The ultimate way to move beyond trading latency?

Posted on : 29-03-2019 | By : richard.gale | In : Finance, Uncategorized

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A number of power surges and outages have been experienced in the East Grinstead area of the UK in recent months. Utility companies involved have traced the cause to one of three  high capacity feeds to a Global Investment bank’s data centre facility.

The profits created by the same bank’s London based Propriety Trading group has increased tenfold in the same time.

This bank employs 1% of the world’s best post-doctoral theoretical Physics graduates  to help build its black box trading systems

Could there be a connection? Wild & unconfirmed rumours have been circulating within  the firm that a major breakthrough in removing the problem of latency – the physical limitation the time it takes a signal to transfer down a wire – ultimately governed by of the speed of light.

For years traders have been trying to reduce execution latency to provide competitive advantage in a highly competitive fast moving environment. The focus has moved from seconds to milli and now microsecond savings.

Many Financial Services & technology organisations have attempted to solve this problem through reducing  data hopping, routing, and going as far as placing their hardware physically close to the source of data (such as in an Exchange’s data centre) to minimise latency but no one has solved the issue – yet.

It sounds like this bank may have gone one step further. It is known that at the boundary of the speed of light – physics as we know it -changes (Quantum mechanics is an example where the time/space continuum becomes ‘fuzzy’). Conventional physics states that travelling faster than the speed of light and see into the future would require infinite energy and so is not possible.

Investigation with a number of insiders at the firm has resulted in an amazing and almost unbelievable insight. They have managed to build a device which ‘hovers’ over the present and immediate future – little detail is known about it but it is understood to be based on the previously unproven ‘Alcubierre drive’ principle. This allows the trading system to predict (in reality observe) the next direction in the market providing invaluable trading advantage.

The product is still in test mode as the effects of trading ahead of the data they have already traded against is producing outages in the system as it then tries to correct the error in the future data which again changes the data ad finitum… The prediction model only allows a small glimpse into the immediate future which also limits the window of opportunity for trading.

The power requirements for the equipment are so large that they have had to been moved to the data centre environment where consumption can be more easily hidden (or not as the power outages showed).

If the bank does really crack this problem then they will have the ultimate trading advantage – the ability to see into the future and trade with ‘inside’ knowledge legally. Unless another bank is doing similar in the ‘trading arms race’ then the bank will quickly become dominant and the other banks may go out of business.

The US Congress have apparently discovered some details of this mechanism and are requesting the bank to disclose details of the project. The bank is understandably reluctant to do this as it has spent over $80m developing this and wants to make some return on its investment.

If this system goes into true production mode surely it cannot be long before Financial Regulators outlaw the tool as it will both distort and ultimately destroy the markets.

Of course the project has a codename…. Project Tachyons

No one from the company was available to comment on the accuracy of the claims.

Battle of the Chiefs

Posted on : 25-01-2018 | By : Tom Loxley | In : Predictions, Uncategorized

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2018 Prediction – Deep Dive

Chief Information Officer 1 – Chief Digital Officer 0

Digital transformation is undeniably the main driving force for change in businesses today. We have seen the financial sector being completely transformed by new technologies that offer the ability to engage customers in very different ways, driving more profits. Originating in the marketing department, digitally morphed into E-commerce where it gained more budget and more power. This led to the establishment of a new executive role of the Chief Digital Information Officer (CDiO). The more traditional role of the Chief Information Officer (CIO) faded in many organisations as CIO’s concentrated on their legacy systems, often accused of being slow to change in this new fast-paced environment. The CDiO rose as the star of the transformation show moving at lightening digital speed, propelling the competitive advantage and adding value to the business.  The two Chiefs have been working alongside each other uncomfortably over the past few years, neither understanding the boundaries between them. Not for much longer ….

We are starting to see some CDiOs come adrift as the main power point, with the promised world of digital failing to emerge. They too are being slowed down and unseated by the weight of legacy systems and legacy ideas in many organisations. Business leaders are getting impatient with the time to deliver ‘revolutionary’ change. Is it that these changes take time or is there a hint of the ‘Emperor’s new Code’ about this?

