Future of Operations Hinges on Tech Approach, Industry Collaboration

ISITC's Lisa Iagatta explains why the industry will need to come together to tackle new challenges facing the world of operations.


Several factors have converged to force companies to make vital decisions about the future of their operations departments.

The most pressing issue is the ongoing Covid-19 pandemic. Government-enforced shelter-at-home orders worldwide have compelled financial institutions to set up their employees for success in remote environments. The situation no doubt will have long-lasting effects on the industry.

Lisa Iagatta, ISITC
Lisa Iagatta, chairman of the ISITC board of directors.

But before the pandemic reached a crescendo in the US, financial institutions faced several key issues with their operations teams.

The emergence of zero-fee equity trading caused teams handling treasury operations to become more cash management-oriented due to the need to be more value-driven than ever. At the same time, aging technology stacks forced companies into deciding whether to invest in current systems, or undertake a complete overhaul. Financial institutions were also faced with outsourcing capabilities outside of their core operations.

These issues today still hold true, and will continue to exist even in a post-Covid world.

As financial institutions build their operations with an eye toward the future, it spurs conversations about how best to handle these challenges, and technology will be at the forefront of this change. Emerging technology will transform how operations departments work. For example, DocuSign has begun to replace “wet signatures” on documents; videoconferencing services like Zoom have made remote work environments more feasible; and blockchain might have the ability to eliminate many reconciliation and P&S teams. Additionally, technologies such as artificial intelligence (AI) and machine learning eliminate and streamline reconciliations, doing away with entire departments.

It’s imperative for financial institutions to take advantage of the changes while future-proofing their teams. They can do this by moving to a cloud-based platform. First of all, the cloud allows for a more distributed workforce, which in this environment has become vitally important. Also, cloud allows firms to embrace microservices, as opposed to being locked into full front-to-back solutions. And perhaps most importantly, cloud allows users to be nimble when it comes to picking the tools they want to deploy, thus allowing them to focus their internal teams on building true value-add systems and solutions.

Future Proofing Ops

Changes in technology, particularly as they relate to data, are impacting today’s operations teams. For example, data is essential to the way companies will set up AI and machine learning going forward. In the past, companies might have gotten away with having an offshore ops team reviewing reference security data and enriching it post-trade. With AI and machine learning, that process can start up front so companies can focus on extracting real-time trade data.

And it’s the distributed nature of this data that is causing changes to how those employees work.

Data now is filtering in from multiple sources as opposed to a centralized location companies dealt with a decade ago. This development has been the proverbial “game-changer” as financial institutions seek how best to organize such vital information. At the same time, firms now view their own data as a commodity, which prompts a couple of questions: Should it be monetized? If yes, then how?

That said, the technology to ingest and leverage datasets has dramatically changed as well in the past three years, which has changed the role of operations teams.

Teams must now identify, fix, and prevent problems, and have a deep understanding of the technology being used. The path to future-proof operations teams will rely on hiring personnel familiar with the latest technology along with traditional skills such as market awareness. No longer will the prerequisite for jobs be simply knowing how databases are built and how to read them.

Financial institutions also will need to answer questions about how best to deal with technology shortfalls, either internally or via outsourcing.

Those firms should seek to outsource capabilities that are not unique to a company. More and more, financial institutions are moving toward a model of “keep your bread and butter internal, and outsource functions that don’t add differentiating value.”

While outsourcing has become more bespoke and modular than in the past, a company’s strategy will vary according to its size. For example, a large financial firm might want to leverage a third-party user interface to take advantage of industry scale and various resources, so there may no longer be a need to build internally. 

The end goal for these technology changes is to help ensure efficiency within the operations team, which extends to the entire organization. That will help organizations improve their response to customer inquiries and issues.

Come Together

Since every company is unique in its processes, and approaches operational challenges in its own way, the need for communication and collaboration with industry peers is important. In order to communicate harmoniously as an industry, we need to agree that the future of operations cannot rely on a system that only works for one bank.

Organizations like ISITC, Sifma, Isda, and the EDM Council exist to assist companies in accomplishing their end goals when it comes to modernizing the operations team with uniformity across financial institutions’ systems. Our organizations can help lead the way as part of the ecosystem by establishing standards that make sense for all companies.

Companies today need to have conversations about vital topics with the goal of identifying common understandings of various processes. The industry needs to collaborate and align on such aspects of the business. If not, we will repeat the mistakes of the past without transforming the operations teams of the future.

Lisa Iagatta is chair of ISITC, where she is responsible for the strategic direction and growth of the independent non-profit financial services organization. She is also director of account management at Tegra118

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