Cutting the cloth to fit in Regulatory Change portfolio delivery
Banks are overrun with demand for change. The vast majority is to ‘keep the lights on’ for existing technology and to comply with changing regulation. The pressure to modernise, comply, reduce cost, improve service and innovate is all-consuming.
In order to prioritise resources, rigorous decision-making is needed over which initiatives to fund, when to deliver them and how to resource. Add to this mix competing demand from business units and customer owners, and the challenge is clear. The solution is a clear roadmap for change, prioritised against delivery of strategic objectives, and constantly reviewed against fitness for purpose. Smart use of external partners to deliver the intended outcomes completes the picture.
Ask any bank Change Portfolio Director what they wish for and the response is unanimous. More. Whether it is more time to execute, more funding to resource projects or more clarity on what they will face next, all agree that they are under pressure to deliver.
The one thing they would like less of, paradoxically, is change. Happiness is an organised and stable portfolio, and a frustration of most internal customers and change functions is the state of flux they are operating in while regulations are delayed or await confirmation, new requirements emerge and the impact of new technology continues apace.
Having more time to execute can be a double-edged sword. More time enables further thinking around design and testing of options for solutions, but it can also lead to over-engineering and indecision.
Good is good enough’ and ‘Done is better than perfect’ are often-heard mantras in technology firms where speed is key and it is accepted that more is known as the solution moves through the lifecycle.
Regulatory change has an added complexity in that getting it wrong is costly in both financial and reputational terms, and the final measures against which solutions are judged may be confirmed at a relatively late stage, and the fines for breaches can be crippling.
However, there are pragmatic steps that banks can take to ensure that their groundwork is complete at an early stage, enabling a strategy to be set out and the core components such as data, systems, processes and organisational structures to be well understood.
The fact that most regulatory change in the UK is either in-flight or mobilising now at least means that banks can concentrate on execution of exiting portfolios rather than worrying about new rules about to hit them. More funding to resource projects may not be the answer either.
Viewed as a portfolio, most banks are still approaching regulatory change at a discrete project or at best programme level with little or no co-ordination across business units, data sets, regional operations or processes.
This can often mean that data is structured for a single purpose without regard for other potential uses, that multiple solutions or instances of change are developed to address the same issues and that stakeholders find themselves trying to piece together a roadmap for change from the bottom up, rather than a top-down strategic viewpoint.
Being more efficient in delivery, through better use of Design Authorities to oversee integrated change plans and enable focus on agreed outcomes is a good start point for co-ordination. Applying global standards to data and process change to ensure efficient and consistent solutions is another mark of success.
Where local regulation or customer preference dictate, exceptions to the standards can be accommodated, but with justification and associated benefit spelt out, rather than simply due to legacy practice or unwillingness to conform.
More clarity is needed, and more active consultation between regulators and banks will aid this. Significant strides have been made in recent years by the regulators to engage with banks actively and at an early stage, but too much is still confirmed at too late a stage to enable banks to fully absorb the final requirements and pivot their plans to suit.
This being the case, banks best response is to adopt a more agile and flexible delivery model. This involves both their technology and their resourcing arrangements, setting clear priorities and defining responsibilities to assure delivery. This model requires a substantial overhaul to become both more efficient in its use of resource and more effective in its delivery of outcomes. The resource component in particular merits further analysis.
Banks are fairly constrained in their ability to hire more staff to deliver the ‘oversubscribed’ change portfolios set out by their business units. The cost and time factors alone work against them, even if the required skills and experience are available. Consultancy is often the chosen antidote. Here again, cost can be a major obstacle. Used incorrectly, for example as a resource solution to a multi-year programme implementation and transition into normal operation, premium consultancy would be akin to buying a house on a credit card. Although quick to mobilise and a good fit with the underlying need, the cost quickly becomes unsustainable.
More recently, banks have hoovered up resources from the open contract market, with varying degrees of success. This again ticks some but not all the boxes. Resource can be mobilised quickly, and may have the requisite skills as a point solution. Even the cost is more in line with employee levels than premium consultancy would be. The catch is that there is no real guarantee of quality, an ever-present risk of knowledge flight and the fact that nothing binds together a group of 10 or so individuals creates both an operational risk a management headache.
Our experience is that a blended approach delivers the best results. Premium consultancy, where the strength of an accounting firm’s brand will satisfy both Board members accountable for the outcomes and the regulator, has a place. This is best use for short phases in definition and design, to bring in broad market insight and set out a credible plan.
Contract staff can also be deployed in specific roles where a skill match is clear, and in more functional areas such as PMO and Business Analysis which lend themselves more to a standalone solution. The ‘middle ground’ is the remaining area. This is where the detailed design, change delivery, embedding and transition to normal operation takes place.
This is best handled by proven practitioners, overseen by bank permanent staff to ensure there is ownership beyond the life of the project.
The external support can come from mid-tier consultancies whose specialism is in implementation rather than advice (the ‘doing’ that follows the pure ‘thinking’). This blended model satisfies the cost, quality, timeliness and ownership criteria that are the hallmarks of successful programmes.
As banks have streamlined their in-house change delivery capacity they are more reliant on external support. The financial challenges however, dictate that they must make informed choices on how they partner with external firms.
The often-cited failure of programmes to deliver to time, cost and quality can often be traced back to a failure to set out a clear roadmap, a firm ‘handshake’ between business and technology teams, and a coherent partnering strategy for delivery.
As the competitive and market forces place further pressure on banks and their change portfolios, getting this right will become even more crucial.
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