Broadgate believes that 2018 will see the resurgence of the CIO as the leading force. The digital buzzword is fading as digital is increasingly seen as a core part of any business strategy, intrinsic to the organisation. The development of the CDiO was a good short-term fix to turbo charge the digital roadmap, taking some of the weight off the CIO shoulders and enabling change. It could be said that the CDiO role developed as a result of an early division of labour between old and the new as digital models emerged. However, recently we have seen a considerable shift across all major sectors with four trends leading the charge for change: cloud, mobility, IoT and big data. It is this technological innovation that has enabled the role of the CIO rise once more.

This is the big moment for the CIO essentially becoming the hero of the digital age, not only embracing the new but also connecting the old with the new and really enabling organizations to move forward. That said, we must not underestimate the scale of the challenge CIO’s face, there is a level of complexity in this new age of digital transformation that isn’t going away. Compounding this issue, business processes are often overlooked when technology is being rapidly applied. In many cases the CIO needs to reach out to their business counterpart in the area where technology is going to be deployed to ensure not only that there is complete connection but also that, working together, they understand how the business will function in that new environment and how orchestrating business technology will produce and deliver a strong result. CIOs must now take ownership of both to ensure they are not locked out of future technology decisions. The CIO who can keep up with the pace of new technology adoption can stay ahead of potential CDiOs encroaching on their territory.

5 Minutes With Mark Prior

Posted on : 18-12-2015 | By : Maria Motyka | In : 5 Minutes With

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Which recent tech innovations are you the most excited about?

I get most excited about how my business can benefit from technology (whether it’s new or not). It’s my team’s job to understand our business; its processes, strategy and competitor landscape and bring technology to bear to address those challenges.
Smith and Williamson is a very client centric business – there is a great opportunity to leverage even well-established technology like IPT, Workflow and Document management to improve the service we provide to clients. Additionally Cloud based collaboration tools offer new ways to engage with our clients 1-1 and perhaps open up new markets for services.

Like all industries if we can both improve the service to the client through technology and at the same time lower the cost of servicing a client we will be successful.

From a pure technology perspective I’m looking forward to improvements in price and functionality of end user devices – particularly low cost 2in1 windows devices displacing the desktop or traditional clam laptop as the default end user device. I hope the combination of these devices, windows 10, office 365, Wi-Fi and IPT will provide a better mobile platform that’s easier to manage and support and offers a seamless user experience regardless of location and connection type.

Looking ahead I’m also interested in how graphene will impact IT – whether it’s in battery technology or the size and speed of microprocessors, it appears to have the potential to be revolutionary (and it was invented in the UK!!).

 

How do you see business applications in wealth management adopting As-a-Service operating models?

Firms buy solutions that best meet their needs – how those solutions are delivered is often secondary, however vendors that deliver their solution (only) as a service are I feel better placed to rapidly adapt and evolve their offering as it’s a single code set, single port etc. This should keep their costs down and by passing those savings to customers they will drive adoption and create a virtuous circle. It should also mean they can focus development resource on new features rather than maintaining multiple code sets and branches.

 

In your opinion, what are the biggest data security risks that financial organisations are currently facing and how can they be overcome?

I think everyone understands the need for perimeter security, good patch management, access controls etc. But I think an area this is sometimes overlooked are “end users” either inadvertently or deliberately exposing data. We need to ensure we classify our data based on risk, educate our employees and have appropriate audit trails and controls based on data classification (all easier said than done). Service like MS Office 365 and OneDrive mean this has to be driven as much by policy and education as by IT.

 

Why did you choose Broadgate to assist you? What value has working with Broadgate brought to your team?

I’ve known the team for many years and trust them to do a good job for their clients.

Broadgate’s engagement style is collaborative and consultative, unlike other firms where every conversation is viewed as a selling opportunity.

 

Which technology trends do you predict will be a key theme for 2016?

Every year we think it will be cloud – maybe this year it will happen (though personally I’m not sure it will) Financial service firms are still hesitant to put client data into the public cloud and many firms say the cost of cloud is more than the marginal cost of adding capacity to their own facilitates.
Hosting strategies are difficult to formulate as the options are many and varied with no clear leaders. I think Google will drive into MS market share (a few years ago I can’t recall anyone seriously considering alternatives to MS Office) which should ensure healthy competition and better options for their customers.

THE NEXT BANKING CRISIS? TOO ENTANGLED TO FAIL…

Posted on : 29-10-2015 | By : Jack.Rawden | In : Finance

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Many miles of newsprint (& billions of pixels) have been generated discussing the reasons for the near collapse of the financial systems in 2008. One of the main reasons cited was that each of the ‘mega’ banks had such a large influence on the market that they were too big to fail, a crash of one could destroy the entire banking universe.

