[Interview] Kaori Hattori, Head of Global Markets Trading and Sales Operations, Nomura Securities
The evolution of Security Operations – what does it take to be successful?
Back in 2014 Morgan McKinley caught up with Kaori Hattori, a Senior Manager within Operations at Nomura Securities. I recently reread this interview and was struck by how little has changed in the intervening 5 years. Operation managers are still dealing with the same issues and there remains a lot of uncertainty over which direction Operations is heading. New technologies, solutions provided by vendors and opportunities to off-shore certain functions create a conundrum for managers who are balancing requirements from the business and client with the need to reduce costs. What is clear though is that Operation professionals who are able to add value to the business, support clients and deal with the ever-changing regulatory and technological environment, remain in high demand. Please see below for the full interview.
The face of security operations has changed drastically since the Lehman Crisis of 2008. All financial institutions have sought to cut costs and improve efficiency, with offshoring central to most companies’ strategies. In addition, companies have upgraded systems and process and streamlined operations to allow them to compete in a global market. The word ‘Projects’ has become a common word in all operational staff’s vocabulary and it is very rare that someone will have worked within operations over the last few years and not had exposure to projects in some capacity.
It is with this in mind that Morgan McKinley spoke to Kaori Hattori, Head of Global Markets Trading and Sales Operations at Nomura. Her department have arguably gone through and continue to go through some of the biggest changes within operations in Japan. With the takeover of Lehman, the upgrading of their Nomura settlement and middle office systems and the migration of their OTC Derivative booking entity from London to Japan, staff within her department have been experiencing a constant state of evolution that will continue into the future. Morgan McKinley was keen to find out her thoughts on the biggest challenges facing operations staff now and in the future. Also what it takes to stay ahead of the curve and be successful in this extremely dynamic environment.
Nomura Financial Products and Services (NFPS) is the name of the new-legal entity, based in Japan but responsible for all global OTC Derivative booking. This entity was previously traded out of an entity located in UK, but in light of the current environment Nomura decided to bring it back to Japan and fully under its home regulator. “On the surface, this is quite an easy process as all the systems already existed in London; however, in reality it is extremely complex, not least because of the requirement to manage all of the operational risk with re-locating these systems. The project began in 2011 with the creation of the new legal entity and all departments have been heavily involved, with compliance managing the new requirements associated with facing Japanese regulators, Risk Management managing the long-term risk and Finance managing the new accounting requirements. Arguably Operations have the most involvement, as they are heavily involved in all of these areas and take ownership of all of the systems and infrastructure. The new entity is set to go live from next year”.
On top of the project centred on NFPS, Hattori-san’s department have also been developing new settlements and middle-office systems. “The whole department has been going through a process of change and transformation. With the take-over of Lehman in 2009, the inception of NFPS and the drive to update all of our systems, it has been an extremely busy few years”. This is a sentiment that is echoed by all people working within operation at banks within Japan and globally.
So what have been the main challenges?
“Overwhelmingly the biggest challenge has been managing risk and control within the department. OTC Derivatives are extremely complex anyway, with maturities typically up to 30 years and new products constantly emerging. Risks associate with trade processing, cash settlement and client services exist in the short- and long-term that need to be identified to ensure we provide a superior service to our customers. With the upgrading of systems and the relocation of the international booking system we need to be even more vigilant to these risks as they will not be captured by immature systems and controls. On top of this has been the challenge of the changing regulatory environment. The international OTC booking system complied with the primarily European driven regulations, but now needed to incorporate the technical specifics of the Japanese regulation. Operational staff find themselves dealing with regulators on a daily basis to ensure our new systems and infrastructure comply and that our controls are robust enough”.
And what does it take to be successful, given all the change that is taking place?
“Operational staff can no-longer be ‘process people’, working nine to five, typing numbers into a computer and relying on computers to do the rest. To succeed and progress within operations, people must always think ‘big-picture’. Where does my role fit into the team; where does the team fit into the department; and where does the department fit into the business? What are my team and department trying to achieve? Is there a better, quicker and less-riskier way of achieving that? How do my department, my team and I add value to the business? These are the questions that operations staff should be asking. In addition, they should be risk aware and have a control mind-set. With all the changes we cannot rely on systems to mitigate all of the risk. We need to be aware of the changes to products, regulations and infrastructure. We need to be mindful of what risks may exist in the short and in the long-term”.
And for junior staff joining operations, what can they do to ensure their success?
“They need to take on responsibility early. Work on projects as much as possible. Look to supervise or manage people in the future. Seek outward facing roles: roles where you might face internal business partners, regulators or clients. Look to add value and improve efficiency. Get experience of working with OTC Derivatives – these products are inherently more complex and require dynamic people who can adapt to change quickly. There is also a gap in knowledge and experience in Japan for OTC Derivative Operations and as these products are traded more and more, these skills will be heavily sought after”.
If you have experience of working within Operations in Japan and have thoughts on the comments made, please feel free to share these with us.