and eventually compared to a post-conversion snapshot "just to make sure" that things matched up, he says.

Above all, says Guardino, it's important to understand that there will be bumps in the road. "If we learned one thing, it is that the word seamless doesn't apply. Telling customers or business partners that a big project will be seamless is an out and out lie."

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