David Loader is Managing Director of the London based Derivatives and Securities Consultancy Ltd (DSC). DSC provides various consultancy and educational services to a wide range of financial institutions globally. David has over thirty years’ experience in the finance industry, particularly in operations, gained in a number of major organisations including SG Warburg Group where he was Operations Director. He is heavily involved in financial education and training, as a Director of Computer Based Learning Ltd (providing e-learning solutions to the financial services industry), and as an author and presenter of training courses for The Securities and Investment Institute.David is a member of The International Guild of Bankers, The Institute of Directors and The Securities and Investment Institute.

• Preface xviiAbout the author xix1 THE CHALLENGE 1The profile of operations 2Operations is a business 3The challenge of change 5The challenge of management style 7The challenge of global markets 8The challenge of personal goals 10The challenge of dealing with events 102 THE MANAGEMENT PHILOSOPHY 13Reporting lines 193 THE MANAGEMENT OF RISK 23Market risk 26Characteristics of the products used 27Management risk 27Inadequate procedures and controls 27Information or reporting risk 28Market or principal risk 28Credit or counterparty risk 30Operational risk 31Means of reducing settlement risk 33Personnel/HR risk 35Liquidity risk 36Systemic risk 37Financial or treasury risk 38Technology risk 39Systems failures 39Technology awareness 40Legal risk 40Regulatory risk 41Reputation risk 42Other risks 43Malicious risk 43Country risk 43Understanding risk 45Controlling risk 45Strategic controls 46Management responsibility 48Role of risk management 49The risk management process 50Risk management departments 52Staff training 554 SECURITIES FINANCING 57What is securities financing? 58Stock lending 59Securities lending process flows 64Loan initiation 65Delivery of collateral and securities 65Management of benefits and collateral 65Return/recall of securities 66Payment of fees 66Lending agreement 67Repurchase agreements (Repos) 67Collateral 68Securitisation 705 TREASURY AND FUNDING 71Case study 75Unsecured borrowing 80Secured borrowing 81Money market instruments 83Derivatives 84Foreign exchange 84Treasury settlements 85Cash management 86Risk in treasury settlement 886 RESOURCE MANAGEMENT 91Pressures on resource 92Defining resource 96Training and developing people 97Contingency planning 98Restructuring 101Training and personal development 103Succession planning 105Dealing with people 107The working environment 110Managing systems 110Technical performance 113Operational performance 114Difficult people 115Motivation 117No motivation means trouble is brewing 120Performance measurement 120Management of people 1227 TECHNOLOGY IN OPERATIONS 127Timing and resourcing 135Loss of key personnel 137Managing the operations function through the project 137Post-implementation 141Technology and the future 1418 PROCEDURAL DOCUMENTATION – CAPTURING THE KNOWLEDGE BASE 143The historical perspective 144The benefits of good documentation 145What is good procedural documentation? 148In-house or outsource? 1501 Skill 1502 Time 1513 Cost 152Maintaining, controlling and distributing the documentation 1529 CLIENT MANAGEMENT 155Customer relationships 157The approach to customer relationships and the ‘client culture’ 160Know your client 164General guide to account opening and customer identification 164Money laundering 178Defining the service and establishing relationships 178What is considered as client service? 178Establishing relationships 179The manager’s role in relationship management 180Structure of the operations function 182Responsibility 182Measuring service levels 184Escalation procedures 186Client liaison programmes 187Front-office client team 188Industry issues 188Training the team 189Analysing competition 189Developing the service 190What are the potential problems in customer relationships? 191Managing risk in the customer relationship 192Client visits 19410 MANAGEMENT INFORMATION 197Information paths 200Distribution 201MI production 202Sourcing data 203Compilation and validation 204Production of MI 204Risks in MI 20711 OUTSOURCING/INSOURCING OPERATIONS FUNCTIONS 211Outsourcing 212Regulation and outsourcing 214Insourcing 22312 INDUSTRY DEVELOPMENTS 225Regulatory changes and T&C 231Industry recommendation 232Shortening settlement cycles 232What else? 233Bank for International Settlement 233Securities Industry Association 234Alternative Investment Management Association 235International Swaps and Derivatives Association 235International Securities Markets Association 236GSCS benchmarks 237Other industry organisations 237Remote clearing 237The G30’s 20 recommendations 239Creating a strengthened, interoperable global network 239Mitigating risk 240Improving governance 241AppendicesA FATF DOCUMENTS ON THE FORTY RECOMMENDATIONS 243B FATF–GAFI 279C CONSOLIDATED KYC RISK MANAGEMENT 283Glossary 297List of abbreviations 311Useful websites and suggested further reading 313Index 315

David Loader is Managing Director of the London based Derivatives and Securities Consultancy Ltd (DSC). DSC provides various consultancy and educational services to a wide range of financial institutions globally. David has over thirty years’ experience in the finance industry, particularly in operations, gained in a number of major organisations including SG Warburg Group where he was Operations Director. He is heavily involved in financial education and training, as a Director of Computer Based Learning Ltd (providing e-learning solutions to the financial services industry), and as an author and presenter of training courses for The Securities and Investment Institute.David is a member of The International Guild of Bankers, The Institute of Directors and The Securities and Investment Institute.

