Investment Bank - Front To Back Analysis - Mortgage and Asset-Backed Securities
Situation and objective
A major investment bank had embarked on a significant global technology investment programme aimed at reducing risk and making their business more scalable by eliminating control weaknesses, inefficiencies, and manual processes. Multiple analysis projects were launched to analyze the main business-line silos, front-to-back, and generate recommendations as well as cost-benefit analyses that would justify proceeding with those recommendations.
Confluentia was selected to run the analysis project for the bank's multi-trillion-dollar mortgage-backed and asset-backed securities business line, based on a combination of its proven business-analysis capability and its experience in the securitized-products space.
Solution
Under Confluentia's direction, the team:
- Compiled issues and prepared workflow diagrams based on meetings and requirements-gathering sessions with senior managers and subject-matter experts across all functions: sales, trading, market risk, credit risk, compliance, technology, product control, financial reporting, tax, regulatory reporting, and operations
- Prepared high-level business requirements for the key projects identified
- Consulted the steering committee to gain an initial consensus on the relative priority of each project
- Worked with IT to obtain estimates for the prioritized projects.
The recommended projects included trade-capture enhancements, work to support industry and regulator-mandated initiatives, enhancements in processing for TBAs and whole loans, and various reference-data refinements.
An overall two-year technology roadmap was then produced that established a sequence for delivering the projects, taking into account various interdependencies and constraints. In parallel, to build cost-benefit cases for the projects, the team collated information on:
- Volumes
- STP (straight-through processing) rates
- Time spent on manual or duplicative processes
- Expense that could be saved by decommissioning systems
- The potential implications if any of the identified risks were to materialize.
The team then prepared a detailed presentation for the steering committee that summarized:
- The issues identified
- The dozen or so recommended projects and their cost (several million dollars)
- The delivery roadmap
- The monetary and control benefits to be realized.
Result
The steering committee approved the recommendations, and the global investment-programme board approved the multi-million-dollar budget. The projects are in progress, and Confluentia is providing project management and business analysis for a number of them. The staff and senior managers within the asset-class silo are very satisfied with the outcome, as once the projects are delivered, their overall infrastructure will have undergone a significant overhaul to a new level of scalability, efficiency, control, and risk-management.