Alpha FMC launches Compliance and Regulation practice

26 April 2016 Consultancy.uk

Consulting firm Alpha FMC has launched a dedicated Compliance practice. The new unit will be headed by Andrew Glessing, a former FCA manager, and run from the firm’s London office.

With over 160 employees and 50 associates, Alpha FMC is one of the larger consulting firms that specialises in the asset and wealth management industry. Since its inception in 2003, the consultancy has significantly grown its footprint, not just across regions – Alpha FMC currently has seven offices globally – but also in terms of functional and industry offerings. Alpha FMC’s service portfolio currently spans around ten service lines, with propositions ranging from strategic and advisory work to benchmarking services and execution related support.

In a bid to capitalise on growing demand in the area of compliance and regulation, the consulting firm has decided to add a new practice to its profile. Its newly formed Compliance Practice will provide clients with a variety of compliance offerings, including helping them with developing roadmaps to navigate regulation, translating regulations into change projects and implementing commercial, operational and customer service impacts. The new service line will not be built up from scratch but leverage Alpha FMC’s already exiting expertise in the field. Euan Fraser, CEO of Alpha FMC, explains: “Alpha already plays a central role in helping clients meet the expectations of the Regulator, particularly in relation to governance, systems and controls, risk management and the way in which firms deal with regulatory and business changes. Today’s announcement reflects the formal establishment of this capability as a stand-alone practice within Alpha." 

To lead the unit the firm has hired Andrew Glessing, a professional with over 25 years’ experience in financial services and compliance consulting. Glessing joins Alpha FMC from compliance consultancy firm The Consulting Consortium where he was Managing Director of Advisory Services for three years. Prior to that, he spent seven years as manager at the Financial Conduct Authority (FCA) where he led teams supervising FSA/FCA-regulated asset and wealth managers, platforms, pension providers and outsourcing firms, as well as conducting numerous risk assessments and thematic reviews across these companies. Previously, Glessing worked as a freelance consultant and more than ten years in the financial services industry.

In his new role role, Glessing, from the firm’s base in London, has been tasked with building the Compliance Practice. He will bundle the firm’s existing capabilities and track record, and, going forward, both broaden and deepen them to meet growing market demand. The practice will initially comprise nine consultants – including Principal Mikko Ala-Ilomaki, who joined Alpha earlier this year. Ala-Ilomaki previously was at Deutsche Asset & Wealth Management and plays a senior role leading Compliance Rule Coding within the new practice and will report directly to Glessing. 

“Alpha already has a strong track-record of supporting our clients with their compliance initiatives and Andrew and Mikko’s extensive experience will allow us to deepen our capabilities and provide a new range of services to our clients”, comments Fraser.

Growth plan
The move is part of the firm’s wider, ambitious growth plans for the coming years, says Fraser. In February this year Alpha FMC received a million pound funding from Dunedin, a mid-market private equity firm, valuing the company at £80 million. The business has more than trebled in size in the last 3 years, with profits increasing from £2.3 million to in excess of £8 million in 2016, and for the coming years the partner team eyes further growth. “The new practice is part of the plan to grow significantly in the coming years”, states Fraser, adding that geographic and sector expansion will serve as other main growth drivers.

Looking ahead, Glessing says he sees considerable growth opportunity in the market stating: “With high-profile regulatory directives such as MiFID II, MAD 2 and PRIPS underway, alongside the FCA’s asset management review in the UK, we are seeing an increased demand for compliance services from the asset and wealth management industry. At this time of significant change and closer regulatory scrutiny, Alpha is committed to supporting clients meet regulators’ developing expectations, and the standards of conduct they set for themselves.”

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An 8-step framework for banks to prepare for FRTB changes

02 April 2019 Consultancy.uk

With FRTB expected to come into force in 2022, it is critical that banks implementing necessary changes remain on track for their compliance timelines. Whether a company is aiming for the mandatory Standardised Approach (SA) or the voluntary Internal Models Approach (IMA), the programs often represent a significant investment, requiring process, systems and cultural change. 

