Regulatory Support
Target Operating Models
Resource Augmentation
System Validation
Regulatory Support
Regulatory Support
Managing regulatory change in capital markets can be challenging. Australian banks and fund managers have been impacted by local and international regulatory changes that affect how they interact with clients, the types of products that they can transact, how they are reported and even how information is stored.
Datalysis keeps track of Australian and international regulations affecting local banks and fund managers to ensure our clients satisfy their regulatory requirements.
We support our clients satisfy regulatory challenges through:
- Impact assessments: Organisations are sometimes unaware of how changes in regulations can affect their operations. For example, many Australian fund managers caught under phase 6 of CPS 226 were unaware as to how much effort is required to satisfy APRA so that they may use ISDA SIMM. Datalysis Impact Assessments explain how regulatory changes will impact your organisation, what actions are required to be taken and how best to minimise compliance cost. The impact assessments will also investigate how your business can benefit commercially from implementing the required changes.
- Technical support:Many regulations require affected clients to either calculate things differently or to validate vendor system calculations. For example, Australian Prudential Standard CPS 266 requires affected entities to validate the methods by which delta and vega is calculated by their ISDA SIMM calculation service. Validation of these sensitivities requires not only knowledge of a broad range of derivatives but tool to analyse large amounts of data. Datalysis quantitative resources can help clients solve technical problems when the client's internal resources are unavailable or lack essential experience.
- Resource augmentation: Adapting to regulatory change most often requires the establishment of a project to deliver the required changes. Organisations generally populate project teams with their own staff and external contractors. This approach that generally minimises external cost and increases internal costs but does not guarantee that the project team contains the necessary knowledge and experience to deliver the requirements effectively and efficiently - the team generally is learning on the job. Datalysis can supply key project members with appropriate knowledge and experience to ensure that the project is delivered as quickly, effectively and cheaply as possible.
- Validation of system based solutions:Any new system, or existing system which has been changed, must be testing prior to promotion to production. Datalysis can support clients on a broad a range of testing activities from unit testing to integration testing. In many cases we can build challenger models to ensure that the outputs are as expected. Our challenger models range from CFTC reporting outputs and yield curve discount factors to ISDA SIMM Initial Margins.
- Development of system based solution: Like everyone in the financial industry we love Excel but we understand its limitations. When appropriate Datalysis develops system based solutions rather than limiting ourselves to Excel. We love Jupyter notebook for quantitative development and data analytics and we use AWS to host our client facing tools. Talk to us about how we can help you build the tools your business need.
Target Operating Models
Operating Models
The regulatory trend towards greater accountability of banks, superannuation funds and insurers for their own and outsourced activities continues. Regulations such as Australian Prudential Standard CPS226 and the recent changes to DTCC reporting to remove safe harbour provisions require covered entities to develop robust, transparent and effective operating models. Covered entities may be required to demonstrate to regulators that they have an effective operating model that satisfies regulatory requirements for example the process by which initial margin is monitored.
Datalysis has extensive experience of the regulatory environment covering the trading activities of Australian banks and superannuation funds as well as developing appropriate operating models for our clients - from initial margin marginning, model governance and regulatory compliance frameworks.
Datalysis can support our clients with operating models in several ways:
- Assessment of existing operating processes and models: To satisfy new regulatory requirements an organisations current operating model may only require small changes - or unexpectedly large ones. For example, typical model governance frameworks used by Australian superannuation funds to manage model change only consider the requirements of the organisation and do not consider the role of the regulator. Updating these model governance frameworks often requires a significant and fundamental change to the framework. Datalysis can review your operational models and documentation and suggest changes to ensure that they are fit for purpose, simple, cost effective and in-line with industry peers.
- Development of new procedures and processes: Regulatory changes often require organisations to determine new procedures and processes to deal with increased compliance requirements. In some cases, regulatory change requires that new departments or functions may be required. Collaboratively, the client and Datalysis develop operating models and control frameworks to satisfy regulatory changes as well as internal organisational constraints.
- Benchmarking to peers: Regulatory change can force expensive operational changes on organisations - some view these changes as an unwelcome cost to the business whilst others turn the change into an opportunity. For example, CPS226 can be viewed as unnecessary operational overhead or as a tool to obtain better and cheaper access to derivative products. Datalysis has a broad range of clients all of whom are covered by similar regulatory requirements and therefore we can provide perspective on good and common practice throughout the industry. This perspective enables our clients to determine the most cost effective operating model to meet the needs of the business.
