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Best practice in the back office

Best practice in the back office

Source: Peterevans, Mellon Corporation

A complete overhaul of back and middle office functionality is considered one of the most challenging projects facing any financial institution – but Mellon Corporation decided to do it in six months.

"We recognised there were a number of areas where we could make significant efficiency gains through ‘smoothing’ the automated front to back end process," said Mellon’s Project Manager Steve King, of the 2003 decision to outsource a complete back office infrastructure.

"What we needed was capacity for increasing transaction volume across the board – not only immediately but looking five years down the line. With the availability of technology allowing automated corporate actions and tax voucher processing, for example, we felt we needed to be among the innovators."

Steve, who previously managed infrastructure projects for Deutschebank, approached peterevans with a clear yet complex brief.

"The peterevans team was up front about what they could and couldn’t achieve, and this helped enormously at the initial stage. We found some vendors offering expensive solutions to every problem under the sun – but you have to be able to have a robust and honest dialogue about capability. This approach allowed us to be realistic about deadlines, the scope of the project and the impact on Mellon of transition to a new system."

Using its flagship system TRACS as a base, the peterevans team began configuring and tailoring functionality with the goal of a clear and smooth integration into the Mellon loop.

"Of course, it’s not easy and there were a number of hurdles to be overcome at the early stage," explained Steve.

"The first was the tight deadline. From initial talks in October 2003 we were looking at a Quarter two launch date – this puts everyone working on the project under a great deal of pressure, particularly as it was reported in the Financial Times. Another risk is disruption – most of our technology infrastructure is housed in Pittsburgh – this meant relocation for team members and plenty of late night phone calls!"

A second major hurdle was the obvious ‘disconnect’ in terms of knowledge between Mellon’s sales and implementation teams, as the sales team was initially responsible for sounding out peterevans.

"It’s vitally important for vendors to educate their clients – about what can be brought to the table by a technology provider and what can be done in-house. peterevans were careful to ensure that they only put on the table from their end what was necessary to the project. This helped build trust and a strong sense of partnership, which is also crucial in a project like this."

The final area of concern was risk reduction. Steve’s team wanted an archiving system that was robust enough to allow instant and accurate mining of client and activity data. "Reducing risk through strong data maintenance is vital but you need effective controls," he said.

"It’s akin to filing – if something is mis-filed, it’s a nightmare waiting to happen. Thanks to TRACS pulling information is now surprisingly easy – while records are kept in-house, our next idea is to outsource it, giving a transfer of responsibility allowing us to focus on more pressing matters."

Steve’s intent was to involve as many individuals as possible in consultation during the process – particularly those working in the front office, a group which he says is often overlooked.

"It’s often the perception- particularly in larger firms - that when it comes to creating systems it’s the ‘tail that wags the dog’ – that front end staff are handed a system to use and told to get on with it. In fact, their input is vital. It’s easy to make assumptions about how front office staff will want to work, and what they’ll need out of a new system. To ensure we didn’t get trapped in that way of working, myself and the peterevans team sought to consult regularly and closely with our fund and client management teams to ensure everyone got the opportunity to participate. And I’m glad we did – it’s how we got some of our best ideas.

"Applications must be built around the user – and sharing best practice ensures you don’t get complacent."

Another key element of the process is reacting well and efficiently to surprises, he said.

"You can only do so much testing within your allotted time frame but this is the period when unexpected glitches and problems turn up. For example, we had a problem with statement issuing from the back office. On contacting peterevans a patch was swiftly developed and delivered. That’s typical of the relationship we established and one which continues."

Two years on, and TRACS continues to manage the Mellon back office operation with efficiency and smoothness of process. But the partnership team has been far from idle.

"We recognise it’s not simply a case of implementing your product and watching it work," said peterevans Managing Director Dr Mike Foley.

"It’s important to view systems as living entities which require regular attention and new, creative ideas. Our team meets regularly with the Mellon team to swap ideas and insights – and it’s a system which works for us both. Not only does it help ensure Mellon are receiving the best level of care in terms of development, but it keeps us on our toes!"

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