Three for IT
CIOs Claude Honegger, Laura J. Barrowman and Steve Hook are responsible for developments in IT and explain where the journey is headed.
"Invest where we add most value."
URS SCHWARZ: What are the most important initiatives for Private Banking & Wealth Management and Shared Services IT at the moment, and how do they align with the firm’s and IT’s overall strategy?
CLAUDE HONEGGER: First, there are the growth initiatives, which involve finding new sources of revenue or protecting existing revenue. Digital private banking (DPB) and Credit Suisse Invest are the most recent examples here, but Client Reporting and the Secured Lending initiative could also be cited.
Second, we pursue regulatory initiatives in order to ensure the bank’s compliance. Some programs implement requirements related to the distribution and sales process; others involve risk, capital and liquidity management as well as the bank’s reporting. Third, we are reducing the complexity of processes and applications. This is especially important because complexity is one of the key drivers of costs and operational risks.
To what extent has DPB changed the IT organization?
Today’s clients are accustomed to using a wide range of communication channels and end-user devices. They expect our ser-vices and products to be available via all channels 24/7. In order to provide such a comprehensive offering, we need to apply changes to the entire value chain. Because the market is very fast-moving, short development cycles are essential. We therefore place great emphasis on agile and scrum development. At the same time, we need a flexible IT framework so that external components can be updated or replaced quickly. DPB is a good example of how technology helps to enhance existing business models and tap into new markets.
Has the flexible agile and scrum development method led to a change in culture?
The iterative method of agile and scrum is very well suited for projects such as DPB. Thanks to its short cycles, results can be produced quickly and immediately verified. However, depending on what needs to be developed, using the traditional waterfall method might be the better choice for certain projects. In the end, it is important to choose the methodology that fits best. Horses for courses, so to speak.
What trends are currently shaping IT?
The general trends in the banking sector are of central importance to us: Client behavior has changed, FinTech companies are entering the market, cost pressure has increased substantially, and we are facing an abundance of regulatory requirements. These trends are triggering substantial changes in business models. In such an environment, technology plays a key role as an accelerator and enabler. To meet the challenges mentioned, we need as much flexibility in the front-end as possible so that we can quickly offer client- or product-specific channels, enable white-label solutions, and enter into partnerships where it makes sense. The back-end involves further enhancing scalability and straight-through processing through automation and standardization, thus reducing transaction costs. We apply a modular structure, which gives us the optionality to insource, use market utilities, or enter into partnerships with other banks or third-party providers.
Banking is IT-intensive per se.
IT is often perceived as a pure cost factor. What would you say in response?
Banking is IT-intensive per se, and the importance of information technology will continue to rise. We must therefore use our resources where we can add the most value and where we can distinguish ourselves from the market. In the future, we will have to differentiate much more sharply between areas where we can create a competitive advantage, areas where the focus is on seamless processes and low operational risks, and other areas where we are willing to accept curtailments. This distinction will allow us to further reduce costs, creating room for more investments in new growth initiatives. The overall size of the IT investments has to be determined as part of ongoing cost-benefit analyses together with the business.
Do you sometimes need IT support from your children?
Of course! When it comes to new apps or social media, my kids are the experts.
URS SCHWARZ: What are the key initiatives in Technology Services, and how do they align with the firm’s overall strat-egy and that of IT?
LAURA J. BARROWMAN: Technology Services supports all major firm-wide programs through the provision of IT infrastructure, testing services and production support. Our role is critical in ensuring the stability and high quality of services and products delivered to our clients. With the increased focus on regulatory requirements globally, we partner with the Risk and Finance organizations to ensure that these requirements are met in a timely and proactive manner so that we are driving the dialogue with regulators in this space. Our group has a set of internal strategic programs that help us deliver core infrastructure and support services for IT. We ensure that all strategic initiatives are aligned and enable delivery for clients. One example of this is the collaboration tools that are being developed and enhanced in support of the digital private banking (DPB) delivery.
How would you judge the health of our IT infrastructure and what measures are we taking to modernize it?
If we look at our end-user platform, some of the things we are doing with Lync and other collaboration tools are quite advanced even by Microsoft’s standards. However, we have numerous servers that are very dated, so this is an area for improvement. Working with our partners in Application Development, we are trying to identify methods to modernize the environment without increasing operational risk. With complex applications such as our electronic trading applications, some risk applications and DPB, it’s crucial to manage the migration of infrastructure to newer versions in a seamless manner, to ensure the business is appropriately supported, with no impact to the client experience. The key to doing this successfully is to remain agile while we adopt new technologies, being mindful of the complex application landscape.
How can you improve awareness of the work that happens behind the scenes?
The best way to impress people is by continuing to deliver services and tools that improve productivity within the firm. The work speaks for itself and I believe that, when the technology allows people to do their jobs without interruption or roadblocks, there’s no better story to tell.
How are we currently positioned in the war for IT talent? How can we further improve our position?
We have some areas such as collaboration technology, where we’ve succeeded in attracting talent. In the security technology space, we’ve got to do more to pull the right talent into the organization. If you look at the market at the moment everybody is required to complete regulatory work and there’s a lot of focus on security. As an organization we need to react faster to that reality and understand that we need to pay a premium for those skills. We also need to better align our workforce strategy. Historically, when we have deployed or outsourced functions we have done this with a short term view – focusing on targets and not really looking at the workforce and strategically aligning it across services. We must reassess the skills we need by location and target those skills for those locations. That to me is a much more sustainable strategy for achieving a well-balanced workforce and will allow us to attract and retain some of the best talent.