Although the underlying issues still exist; there are a small number of huge banking organisations, vast amounts of time and legislation has been focused on reducing the risks of these banks by forcing them to hoard capital to reduce the external impact of failure. An unintended consequence of this has been that banks are less likely to lend so constricting firms ability to grow and so slowing the recovery but that’s a different story.

We think, the focus on capital provisions and risk management, although positive, does not address the fundamental issues. The banking system is so interlinked and entwined that one part failing can still bring the whole system down.

Huge volumes of capital is being moved round on a daily basis and there are trillions of dollars ‘in flight’ at any one time. Most of this is passing between banks or divisions of banks. One of the reasons for the UK part of Lehman’s collapse was that it sent billions of dollars (used to settle the next days’ obligations) back to New York each night. On the morning of 15th September 2008 the money did not come back from the US and the company shut down. The intraday flow of capital is one of the potential failure points with the current systems.

Money goes from one trading organisation in return for shares, bonds, derivatives, FX but the process is not instant and there are usually other organisations involved in the process and the money and/or securities are often in the possession of different organisations in that process.

This “Counterparty Risk” is now one of the areas that banks and regulators are focussing in on. What would happen if a bank performing an FX transaction on behalf of a hedge fund stopped trading. Where would the money go? Who would own it and, as importantly, how long would it take for the true owner to get it back. The other side of the transaction would still be in flight and so where would the shares/bonds go? Assessing the risk of a counterparty defaulting whilst ensuring the trading business continues is a finely balanced tightrope walk for banks and other trading firms.

So how do organisations and governments protect against this potential ‘deadly embrace’?

Know your counterparty; this has always been important and is a standard part of any due diligence for trading organisations, what is as important is;

Know the route and the intermediaries involved; companies need as much knowledge of the flow of money, collateral and securities as they do for the end points. How are the transactions being routed and who holds the trade at any point in time. Some of these flows will only pause for seconds with one firm but there is always a risk of breakdown or failure of an organisation so ‘knowing the flow’ is as important as knowing the client.

Know the regulations; of course trading organisations spend time & understand the regulatory framework but in cross-border transactions especially, there can be gaps, overlaps and multiple interpretations of these regulations with each country or trade body having different interpretation of the rules. Highlighting these and having a clear understanding of the impact and process ahead of an issue is vital.

Understanding the impact of timing and time zones; trade flows generally can run 24 hours a day but markets are not always open in all regions so money or securities can get held up in unexpected places. Again making sure there are processes in place to overcome these snags and delays along the way are critical.

Trading is getting more complex, more international, more regulated and faster. All these present different challenges to trading firms and their IT departments. We have seen some exciting and innovative projects with some of our clients and we are looking forward to helping others with the implementation of systems and processes to keep the trading wheels oiled…

Caveat Emptor: The impact of poor cyber security in mergers & acquisitions

Posted on : 30-09-2015 | By : richard.gale | In : Cyber Security

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The Ashley Madison breach is now infamous in the world of cyber security as a stark warning of what can happen when hackers get hold your data.  The fallout from this incident has been far reaching and resulting in a failed IPO attempt to list on the London Stock Exchange and multi-million dollar class action lawsuits.  US retailer Target suffered another high profile breach where costs are said to have reached over $160 million and traffic to its site dropped by 23% over the following year. We can see how a breach can have a major impact on company financials in terms of profit and reputational damage.  How you would be feel if you were a new shareholder in Ashley Madison or your company had recently acquired Target?!

Cyber security should be part of any company risk profile and the M & A sector is no exception. However, more often than not this is not the case.  The prime purpose of a merger or acquisition is for the acquiring company to make a return on investment or add value to the existing company.  As cyber security can have a major financial impact it must be seen as a key risk indicator in the due diligence process.

It wasn’t that long ago that mergers and acquisition deals were conducted in a paper based room secured and locked down to only those with permitted access.  These days the process has moved on and is now mostly online, with the secure virtual data room being the norm. Awareness of cyber security in the information gathering part of the deal making process is well established. It is the awareness and need to look at the cyber security of the target company itself that needs to be addressed.  Technology due diligence is investigated but tends to focus on system compatibility and integration alone.

