The Customer:

A banking conglomerate in South Africa

The Challenge:

The banking conglomerate, with branches across several countries, was going through a process of business and technology consolidation with the merger of many independent banking and investment units into a single corporate and investment banking entity. The Treasury, Investment Banking and Unit Trust activities, along with Corporate Banking, formed the core of the business for the bank.

Apart from the above business merger, the bank was also in the process of migrating to a new technology platform. A decision was taken to introduce market-oriented business practices and processes as a precursor to the technology migration. External consultants had been engaged to conduct a Business Process Reengineering (BPR) exercise, which included detailed recommendations to be implemented in each of the business segments.

In the current engagement, the bank engaged i-flex Consulting to assist them in the implementation of the earlier BPR recommendations pertaining to the treasury, investment banking and unit trusts businesses, as well as to help manage the change process. The challenges in moving towards a quantitative market and system-oriented process involved:

	understanding the domestic treasury markets
	understanding the local regulatory environment
	redefining the organizational structure of the treasury, investment banking and unit trust businesses
	segregating treasury from banking activities, allowing personnel to focus on dealing
	segregating front- and back-office duties
	introducing the concept of middle office for measuring and monitoring risk
	setting up a limits structure for the treasury
	documenting treasury policy and procedures

Recommended Solution:

Our consultants adopted a proactive methodology and took up the role of facilitators of change management. i-flex Consulting worked with representatives from each business segment, enabling them to take the lead in defining change in their respective areas. The proposed changes were validated through meetings with the senior management where:

	concepts were presented, discussed and reviewed
	policies and procedures of each business group were deliberated and documented
	key deliverables of the assignment included:  a detailed organizational structure for the treasury group  introduction of the concept of middle office and documenting the roles and responsibilities for the middle-office personnel  methodology for setting up of trading exposure limits for forex, domestic treasury, and equities based upon capital allocation (quantitative methodology derived from a mix of standardized and VaR based methods as suggested by the Basel committee for market risks)  a documented methodology for re-valuation of treasury (both forex and interest rate) exposures  setting up of product-wise threshold limits for quoting 'market oriented' rates directly by the treasury for top-tier customers and for large value transactions  a proposal for defining stop-loss limits for all trading positions initiated by traders

Customer Benefits:

	a well-documented organization structure, roles and responsibilities
	a middle office set up to measure and monitor risk
	quantitative approach in setting up of exposure limits, stop-loss limits and performance measurement
	clarity and transparency in day-to-day functioning of trading activities