• Preface xviiAbout the author xix1 THE CHALLENGE 1The profile of operations 2Operations is a business 3The challenge of change 5The challenge of management style 7The challenge of global markets 8The challenge of personal goals 10The challenge of dealing with events 102 THE MANAGEMENT PHILOSOPHY 13Reporting lines 193 THE MANAGEMENT OF RISK 23Market risk 26Characteristics of the products used 27Management risk 27Inadequate procedures and controls 27Information or reporting risk 28Market or principal risk 28Credit or counterparty risk 30Operational risk 31Means of reducing settlement risk 33Personnel/HR risk 35Liquidity risk 36Systemic risk 37Financial or treasury risk 38Technology risk 39Systems failures 39Technology awareness 40Legal risk 40Regulatory risk 41Reputation risk 42Other risks 43Malicious risk 43Country risk 43Understanding risk 45Controlling risk 45Strategic controls 46Management responsibility 48Role of risk management 49The risk management process 50Risk management departments 52Staff training 554 SECURITIES FINANCING 57What is securities financing? 58Stock lending 59Securities lending process flows 64Loan initiation 65Delivery of collateral and securities 65Management of benefits and collateral 65Return/recall of securities 66Payment of fees 66Lending agreement 67Repurchase agreements (Repos) 67Collateral 68Securitisation 705 TREASURY AND FUNDING 71Case study 75Unsecured borrowing 80Secured borrowing 81Money market instruments 83Derivatives 84Foreign exchange 84Treasury settlements 85Cash management 86Risk in treasury settlement 886 RESOURCE MANAGEMENT 91Pressures on resource 92Defining resource 96Training and developing people 97Contingency planning 98Restructuring 101Training and personal development 103Succession planning 105Dealing with people 107The working environment 110Managing systems 110Technical performance 113Operational performance 114Difficult people 115Motivation 117No motivation means trouble is brewing 120Performance measurement 120Management of people 1227 TECHNOLOGY IN OPERATIONS 127Timing and resourcing 135Loss of key personnel 137Managing the operations function through the project 137Post-implementation 141Technology and the future 1418 PROCEDURAL DOCUMENTATION – CAPTURING THE KNOWLEDGE BASE 143The historical perspective 144The benefits of good documentation 145What is good procedural documentation? 148In-house or outsource? 1501 Skill 1502 Time 1513 Cost 152Maintaining, controlling and distributing the documentation 1529 CLIENT MANAGEMENT 155Customer relationships 157The approach to customer relationships and the ‘client culture’ 160Know your client 164General guide to account opening and customer identification 164Money laundering 178Defining the service and establishing relationships 178What is considered as client service? 178Establishing relationships 179The manager’s role in relationship management 180Structure of the operations function 182Responsibility 182Measuring service levels 184Escalation procedures 186Client liaison programmes 187Front-office client team 188Industry issues 188Training the team 189Analysing competition 189Developing the service 190What are the potential problems in customer relationships? 191Managing risk in the customer relationship 192Client visits 19410 MANAGEMENT INFORMATION 197Information paths 200Distribution 201MI production 202Sourcing data 203Compilation and validation 204Production of MI 204Risks in MI 20711 OUTSOURCING/INSOURCING OPERATIONS FUNCTIONS 211Outsourcing 212Regulation and outsourcing 214Insourcing 22312 INDUSTRY DEVELOPMENTS 225Regulatory changes and T&C 231Industry recommendation 232Shortening settlement cycles 232What else? 233Bank for International Settlement 233Securities Industry Association 234Alternative Investment Management Association 235International Swaps and Derivatives Association 235International Securities Markets Association 236GSCS benchmarks 237Other industry organisations 237Remote clearing 237The G30’s 20 recommendations 239Creating a strengthened, interoperable global network 239Mitigating risk 240Improving governance 241AppendicesA FATF DOCUMENTS ON THE FORTY RECOMMENDATIONS 243B FATF–GAFI 279C CONSOLIDATED KYC RISK MANAGEMENT 283Glossary 297List of abbreviations 311Useful websites and suggested further reading 313Index 315

David Loader is Managing Director of the London based Derivatives and Securities Consultancy Ltd (DSC). DSC provides various consultancy and educational services to a wide range of financial institutions globally. David has over thirty years’ experience in the finance industry, particularly in operations, gained in a number of major organisations including SG Warburg Group where he was Operations Director. He is heavily involved in financial education and training, as a Director of Computer Based Learning Ltd (providing e-learning solutions to the financial services industry), and as an author and presenter of training courses for The Securities and Investment Institute.David is a member of The International Guild of Bankers, The Institute of Directors and The Securities and Investment Institute.

