Have you experienced the seven deadly risks of systems transitions?
This article highlights some of the typical investment operations transition risks and their mitigations to help firms with a successful transition delivery phase.
Migrating between systems introduces transition risks for investment firms using outsourced service and technology providers. This article highlights the seven deadly risks for systems transitions of typical investment operations and their mitigations to help firms with a successful transition delivery phase.
An end-user viewpoint
“Successful transition management is as fundamental as the foundations of a building, yet is often given less priority than the BAU systems integration. This imposes an unneeded transition risk to any outsourced business implementation. The corners stones to success are;
- static data alignment;
- data controls on extracts;
- reconciliation pre to post transition book of record
In our view, the alignment of static is the first building block. Removal of the ad hoc approach to this is a key part to minimising overall implementation delivery risk” –Bryan Kelly, MD, Head of Institutional Middle Office Solutions EMEA at SS&C GlobeOp
During systems transitions normal BAU procedures will be disrupted, for example:
A typical BAU approach consists of:
- Encrypted system to system communications such as sFTP
- 100% straight through processing (STP)
- System enforced maker-checker controls when manual input is required
During a transition the approach may include:
- Email transmission of TXT, CSV and/or Excel files
- Procedurally enforced maker checker controls, built into daily procedures
- Significant manual manipulation of data with minimal audit trails
- A ‘hit & hope’ approach to the upload of files to a destination system and hoping it works
This introduces significant stress and risk to the production environment and is seen as a temporary state that you just have to get through.
Risks we identify can include, but are by no means limited to:
- Account Information security breaches: due to incorrect client information leakage or simply sharing the wrong fund data or providing wrong client trade data
- Data mapping: Incorrect mapping of source data leads to incorrect information being loaded into the target systems. The risks of long-term error are reduced, but not eliminated through post-upload quality assurance (QA) checks
- Manual Intervention: An environment with significant manual intervention will have higher error rates leading to increased human resource demand.
- Reputation: The transition stage is usually a precursor to a parallel phase, which itself places a significant burden on project and BAU teams. Issues with the transition, either in quality or timeliness usually has a knock-on impact into the subsequent parallel and go live phases. Transition mishandling can sometimes lead to customer service and reputation impacts, and possibly regulatory awareness of the problems
- Regulatory: Firms may require written approval from local and or regional entity jurisdiction regulators within a scheduled deadline. This adds further stress and challenges to the team
- Economic: If the transition phase is not successfully completed as contractually planned, this can lead to a severe economic impacts or contractual penalties
- Operational: Delays and further dry runs can quickly lead to significant distractions for the existing BAU operations team and lead to errors and impacts
All of the above risks combine to jeopardise the overall transition of the business or function and reduces client trust in your firm as a service provider.
A dedicated transition service which addresses these risks by supporting a more secure form of data transmission, transformation & delivery goes a significant way to mitigating these risks and ensuring an organisation goes into parallel or go live phases with maximum efficiency.
There is an opportunity to improve your client experience using a cloud-based transition service that is user friendly, configurable and can support robust capture, transformation and routing of source data to destinations with appropriate quality assurance checks at various points on the journey, to mitigate the risk of errors & rework.
Discover our new platform ProdktrSegue
The ProdktrSegue platform empowers Prodktr to transition Investment firms trading positions from one technology/service provider to another quickly, effectively and safely using the following four control features.
- ProdktrSegue can pull data from multiple sources and store that in an integrated database. In one middle office outsourcing scenario, we sourced data from multiple trade position databases, transformed and scrubbed the data before exporting it to the new service provider.
- A control check is completed to ensure all trades are included in each step of the process and all required fields are processed.
- The conversion files are created and exported in the format specified by the new service provider.
- Prior to loading the trade files a final quality control check is completed to ensure all required fields are included in the required format.
Service or systems transitions can be planned and executed in a controlled way. Risks can be anticipated and mitigated to make the process safer. The combination of experience in the Prodktr team, and our ProdktrSegue platform means we can execute a Transition to a high standard. Contact us to find out more.
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