Case Studies
Delivering a new trading business
One of three actual case studies.
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One of three actual case studies.
The senior management of a multinational investment bank had decided to expand its current commodity derivatives trading to include physical trading. Due to regulatory constraints, the new trading business had to be set up as a new legal entity within the company’s existing legal structure, and preferably with a target operating model that would allow the new entity to take maximum advantage of existing infrastructure, systems, and support functions.
Starting a new commodity trading business from scratch is in most cases a time-consuming process. The challenges often lie in keeping stakeholders engaged and maintaining management support throughout the process, while many new and unknown activities need to be designed and implemented. In this specific case, the requirement was to deliver the new business within 12 months, which included decisions on geographic location, legal structure, funding model, new trading system for physical commodities, and how a new target operating model with 14 internal support functions would be designed and put into operation.
Commodity First was selected:
A good understanding and genuine commitment and ownership are always important ingredients in large-scale projects, but they are even more important when a new type of business is being introduced. The foundations for this were mainly achieved by investing time in advance for:
To deliver a complex project with the right quality, on time and within budget, the composition of the project team must also be well thought through. Although external resources can provide the specific expertise and be fully dedicated to the project, in this case it was important to involve internal resources to ensure and effective transfer of ownership back to the organisation at the end of the project. Motivation, proper reporting, continuous communication, and stakeholder management were other important ingredients considered.
The new trading operations, including a new legal entity in a new geographical area, a new fully equipped office, a new funding model, a new operating model with 14 SLAs with internal support functions, new infrastructure, and a new trading and risk management system, were delivered on time and well under budget.
The time taken at the beginning to ensure understanding, commitment, and involvement was key to the success of the project. Identifying and engaging key stakeholders to ensure progress and transfer of ownership were other key activities. Finally, getting key external resources with hands-on experience involved from the outset was important to influence the design, structure, and reporting, laying the foundations for successful delivery.
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