The unfortunate reality of post trade infrastructure within capital markets is that the inherent complexity built up over time makes transformative agendas a tough sell.
Given that systems and processes have suffered from a lack of investment over a long period of time, transformation is usually more about fixing the domain rather than driving radical innovation. Which can make justification of investment spend a challenge, particularly where decision makers prioritise resources through a traditional return on investment lens rather than perhaps understanding the need to enable a future state vision. Perhaps post trade data is a mess and remediating this becomes a critical enabler to a transformation journey? But this initial remediation is unlikely to deliver significant cost reductions, making approval unlikely as internal hurdle rates cannot be achieved.
This creates a real challenge for domain owners, who require sponsorship and buy in to pursue these remediation agendas but typically fail to grain traction with decision makers to drive meaningful change. We are in the world of B2C innovation where transformation and innovation are often seen as the same thing – disruptive technology transforms business models that have become increasingly client centric over time. So, making a case for investment to fix, rather than radically innovate from the current state can be difficult for post trade leaders to position. But with ever increasing pressure on business models – from both an economic perspective and also due to client demand – the need for post trade change is as strong as ever because of its critical role in enabling an organisation’s response. This makes the need to drive transformative agendas key to future proofing business models. Success here is not impossible, but the pitch needs to be thought through to justify why investment should be made. Here are some key tips for success.
1. Show the vision (The Why). Most investment pitches for post trade remediation focus on the problem, creating a perception of fear that unless things change something bad will happen. ‘Who goes to jail’ is a common narrative in reference to the regulatory regime that senior managers operate in to justify action. But this approach usually ends up being divisive, with decision makers feeling coerced into action rather than buying into the end point of the journey. The start point must be the ‘why’ – ‘We want to be able to’ – in an effort to align focus on the outcome. Not strong-arm decision makers into supporting an agenda through fear of a negative personal outcome. Successful visions here are clear in their outcome as they provide a reference point for all front to back stakeholders – not just post trade functions or IT divisions – to understand the importance and need for change.
2. Own the outcome (The Who). Investment spend is often allocated to resource owners in banks – such as technology – as opposed to owners of the transformational outcome (operations, middle office, COO). This often leads to ownership for sponsorship being misaligned with the business impact. The owner of the vision has to be responsible for justifying the need for the change – this can’t be delegated or federated – and needs to be engaged from the outset to ensure they feel ownership for the transformational outcome. This role shouldn’t be confused with the enablers of change, who may be a different set of departments, but aren’t responsible for the vision. This is a common trap that programmes fall into, where the enabling function ends up being responsible for defining the outcome, and typically ends in disappointment.
3. Show the journey (The How). A good pitch must reflect the downside of inaction and the challenges with execution – but this must be presented as risks needing to be managed and problems to be solved in support of delivery of the vision. Too often pitches focus on these challenges in the executive summary, immediately creating a negative backdrop to what should be an energising discussion around the future of the business. Our view would be that actually these challenges don’t even get presented until the vision is bought into – as this can be counterproductive to aligning the interests of the organisation behind a common set of goals.
4. Engage, engage, engage. (The With). No recipient of a transformation pitch should ever see it for the first time in an investment committee (or equivalent meeting). Stakeholders should be identified and engaged, and concepts socialised to create buy in and ultimately bring endorsement. Competing agendas can frustrate this process, but it is an essential (though time consuming) part of a successful transformation pitch. Investment made in this part of the process typically correlates directly with success, where a compelling vision has been syndicated with credible, commercial outcomes to support buy in of the audience.
Due to its position within the organisation, the post trade environment has often been an afterthought in investment rounds which have historically focussed on the more ‘sexy’ front office areas of business growth or the inevitable necessity of meeting mandatory compliance requirements. But given its criticality in enabling the future of capital markets, investment must flow into these legacy systems and processes to unlock the opportunities that modern technology can bring.