Business as usual isn’t always smooth sailing in the world of operations, so given we’re currently faced with an unknown period of time working from home and some backup locations, things aren’t rosy at the moment. Add to that the rollercoastering markets and insane processing peaks caused by volatile trading activities, and describing things as a ‘challenging situation’ might be something of an understatement.
The nausea-inducing market volatility is not only causing challenges for the front-office trading community stuck out in UK backup sites like Croydon and Lewisham, it’s also causing major headaches for the middle- and back-office staff struggling to keep up with processing all those trades. There are numerous departments working late into the night to process the trading peaks across the globe on systems that just weren’t built for large teams working remotely. Tales of glitchy mainframe workarounds and flaky Wifi connectivity bound across the industry. Logging into your key systems and remaining connected is a challenge in itself.
Moreover, after the endless rounds of cost-cutting over the last decade or so, these teams are already chronically shorthanded. As more people unfortunately fall ill, the more the pressure builds on those that remain (relatively) healthy. There is an ever-decreasing circle of pressure building on these teams. Given the systems on which they work are often heavily customised, while user interfaces are not at all intuitive to use, key person risk is incredibly high. If it takes weeks to train new staff to use a particular system, then problems are sure to happen, especially if your online training manuals and processes are as poorly put together as your patchwork of legacy systems.
The challenge of managing offshore locations when there are travel bans in place is another HR pain point for the executives in charge. Yes, a lot can be done over Skype or other similar software packages, but many execs have relied on in-person visits to get things done. What happens if your main method of governance enforcement is the bi-weekly visit from head office?
Add the human element into all this of people cooped up with their families for weeks on end, lack of sleep, etc. and a rather disturbing picture emerges.
Operations teams are under-resourced and often under-appreciated. How many stories have you read in the financial services press about what’s going on in the trading community versus what anyone in post-trade is faced with on a daily basis? The focus is of the media naturally is on the market impact of all this and the endless woes of traders make a good story, even if most of this stuff is now electronic (in the equities world at least). Spare a thought for the middle and back office operations teams – they’re out there, working hard to make sure everything remains functioning.
Also – my plea to the C-suite when all of this is (hopefully) over – learn from the challenges that this experience has taught us. Invest in your key post-trade systems – it’s long overdue. The project risk in replacing these systems can be high, but so is the risk caused by doing nothing. The industry has taken a long time to get systems into cloud-hosted environments, we need to move faster than this.
Take time when you’re back in your regular Hudson Yards or Canary Wharf office with a view (rather than a business continuity basement or your own home), to examine your operational resilience. Where are the pressure points and how can you alleviate them? So that next time something like this happens your firm is in a better position and your ops staff don’t have to work all hours to keep the lights on.
Also – don’t forget that this experience is also a fertile learning ground for the regulatory community. The UK’s Financial Conduct Authority already has a paper out on operational resilience and no doubt, will be taking note of just how well each firm lives up to their promises.