STP Implementation

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The success of a firm's STP initiative goes beyond technology and systems integration. It redefines the way of running a firm's operations and needs to be done systematically. It is dependent on a firm's ability to merge process, technology, structure, and culture into a single cohesive force to address the challenges posed by STP. As Borelli and Auxier (2002) stated, achieving STP will require that "many diverse transactions, system functions, and operations must occur simultaneously. This highly parallel-processing environment will need to be supported by a complementary-technical architecture and organization design."

Operating financial services in this increasingly globalized world will yield long-term benefits for the firm with a global-centric view of doing business. The most successful firms will adopt new and innovative intra-STP, extra-STP and global-STP propositions that cut across the firm, third parties, and national boundaries. STP is built on a customer-centric approach that will give a better understanding of customer needs and motivations and lead to a better opportunity to realize the full potential of STP. Implementing STP requires organizational learning, which often requires lead-time for firms to absorb and become part of their culture. As a firm progresses from an intra-STP to extra-STP and global-STP operating environment, it will build on its capabilities and increase its competitive and strategic advantage.

Currently, only a handful of institutions in the financial industry have taken on the global STP challenges. The case study below summarizes a STP project conducted by the KPMK Consulting in Australia, following the STP readiness assessment framework presented above. It highlights some of the benefits of embarking on STP readiness assessment and implementation.

Case Study: Global Asset Management Company

A leading asset management company with operations dispersed globally is responding to changes in the securities industry with respect to compressed trade settlements. The project objective was to analyse the transaction-processing environment and make specific recommendations for changes needed to support compressed settlements, T+1, connectivity to GSTPA and a domestic trade match utility. The project also developed tactical recommendations to facilitate short-term improvements to their current environment and long-term strategic recommendations to support future business initiatives and industry trends.

KPMG Consulting worked with the client's technical and operations staff to build a current state transaction flow model. This was the basic building block driving a gap analysis, leading the organization to a future state model. Utilizing subject matter experts in the areas of technology, GSTPA, and securities processing, KPMG Consulting delivered an analysis showing the organization where the future lies for participants in the Investment Management arena. Benefits of the project are summarized below.

• Detailed current state review of business processes and global technical architecture

• Strategic assessment for conformity to STP best practice and readiness for T+1

• Development of high-level future state framework

• Future state roadmap highlighting requires technical and operational changes

• Internal and external communications strategy

The above business case for the implementation of STP demonstrates the tactical and strategic benefits that STP will bring to organizations. The tactical benefits include reduction in transaction costs, error rates, and risk exposure, increased capacity and operational efficiency in transaction processing, and improvement in customer service through knowledge management. The strategic benefits include the opportunities to develop new products, the ability to extend businesses into new markets globally, and the flexibility via open-systems enterprise architecture.

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