Drawing from its experience in helping banks meet the milestone set in their compliance timelines, Capco – a management and technology consultancy for the financial services industry – has developed an eight-point prioritisation framework for FRTB preparation and implementation. Natasha Leigh Giles, a Managing Principal at the consultancy, outlines the main dimensions of the framework: 

Prioritisation framework for FRTB

1. Front office operating model

For those who have already implemented the Volcker rule, the desks are well defined with monitoring and governance frameworks. However, for companies that have not been required to adhere to the U.S. regulation, there may be additional work involved in implementing desk-level controls as required under FRTB. The trading desk structure is especially important for banks planning to implement IMA, as this regime is applied at the desk level and requires that the full flow of the selected desk is able to pass the IMA requirements (including the modelability test for the risk factors). Key business decisions may be required if a desk trades complex products that are more aligned for SA treatment. 

2. Product scope

In order to reach the IMA status, products are required to be supported with additional data sets including historical market and reference data as well as risk factor pricing evidence. The opportunity for 2019 lies in refining the assessment on the feasibility of each product type to ensure a clear scope is agreed for the IMA environment. If the challenges are too complex or costly to overcome, such as access to historical market data, availability of price verification for the risk factors or significant enhancements to support computational capacities, then these products should be scoped out of the IMA program as soon as possible in order to save time and effort on continuing analysis. 

3. Client & trading activities

There is no need to wait until the FRTB implementation timeframe to undertake a holistic review of client and trading profitability – including the capital impacts. For example, running training and awareness campaigns within the front office can help the traders to understand the impacts of their activities and encourage changes in the way that they trade. By considering this holistically as a business and operational change, it can help keep the focus and resources on the primary (profitable) business in preparation for the compliance deadline. 

4. Internal controls

Methodology, reporting, auditability, and process governance for internal controls also need to be monitored in detail. We recommend having clearly defined processes accompanied by effective training across front-to-back office. For some banks, it will be beneficial to audit existing capital adequacy processes to ensure that findings are highlighted in advance of the implementation timeline and the appropriate focus is achieved within senior management.

5. Data & metrics

Financial institutions need to consider their overarching governance and ongoing management for the data (including ownership, quality control, golden source storage solutions, etc.) and the ongoing control framework for ensuring the data remains accurate and relevant for capital adequacy modeling. If there has not been a data lineage exercise already applied, this is a great opportunity to deliver business benefit, even in 2019. By creating agreed definitions, preferred sources, ownership and workflows for managing data quality, the benefits of more accurate data can already be applied to existing capital calculation models. 

Framework for FRTB

6. Model management & validation framework

In preparation for the FRTB regime, an opportunity for 2019 is to understand if there are gaps or control concerns to manage immediately. Model enhancements across SA and IMA will need to be productionized for output accuracy and refinement, however, these need to be maintained alongside existing Basel 2.5 BAU models and other concurrent changes e.g. LIBOR Transition. Business process optimization, testing environments and automation tools, documentation and model validation can all be reviewed for immediate benefits and prepare the process for a smooth implementation of the future FRTB models. 

7. Technology platform & testing environments

With regards to technology planning, the opportunity in 2019 is focusing on gaining agreement of the front-to-back FRTB future state architecture including the use of vendors as applicable. By ensuring a disciplined focus upon design and solution definition across all requirements, it provides a clear baseline for implementation planning and scheduling. Establishing a technology architecture which allows for FRTB data feeds, model enhancements, control definitions and accurate capital calculation outputs will provide the program with essential data and metrics needed for decision making. 

8. Leverging synergies

Once a baseline plan has been established, it is possible to identify synergies across other programs – such as the SA-CCR (Standardized Approach for Counterparty Credit Risk) or the IMM (Internal Models Methodology) – that could deliver overlapping benefits at reduced effort. Understanding requirements, defining the future state architecture, and implementing the change in a complex environment requires a mix of strategic principles and program management. Therefore, we consider it an opportunity for 2019 to take a centralized approach for data lineage and requirements gathering as this would be beneficial for optimizing capital costs across both the market and credit risk environment.

Conclusion

By considering each topic strategically in 2019, benefits such as data quality enhancements, strengthened internal controls and flexible test environments will not only bring immediate business value, but also set a solid foundation for a comprehensive FRTB implementation in the years to come. 

For more information on Capco’s model and the its approach in helping banks plan for FRTB, download the full whitepaper on the firm’s website.