• the biggest trading debacle in Canadian history at the time

     

    THE SITUATION:


     

    A rogue Natural Gas options trader hid market values of trades and caused a $680 million pretax loss. Stephen led the Capital Markets Commodity Products team to replace the existing trading platform with a new front to back office system and improved real-time interfaces to risk control systems.

    The CEO was new in the job and needed to demonstrate for shareholders and regulators that effective steps were being taken.


    THE INTERVENTION:

     

    A three pronged approach was required.

    A dedicated Vendor and technology team, led by Stephen, was assembled and co-located for the duration of the work. Many team members were new and knowledge transfer and coaching was provided so that people could become productive as quickly as possible. It was critical that trust and good working relationships were developed quickly.

    Quarterly communication updates were provided by Stephen to the Ontario Superintendent Financial Institutions (OSFI) Regulator. In addition, to updates on the functionality, the Regulator was supplied with details on bank/project adherence to Project Management Institute guidelines and CMMI software development standards.

    The minimum viable product for the delivered system was well defined. Significant effort was put into creating representative test environments and training front office traders and mid / back office operators. On launch, the business was able to move ahead with reduced risk and stronger monitoring of trades.


    THE RESULT:

  • Improved measurement and control of trading positions;
  • Eliminated occurrences of manual entry of data; and,
  • Improved repeatability/approach for curve calculations aiding profitability and VaR (Value at Risk) calculations.

Application Development – Group Finance and Group Risk

Implementation of new standard to calculate and report regulatory capital.

Results:

1. Submitted enterprise New Credit Risk data files to OSFI (Office Superintendent Financial Institutions) comprised of required data elements; and,

2. Documented and handed-over quarterly reconciliation process to business owners and Group Finance.

Web-Based Banking – Commercial Bank

Provide business customers with an online facility for managing cheque clearing through their accounts and for detecting potential fraudulent activity.

Results:

1. Established support for proposed TECP (cheque clearing) standards,

2. Enhanced the product offering,

3. Reduced operational risk; and,

4. Reduced costs / increased profit.

Situation

This engagement was based on a referral from a colleague. Stephen held a series of phone meetings with the London based Head, Funds Strategy & Global Fund products. The client described the International joint venture for management of funds on behalf of institutional clients. A $30 Million project to implement a new derivatives trading system was stalled.

Unknown to the executive at the time, the project team had hit the wall. The subject matter expertise was highly specialised (Derivatives Trading) and staff were dropping everyone. Sick leave, quitting, and asking to be moved. Morale was at an all time low.

 

Intervention

First of all, within a few weeks Stephen’s recommendation to temporarily halt project work was accepted. Job postings were developed, previous team members were asked to return, the vendor was asked to bring additional full-time support, and leadership within the project was tweaked.

The leadership team was in Toronto, London, Paris, and Luxembourg. Cultural awareness and communication skills were important for re-building team morale. Effectively taking the reins of the project required a hi degree of sensitivity and careful learning on the job. Stephen coached executives in advance of difficult meetings and eventually the differing norms of accountability, styles of communicating issues, and general leadership across the regions became less and less causes of impediments.

The turning point was three months in. A built up team created a productive meeting cadence. Developers, testers, and the Executive identified and agreed on the priority work areas. Derivatives Workflow, Reporting, Trade capture, Pricing, and Accounting all had significant gaps or critical issues.

Daily team meetings were held. Co-location was intensified, and team recognition events were held every two months. Accountability was still critical to forward progress – gaining everyone’s trust was a daily effort and this also meant that continuing to weed out poor performers or negative influences enabled the overall team to grow stronger and perform better.

Results

Implementing the new system was critical to adding new products to the offerings and retaining existing customers. Based on the original business case, the objective met included:

1. Improved competitive offering relative to BONY, J.P. Morgan and State Street;

2. Improved reliability of pricing; and,

3. Improved straight through processing.

However, the big win for the client was the re-building and assembly of a working team that would also transition to operational support once in production.