• Preface xviiAbout the author xix1 THE CHALLENGE 1The profile of operations 2Operations is a business 3The challenge of change 5The challenge of management style 7The challenge of global markets 8The challenge of personal goals 10The challenge of dealing with events 102 THE MANAGEMENT PHILOSOPHY 13Reporting lines 193 THE MANAGEMENT OF RISK 23Market risk 26Characteristics of the products used 27Management risk 27Inadequate procedures and controls 27Information or reporting risk 28Market or principal risk 28Credit or counterparty risk 30Operational risk 31Means of reducing settlement risk 33Personnel/HR risk 35Liquidity risk 36Systemic risk 37Financial or treasury risk 38Technology risk 39Systems failures 39Technology awareness 40Legal risk 40Regulatory risk 41Reputation risk 42Other risks 43Malicious risk 43Country risk 43Understanding risk 45Controlling risk 45Strategic controls 46Management responsibility 48Role of risk management 49The risk management process 50Risk management departments 52Staff training 554 SECURITIES FINANCING 57What is securities financing? 58Stock lending 59Securities lending process flows 64Loan initiation 65Delivery of collateral and securities 65Management of benefits and collateral 65Return/recall of securities 66Payment of fees 66Lending agreement 67Repurchase agreements (Repos) 67Collateral 68Securitisation 705 TREASURY AND FUNDING 71Case study 75Unsecured borrowing 80Secured borrowing 81Money market instruments 83Derivatives 84Foreign exchange 84Treasury settlements 85Cash management 86Risk in treasury settlement 886 RESOURCE MANAGEMENT 91Pressures on resource 92Defining resource 96Training and developing people 97Contingency planning 98Restructuring 101Training and personal development 103Succession planning 105Dealing with people 107The working environment 110Managing systems 110Technical performance 113Operational performance 114Difficult people 115Motivation 117No motivation means trouble is brewing 120Performance measurement 120Management of people 1227 TECHNOLOGY IN OPERATIONS 127Timing and resourcing 135Loss of key personnel 137Managing the operations function through the project 137Post-implementation 141Technology and the future 1418 PROCEDURAL DOCUMENTATION – CAPTURING THE KNOWLEDGE BASE 143The historical perspective 144The benefits of good documentation 145What is good procedural documentation? 148In-house or outsource? 1501 Skill 1502 Time 1513 Cost 152Maintaining, controlling and distributing the documentation 1529 CLIENT MANAGEMENT 155Customer relationships 157The approach to customer relationships and the ‘client culture’ 160Know your client 164General guide to account opening and customer identification 164Money laundering 178Defining the service and establishing relationships 178What is considered as client service? 178Establishing relationships 179The manager’s role in relationship management 180Structure of the operations function 182Responsibility 182Measuring service levels 184Escalation procedures 186Client liaison programmes 187Front-office client team 188Industry issues 188Training the team 189Analysing competition 189Developing the service 190What are the potential problems in customer relationships? 191Managing risk in the customer relationship 192Client visits 19410 MANAGEMENT INFORMATION 197Information paths 200Distribution 201MI production 202Sourcing data 203Compilation and validation 204Production of MI 204Risks in MI 20711 OUTSOURCING/INSOURCING OPERATIONS FUNCTIONS 211Outsourcing 212Regulation and outsourcing 214Insourcing 22312 INDUSTRY DEVELOPMENTS 225Regulatory changes and T&C 231Industry recommendation 232Shortening settlement cycles 232What else? 233Bank for International Settlement 233Securities Industry Association 234Alternative Investment Management Association 235International Swaps and Derivatives Association 235International Securities Markets Association 236GSCS benchmarks 237Other industry organisations 237Remote clearing 237The G30’s 20 recommendations 239Creating a strengthened, interoperable global network 239Mitigating risk 240Improving governance 241AppendicesA FATF DOCUMENTS ON THE FORTY RECOMMENDATIONS 243B FATF–GAFI 279C CONSOLIDATED KYC RISK MANAGEMENT 283Glossary 297List of abbreviations 311Useful websites and suggested further reading 313Index 315