A study published by law firm Freshfields Bruckhaus Deringer found that 78 % of global respondents did not think that cyber security was analysed in great depth as part of the M&A due diligence due process, despite the fact that two thirds said that a cyber incident during the deal or discovery of a past breach during due diligence would significantly impact the transaction.

Deal makers acquiring must take assess the cyber risk of an organisation in the same way that it would assess overall financial risk. Due diligence is all about establishing the potential liabilities of the company you are taking on.  According to the Verizon Data Breach survey it takes an average of 205 days to discover a breach. Often companies are breached without ever knowing. It is therefore crucial to look at the cyber risk not just in terms of have they been breached but what is likelihood and impact of a breach.  An acquisition target company that looks good at the time of closing the deal may not look quite so good a few months later.

The main reason for this lack of importance given to the cyber threat is that M&A teams find it hard to quantify the cyber risk particularly given the time pressures involved.  A cyber risk assessment at the M&A stage would is crucial if the acquiring company wants to protect its investment. The ability to carry out this assessment and to quantify the business impact of a likely cyber breach with a monetary value is invaluable to deal makers. Broadgate’s ASSURITY Assessment provides this information in a concise, value specific way using business language to measure risks, likelihood and cost of resolution.

Conclusion

A cyber security assessment should be part of every M&A due diligence process. If you don’t know what you are acquiring in terms of intellectual property and cyber risk how can you can possibly know the true value of what you are acquiring!

Also crucial for all prospective sellers to demonstrate a serious proactive planned approach to cyber security when attempting to achieve the best price for their business.

“Scores on the Doors” – The Broadgate Brand Perception Survey Results

Posted on : 27-05-2015 | By : Jack.Rawden | In : General News

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Recently Broadgate kicked off an internal initiative to try and gauge the “Broadgate” brand and it’s perception across its stakeholders.  In March a survey was distributed and responses flowed thick and fast.  Respondents were from a variety of groups, from clients to partners, associates, rivals – even one of Broadgates director’s mothers.  If you were one of the people that took the time to respond, thank you.

Survey Aims

Since 2008 Broadgate has been providing Technology and Business Services to a range of institutions.  A decision was made in January this year to see if Broadgate could gain an understanding of how it is viewed by its stakeholders. As a company we were keen to get a feel for:-

  • How the Broadgate “Brand” is seen and what is associated with it
  • If there are any gaps in services Broadgate are currently providing
  • Our Communication Channels, how people use them and the content
  • If there is anything that Broadgate should be improving

Results from the survey were combined, analysed and key trends/themes emerged. Broadgate has taken valuable insight from this and some of the findings are included below.

Broadgate Brand Quotes

Communication

Broadgates communication channels have been generally well received.  Stakeholders have reviewed the Broadgate twitter feed, LinkedIn profile, website, blog and newsletter.  In general the level, detail and frequency of communication was good and as part of the process Broadgate will continue to develop these, particularly the newsletter to keep content informative and relevant. In the near future the newsletter will receive an updated look and we will strive to continue to produce informative, relevant and forward thinking articles.  There will also be a push to improve the social media content, so if you don’t already, follow Broadgate on LinkedIn, Twitter and soon Google +.

Brand Perception

The good news for Broadgate is that the Broadgate name and brand is overall perceived well.  Trust, knowledge and strengths all scored highly.  This is something that as a company we will endeavour to keep and improve as Broadgate grows.

A few comments that came from the survey associated Broadgate as being “Credible”, “Un-biased”, “Knowledgeable”, “Delivers Value”, “Experienced” and “Flexible”.  From a Broadgate perspective this aligns with Broadgate’s “Core Values” and what we pride ourselves as some of our key strengths.  We will continue to work to these “Core Values” and ensure that our standards don’t slip.

Could improve

The survey did highlight some areas in which Broadgate can improve and work has been started to try and improve these areas.  Broadgate has a social media presence, however, respondents to the survey did not view or engage with the content.  Broadgate also needs to improve visibility on its core technical strengths between groups.  Certain groups see Broadgate differently to one another, which means there is an issue with the way Broadgate is communicating its core skills and values.  Work has already started on both of these areas and hopefully these will be resolved in the near future.

Overall the survey has been a success, things that Broadgate are doing well will be the core values for Broadgate as it progresses and expands further.  Areas for improvement will be addressed and plans are in place to try and remediate them.  All feedback received has been taken on board and will used to improve the level of services Broadgate provide.