We need to start leveraging cloud technologies.
Laura J. Barrowman
IT is still widely considered to be a male preserve. Has the number of women in IT increased in recent years?
We haven’t really moved the needle and I actually see this as a personal failing because I’ve been the co-chair of the IT Women’s Council for a number of years. Up to now we have targeted our approach at senior and junior levels, but I think we need to appreciate that it’s about building the capacity throughout the hierarchy. The firm is committed to growing the representation of women in management positions to 20 percent by 2020 and our Diversity & Inclusion department is hard at work putting strategies and initiatives in place to achieve this. This is something I would like to play an active role in enhancing and I strongly believe that the success of this will not be down to training and sponsoring women, but rather to changing the overall culture and raising awareness.
What is your crystal ball prediction of the top IT trends for the next year?
We’ll definitely see a lot more mobile capability across different applications and we need to start leveraging cloud technologies sooner rather than later. That’s something we absolutely need to do which will enable us to better meet regulatory requirements. I also think there’s going to be a lot more collaboration between banks on delivering services that don’t give us a competitive advantage; things where there’s no need for a Credit Suisse-specific solution and no benefit in doing it other than to meet requirements.
Do computers have a soul?
Even though we might one day teach a computer to think, which is what artificial intelligence is trying to do, it will always offer a logical solution to a problem, because that’s what computers are, logical solutions to problems. So the answer is: no, they don’t have a soul.
"People shouldn't think they need permission to be innovative."
URS SCHWARZ: What are the most important initiatives for Investment Banking IT at the moment, and how do they align with the firm’s and IT’s overall strategy?
STEVE HOOK: My answer has to include our Legal Entity program which implements the board-approved legal entity strategy; it is very important not only to the profitability of the individual businesses, but to the firm’s overall use of strategic assets. Very closely coupled with that is how we align with our regulators in every region so that we can be accountable to them. So Legal Entity is very high on that list. We are constantly adjusting how far we can implement our strategic goals as part of the LE program.
Then there’s the Strategic Risk program which establishes IB’s fundamental risk architecture and has two key streams. One is a stream of consolidation aimed at reducing the investment bank’s 47 risk systems (as of two years ago) to 15. The second stream underpins all our risk systems to provide a core infrastructure that is common to all of them. One of its components stores all the features of a risk sensitivity calculation consistently over time and for all users of risk data. Our Execution Path program is also vitally important. Focused on how we execute listed transactions globally, it is the path between clients and liquidity points. It comprises client connectivity, order management, smart order routing, algorithmic trading and exchange connectivity. And, last but not least, I would obviously mention our client-facing technology CS+ that is being used successfully not just in investment banking, but also in private banking.
What role does big data play in the bank’s IT strategy?
Three years ago when we first talked to the Executive Board about big data, it was very much an introduction to the topic as an emerging technology and something we felt we should start to invest in more significantly. We did a proof of concept in the unauthorized trading (UT) space and very quickly felt that this technology gave us a significant benefit over how we were previously thinking about UT and, in fact, the broader question of conduct risk in the bank. So we started to industrialize big data into our core strategy and made some very senior hires both from within and outside the industry to develop our big data strategy.
Can you give a few examples of how big data helps advance the business at Credit Suisse?
One example would be in our Prime Services business for hedge funds where we predict the future price of shorts in the market. At the moment we’re hovering at around 70 percent accuracy which is of very significant interest to our hedge fund clients. On the private banking side, we’re working on social graph discovery which helps us figure out if or how we want to contact potential clients. Who at Credit Suisse might know that person? Research suggests that you are about 50 percent more likely to be successful in a long-term relationship if your first contact with a potential client is made by somebody who knows them.
Collecting data is a delicate matter. How do you ensure that data privacy is protected at all times?
This is obviously a subject we take very seriously, and we have to factor in the context of every region and its applicable rules and regulations. Within IB IT, we introduced a new strategic theme in November focused on operational risk. Whatever job employees do, they must know exactly what managing operational risks means in terms of data privacy. That has been, and will continue to be, an important strategic thrust for us.
Data privacy is a subject we take very seriously.
What about the innovative capabilities of IT at Credit Suisse compared to its peers?
I don’t think we have a shortage of innovative capability, but I think we could apply it more freely. People shouldn’t think they need permission to be innovative. They should try and be innovative in everything they do. Innovation does not always require a budget.
For example, we have a listed Order Management system called Agora that supports our number 1 equity cash franchise. When we came up with generation 3, we re-architected the technology and re-wrote much of the core, we introduced a new database technology that saved us a lot of money on long-term storage, and the infrastructure team introduced a new storage medium that was also at a lower price point. So when we combine these three factors, there were some great examples of all-round innovation. The rollout of that product is proving incredibly successful and it does have a significant impact on the bottom line of the business.
IT is more and more about gadgets. Will you be buying a smartwatch?
Although I do have an iPhone, an iPad and a Mac, I’ve got no plans to get an Apple Watch right now; I struggle to see the use case for having one. I’m sure they will be hugely successful though.