- Provision of templates and standardised approaches: For clients who wish to develop their own operating models Datalysis can provide templated, standardised documentation and operating models which can accelerate and guide the client's own development work. These accelerators are tailored by Datalysis to suit the client. Examples of these standardised documents are: Best practice model validation, model governance framework, implementation roadmaps, margining processes for variation and initial margining.
Resource Augmentation
SME, PM & BA Secondment
Clients occasionally need to augment capability or capacity of projects teams or business units and look to do this by recruiting external contractors on a short-term basis. Locating, identifying and filtering potential resources can be time consuming and risky process especially when it comes to key resources. Some of the main challenges facing our clients when trying to engage external contractors are:
- Inconsistent quality: Recruitment agencies and on-line advertising attracts a broad range of individuals with differing experience levels, technical knowledge and communications skills. Banks and superannuation managers often invest significant time in sorting through the applicants and then managing their productivity - these activities cost time, effort and money.
- Hiring an individual: Contractors are individuals and only bring themselves to an engagement - filling gaps of knowledge or experience can add significant costs and delays to a project.
- Focus on cost not value: Very often hiring managers assume an interchangeability of available resources (all BAs are the same) and therefore are guided by cost i.e. the cheaper the better. In our experience, daily rate is not a good indicator of performance and ultimately the value of that individual.
Datalysis supports our clients augment their projects or business units in two ways:
- for senior or key roles, providing short-term secondment of our expert resources; or
- leveraging our extensive networks to identify and provide appropriate, high-quality and experienced candidates.
All Datalysis seconded resources, whether our own experts or ones we sourced for you, become part of your team as well as ours and as such we will only place resources that meet our high standards. Some of the benefits for our clients are:
- Consistent quality: Datalysis has been involved in many projects across the banking and superannuation industry and we know what makes a good resource and what can make a bad one. We will only recommend resources with the appropriate balance of experience, knowledge and communications skill who are also easy-to-work-with. We invest in our resources to ensure a high standard of delivery that is common to all Datalysis work - during the on-boarding process, we will provide training to ensure the quality of project delivery meets Datalysis' standards.
- More than an individual: Unlike a contractor, seconded Datalysis staff can leverage the knowledge and experience of Datalysis. Depending on the engagement model our resources may access our templates and tools. For example, a project may require an estimate of the Initial Margin of their portfolio under GRID: a Datalysis resource can access our Initial Margin engines. When you second a Datalysis resource you are getting a team not an individual.
- Focus on value not cost:Datalysis provides key resources such as SMEs, Senior BAs or PMs because the quality of the people in these roles is a key determinant of the success of the project. We identify and provide individuals that will disproportionately improve the impact of their role - that's why we focus on value not cost.
System Validation
System Validation
"Validation is the confirmation, through the provision of objective evidence, that the requirements for a specific intended use or application have been fulfilled in the intended operational environment.
The purpose of validation is to establish the compliance of outputs as compared to inputs. It is used to provide information and evidence that the transformation of inputs produced the expected and right result. Validation is based on tangible evidence; i.e., it is based on information whose veracity can be demonstrated by factual results obtained from techniques or methods such as inspection, measurement, test, analysis, calculation, etc."
Datalysis specialises in the validation of capital markets systems ranging from front-office pricing tools to risk systems and payment and reporting platforms.
Reflecting the complexity of many capital markets systems and the effort required to fully test every possible configuration, input and output we use a risk-based approach to validation. Our risk-based approach ensures that critical functionality is fully tested while nice-to-have functionality is tested to an appropriate level. Testing in this way results in the lowest cost whilst still remaining within the defect tolerance of the client.
There are two types of services offered by Datalysis: Testing and Review.
- Testing: Datalysis executes tests directly on the target system and analysis the results. Depending on the client's requirements Datalysis can plan, manage and execute the entire validation process or just parts of it. Also, depending on the items being tested Datalysis can also develop challenger models to validate correctness of the system under test.
- Review: Under these engagements Datalysis acts in an oversight role reviewing the test results and artefacts and producing a report for senior management covering areas such as appropriateness of approach given the client's business model; appropriateness of testing performed; appropriateness of conclusions; benchmarking of effort to similar organisations; identification of items that may require further testing; and suggested improvements to testing approach.