Why is cyber so popular with today’s criminal?

Posted on : 30-01-2015 | By : richard.gale | In : Cyber Security

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In a recent interview Manhattan District Attorney Cyrus Vance Jr stated that a third of the crimes his office investigates are now related to cyber crime and identity theft. Cyrus referred to it as a ‘Tsunami’ and it has forced significant changes in the way his department works.

Cybercrime in all its forms is accounting for 200 – 300 complaints per month and is rising fast. Cyber is one of the few areas of crime that is actually rising. Most other types of crime are decreasing and this pattern continues into the UK.

 

So why is cyber crime on the increase, what sorts of crime are occurring, who are the criminals and how do they operate?

 

Why do criminals carry out cybercrime?

Ease – The ability to carry out cybercrime is getting easier. There are plenty of tools available, some of the crimes are the simplest such as the scamming emails which purport to be from your bank or someone who has lost their wallet abroad do not need any special equipment. There is still a perception from some consumers that emails with the correct logos are official and should be taken seriously. More complex frauds using targeted malware and tools are more difficult to commit but are becoming widespread as the value of theft can be far greater. The ‘cost of entry’ to the Cyber market is getting lower and the tools becoming more prevalent.

Lower sentencing – Traditional crime, especially where violence or threat of violence is concerned is usually severely punished. Cybercrime generally comes under the banner of ‘white collar’ crime and the price criminals have to pay for this can be far lower in the form of lighter/suspended sentences or even just fines. This attracts criminals to the lower risk/reward ratio. Punishment of cybercrime may change as it matures but for the moment it is an easy option.

Higher Risk/Rewards – The average ‘take’ for a bank robbery in the U.S. is $1,200, the sentence for a violent crime can be life. Conversely the average loss for a cyber crime is $4,600 and the likelihood of any custodial sentence is low. In addition the chance of being caught is very low compared to a bank robbery.

Comfort – Traditional crime is weather dependent, burglary rates go down when it is cold and raining (partially due to the lack of open windows but also because burglars dislike going out in bad weather as much as the rest of us). A significant amount of cybercrime can be carried out from anywhere including the comfort of a criminal’s house.

 

What cybercrimes are popular? How are they carried out?

Hacking: This is a type of crime wherein a computer is broken into so that sensitive, confidential or personal information can be accessed by an unauthorised party. In hacking, the criminal uses a variety of software to enter a person’s computer and the person may not be aware that his computer is being accessed from a remote location.

Theft: This crime occurs when a third party steals credentials to access and reuse or sell unauthorised data. This can include reproducing copyrighted material such as music, movies, games and software. There are many peer sharing websites which encourage software piracy, these get shutdown on a regular basis but spring up again very quickly.

Cyber Stalking: This is a kind of online harassment wherein the victim is subjected to a barrage of online messages and emails. Typically, these stalkers fall into two groups. Ones who know their victims and instead of resorting to offline stalking, they use the Internet to stalk and the other where there is no previous connection to the victim except that they are in the public eye for some reason.

Identity Theft: This has become a major problem with people using the Internet for cash transactions and banking services. In this cybercrime, a criminal accesses data about a person’s bank account, credit or debit cards and other sensitive information to siphon money or to buy things online in the victim’s name. It can result in major financial losses for the victim and is an increasing overhead for financial services companies.

Malicious Software: These are Internet-based software or programs that are used to disrupt a network. The software is used to gain access to a system to steal sensitive information or data or causing damage to software present in the system. DDOS – denial of service and malicious encryption tools are often used for extortion purposes.

Child soliciting and Abuse: This is also a type of cyber crime wherein criminals solicit under age children through a variety of mechanisms for the purpose of child pornography. Government agencies are spending a lot of time targeting these types of crime and monitor chat rooms frequented by children to prevent this sort of child abuse.

 

Who are the cyber criminals?

Professor Marcus Rogers, Director of the Cyber Forensics & Security Program and Purdue University has produced a taxonomy of offenders;

Script kiddies: who are motivated by “immaturity, ego boosting, and thrill seeking.” Rogers says they tend to be “individuals with limited technical knowledge and abilities who run precompiled software to create mischief, without truly understanding what the software is accomplishing ‘under the hood.’ ”

Cyber-punks: who “have a clear disrespect for authority and its symbols and a disregard for societal norms.” According to Rogers, “they are driven by the need for recognition or notoriety from their peers and society,” and are “characterized by an underdeveloped sense of morality.”

