1LoD asked two control experts to look into their crystal balls and discuss how they envisage the front office control mandate changing.
How will the front office control mandate evolve?
Jamie Hamilton, global business control officer, global markets, JPM:
“First, it will move in line with the evolution of the businesses, so increasing automation, electronic trading, new data techniques and so on will lead to new risks and necessary controls. Secondly,
front office control functions are new and have probably taken on responsibilities that should sit elsewhere. So, the mandate will also be sharpened up, in particular as firms think about the total cost of controls.”
Neil Saunders, head of front office business management and control, Mizuho International:
“The front office control mandate, in my view, will evolve with the change in operating models across financial services. As firms keep pace with innovation and start to move towards greater automation of systems and processes and adoption of digital
operating models, new risks will emerge across the front office. This coupled with increased regulatory scrutiny around automation (see
the current focus on algorithmic trading activity by the UK regulators) will mean a shift in focus and a firm understanding of new operational risks.”
Where are companies investing?
“Primarily in automation and technology that removes operational activities. Plus, the more advanced are looking to adopt visualization tools to move away from standard desktop tools such as Excel. Secondly, they’re investing in acquiring and developing new skills, in line with the changes occurring in the businesses.”
“Companies are investing in systems to drive a more cost-efficient process and have the technological platform to evolve. Many firms still have in place legacy architecture and part of moving
to digital operating models and the effective use of technology to enhance manual processes requires that the foundations, the legacy architecture is up to date and fit for purpose.”
So, what will the front office controls function look like in the future?
“Chiefly, it will be about monitoring and measuring, with new tools to enable interrogation of the wider operating environment. There will be new capabilities to assess risks based on data from a wider set of sources.”
“Front office control functions will need to adapt to the changing landscape and new risks applicable to financial services. Historically, front office control functions have been staffed
by operational risk, compliance and business professionals. In the future, systemic knowledge and technology knowledge may see IT professionals adding their own level of subject matter expertise to front office control teams.”