Hacktivists: who, in Rogers’ estimation, might just be “petty criminals” trying to “justify their destructive behaviour, including defacing websites, by labelling [it] civil disobedience and ascribing political and moral correctness to it.”

Thieves: who are “primarily motivated by money and greed” and are “attracted to credit card numbers and bank accounts that can be used for immediate personal gain.”

Virus writers: who tend to be drawn to “the mental challenge and the academic exercise involved in the creation of the viruses.”

Professionals: who are often ex-intelligence operatives “involved in sophisticated swindles or corporate espionage.”

Cyber-terrorists: who are essentially warriors, often members of “the military or paramilitary of a nation state and are viewed as soldiers or freedom fighters in the new cyberspace battlefield.”

 

To conclude, cybercrime is a fast growing, multi-faceted problem with new participants entering the arena every day. It will be interesting to see how technology and other commercial organisations approach the problem and how society and government organisations attack the cyber hordes. We will be following this article with our thoughts on how it can be approached in the coming months.

Agile. Is it the new name for in-sourcing?

Posted on : 30-01-2015 | By : richard.gale | In : Innovation

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Business, IT, clothing are all similar in so much that they can lead and follow fashions & trends.

Looking at IT specifically there is a trend to commoditise and outsource as much as possible to concentrate on the core ‘business’ of growing a business. As we all know this has many advantages for the bottom line and keeps the board happy as there is a certainty of service & cost, headcount is down and the CIO has something to talk about in the exec meetings.

At the coalface the story is often a different one with users growing increasingly frustrated with the SLA driven service, business initiatives start to be strangled by a cumbersome change processes and support often rests in the hands of the dwindling number of IT staff with deep experience of the applications and organisation.

So a key question is –  How to tackle both the upward looking cost/headcount/service mentality whilst keeping the ability to support and change the business in a dynamic fulfilling way?

Agile is a hot topic in most IT and business departments, it emerged from several methodologies from the 1990’s with roots back to the ‘60s and has taken hold as a way of delivering change quickly to a rapidly changing business topology.

At its core Agile relies on:

  • Individuals & interaction – over process and tools
  • Customer communication & collaboration in the creation process – over agreeing scope/deliverables up front
  • Reactive to changing demands and environment – over a blinkered adherence to a plan

The basis of Agile though relies on a highly skilled, articulate, business & technology aware project team that is close to and includes the business. This in theory is not the opposite of an outsourced, commodity driven approach but in reality the outcome often is.

When we started working on projects in investment organisations in the early ‘90s most IT departments were small, focused on a specific part of the business and the team often sat next to the trader, accountant or fund manager. Projects were formal but the day to day interaction, prototyping, ideas and information gathering could be very informal with a mutual trust and respect between the participants. The development cycle was often lengthy but any proposed changes and enhancements could be story boarded and walked through on paper to ensure the end result would be close to the requirement.

In the front office programmers would sit next to the dealer and systems, changes and tweaks would be delivered almost real time to react to a change in trading conditions or new opportunities (it is true to say this is still the case in the more esoteric trading world where the split between trader and programmer is very blurry).  This world, although unstructured, is not that far away from Agile today.

Our thinking is that businesses & IT departments are increasingly using Agile not only for its approach to delivering projects but also, unconsciously perhaps,  as a method of bypassing the constraints of the outsourced IT model – the utilisation of experienced, skilled, articulate, geographically close resources who can think through and around business problems are starting to move otherwise stalled projects forward so enabling the business to develop & grow.

The danger is – of course – that as it becomes more fashionable – Agile will be in danger of becoming mainstream (some organisations have already built offshore Agile teams) and then ‘last years model’ or obsolete. We have no doubt that a new improved ‘next big thing’ will come along to supplant it.

 

Broadgate Predictions for 2015

Posted on : 29-12-2014 | By : richard.gale | In : Innovation

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We’ve had a number of lively discussions in the office and here are our condensed predictions for the coming year.  Most of our clients work with the financial services sector so we have focused on predictions in these areas.  It would be good to know your thoughts on these and your own predictions.

 

Cloud becomes the default

There has been widespread resistance to the cloud in the FS world. We’ve been promoting the advantages of demand based or utility computing for years and in 2014 there seemed to be acceptance that cloud (whether external applications such as SalesForce or on demand platforms such as Azure) can provide advantages over traditional ‘build and deploy’ set-ups. Our prediction is that cloud will become the ‘norm’ for FS companies in 2015 and building in-house will become the exception and then mostly for integration.

Intranpreneur‘ becomes widely used (again)

We first came across the term Intranpreneur in the late ’80s in the Economist magazine. It highlighted some forward thinking organisations attempt to change culture, to foster,  employ and grow internal entrepreneurs, people who think differently and have a start-up mentality within large firms to make them more dynamic and fast moving. The term came back into fashion in the tech boom of the late ’90s, mainly by large consulting firms desperate to hold on to their young smart workforce that was being snapped up by Silicon Valley. We have seen the resurgence of that movement with banks competing with tech for the top talent and the consultancies trying to find enough people to fulfil their client projects.

Bitcoins or similar become mainstream

Crypto-currencies are fascinating. Their emergence in the last few years has only really touched the periphery of finance, starting as an academic exercise, being used by underground and cyber-criminals, adopted by tech-savvy consumers and firms. We think there is a chance a form of electronic currency may become more widely used in the coming year. There may be a trigger event – such as rapid inflation combined with currency controls in Russia – or a significant payment firm, such as MasterCard or Paypal, starts accepting it.

Bitcoins or similar gets hacked so causing massive volatility

This is almost inevitable. The algorithms and technology mean that Bitcoins will be hacked at some point. This will cause massive volatility, loss of confidence and then their demise but a stronger currency will emerge. The reason why it is inevitable is that the tech used to create Bitcoins rely on the speed of computer hardware slowing their creation. If someone works around this or utilises a yet undeveloped approach such as quantum computing then all bets are off. Also, perhaps more likely, someone will discover a flaw or bug with the creation process, short cut the process or just up the numbers in their account and become (virtually) very rich very quickly.

Mobile payments, via a tech company, become mainstream

This is one of the strongest growth areas in 2015. Apple, Google, Paypal, Amazon, the card companies and most of the global banks are desperate to get a bit of the action. Whoever gets it right, with trust, easy to use great products will make a huge amount of money, tie consumers to their brand and also know a heck of a lot more about them and their spending habits. Payments will only be the start and banking accounts and lifestyle finance will follow. This one product could transform technology companies (as they are the ones that are most likely to succeed) beyond recognition and make existing valuations seem miniscule compared to their future worth.

Mobile payments get hacked

Almost as inevitable as bitcoins getting hacked. Who knows when or how but it will happen but will not impact as greatly as it will on the early crypto-currencies.

Firms wake up to the value of Data Science over Big Data

Like cloud many firms have been talking up the advantages of big data in the last couple of years. We still see situations where people are missing the point. Loading large amounts of disparate information into a central store is all well and good but it is asking the right questions of it and understanding the outputs is what it’s all about. If you don’t think about what you need the information for then it will not provide value or insight to your business. We welcome the change in thinking from Big Data to Data Science.

The monetisation of an individual’s personal data results in a multi-billion dollar valuation an unknown start-up

Long Sentence… but the value of people’s data is high and the price firms currently pay for it is low to no cost. If someone can start to monetise that data it will transform the information industry. There are companies and research projects out there working on approaches and products. One or more will emerge in 2015 to be bought by one of the existing tech players or become that multi-billion dollar firm. They will have the converse effect on Facebook, Google etc that rely on that free information to power their advertising engines.

Cyber Insurance becomes mandatory for firms holding personal data (OK maybe 2016)

It wouldn’t be too far fetched to assume that all financial services firms are currently compromised, either internally or externally. Most firms have encountered either direct financial or indirect losses in the last few years. Cyber or Internet security protection measures now form part of most companies’ annual reports. We think, in addition to the physical, virtual and procedural protection there will be a huge growth in Cyber-Insurance protection and it may well become mandatory in some jurisdictions especially with personal data protection. Insurance companies will make sure there are levels of protection in place before they insure so forcing companies to improve their security further.

Regulation continues to absorb the majority of budgets….

No change then.

We think 2015 is going to be another exciting year in technology and financial services and are really looking forward to it!

 

Preparing for the emerging upturn

Posted on : 31-07-2014 | By : jo.rose | In : Innovation

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In this article, we consider the timing of the upturn and the implications for the type of change activity to be planned for and some key principles that help ensure success.

I thought I would start with a few sobering statistical observations: Post the 2007-2008 crash, the Gross Value Added by Financial Services and Insurance to the UK economy fell to below that of manufacturing and retail. Further, since GDP bottomed out in 2009, Financial Services output has generally failed to keep track with both GDP growth and other services output. Unsurprisingly, as the crash unfolded, participants in the industry decimated their change budgets as part of wider belt tightening measures.

More recently, official statistics point to the downturn being well and truly over.  However, are the effects of the crash still in evidence in respect of change investment confidence?

We would assert that many companies within the Financial Services industry remain uncertain about their medium term economic prospects as evidenced by a focus on investment in non-discretionary change, such as regulatory requirements, M&A integration, Business-As-Usual maintenance and on smaller scale efficiency or client improvements.

We appear to be sauntering, tentatively up to a turning point in the industry. The latest CBI / PwC Financial Services survey clearly shows optimism, employment and business volumes up across the sector, despite headwinds regarding banking capacity, regulatory and risk management investment, consumer distrust of debt and increased competition from new entrants and as a result of the internet.

As a result there will likely be some relaxation of change budgets, but from a much shrunken base. In the face of increased demand but probably only modestly increased budget, the requirement to invest wisely is more pressing than ever. This means doing only the right things and doing them well.

With a view to the future and a likely phase of modest economic growth, what additional considerations are there for change investment?

With reference to the latest CBI / PwC Financial Services survey, competition has emerged as the primary expected constraint on business growth over the next year. The business environment remains uncertain and so revenue growth will be both difficult to quantify and near impossible to ensure. This suggests investment priorities should be towards reducing the cost base where the impact upon the P&L will be easier to quantify and more realistic to achieve.

Nevertheless, the upturn means that investment in new sources of revenue will need to be made. However, given the business case uncertainty involved, it will be essential that any investments have measurable targets, are aligned with clear strategic goals and have strong sponsorship and accountability.

We would always advocate two broad principles to underpin any organisation’s change programme:

(1)       Sort out the macro agenda first. There is no point ensuring you are super efficient if you’re actually doing the wrong thing. It’s critical that the strategic agenda of the organisation can be traced down to every aspect of the change portfolio, however technical the change may appear at first glance.

(2)       Every aspect of the change portfolio should be owned by an internal customer. Those responsible for delivery aren’t great sponsors because they inevitably have to second-guess the needs of the business or function they are serving. Even overtly technical changes such as network resilience or data architecture improvements really should be owned by the business functions that rely on them.

In our experience, most of the good behaviours you need from an organisation derive from these two principles of operation, but few organisations fully observe them. Taking the time to consider business ambitions over, say, 3 years and to gain the buy-in to every aspect of the change portfolio really pays dividends in the longer term.

In summary, an inoculation plan for uncertain times should include:

  1. Define Strategic Plan: Ensuring the organisation has a clear sense of growth ambitions and business targets to act as focus for all organisational activity. This means having a clear understanding of how strategic targets will be achieved within every department and ensuring those departments have the process and infrastructure capacity to meet anticipated demand.
  2. Go for efficiency: Targeting operational efficiency as a means to maximising profitability. Given increased competition, asset growth by organic means might be difficult to achieve, so operational efficiency, whether it be through outsourcing, industry collaboration, reducing the product mix or process improvement should be on the agenda.
  3. Ensure delivery effectiveness: Having determined what market segments to target, speed to market, as determined by product development processes and infrastructure implementation needs to be optimal. Are contributing departments integrated and working as required?

Although easier said than done, these things can all be achieved through a combination of strategic planning, capability improvement and robust policy implementation.

Thanks to Graham Dash at Luminosity Services for this viewpoint.

If you would like to debate or add to any of the points raised in this article, feel free to get in touch through any of the communications channels below.

Email: graham.dash@citylsl.com

LinkedIn: graham dash

 

Graham is a Director of Luminosity Services Ltd, founded in 2009 to provide specialist consulting services to asset and wealth management companies, investment banks and the organisations that service them. Our leadership team, comprised of Graham Dash and Syd Wilkinson, have more than five decades collective experience in change management, most of it in leadership positions in tier 1 banks, asset managers and consultancies. Our specialisation is “change” – the ability to plan, manage and deliver business improvements. Please visit our website for more details.