CTO: THE NEW C-SUITE GLAMOUR POSITION? BELIEVE IT!

CTO: THE NEW C-SUITE GLAMOUR POSITION? BELIEVE IT!

Princeton Financial Systems (PFS), a State Street company, is a leading provider of investment accounting, investment compliance, data management, performance measurement and reporting solutions to the global investment industry. 2013 by Princeton Financial Systems. All rights reserved. Specications subject to change without notice.

CTO: THE NEW C-SUITE GLAMOUR POSITION? BELIEVE IT!

How the Role of the CTO is Evolving into a Position of Greater Prominence in the Dodd-Frank Era Traditionally within nancial rms there have always been glamour jobs: CEO, CIO, PM and maybe even research analyst. They enjoyed the notoriety in good times analogous to quarterbacks, running backs and wide receivers. CTOs and their teams trapped in the middle and back ofce were the metaphoric interior lineman: Hardworking, essential to the teams success but largely unsung. That is already changing. While CTOs may never enjoy quite the fame of their front ofce colleagues, they will at least begin to earn recognition analogous to star left tackles. Across the nancial industry the regulatory environment is rapidly changing. With a heightened focus on risk management and transparency, insurance companies and many other global nancial institutions are facing a slew of new regulations. Whether because of the Dodd-Frank Act, EMIR (European Markets Infrastructure Regulation), or other imminent changes in countries such as Singapore and Australia, politicians, investors and regulators are demanding more oversight in a global attempt to stem systemic risk. New regulatory requirements are pushing managers to re-evaluate their current platforms and IT infrastructure. Using siloed legacy systems that only allow for interaction via spreadsheets are no longer viable options. Flexible and multi-functional automated platforms are now needed to stay competitive and meet evolving investor needs, regulatory requirements, and front-ofce demands. Operationally, rms are more dependent on the technology and platforms they have in place than ever before. Managers must rethink their business architectures to not only lower their operating

costs, but also to look for productivity-boosting integration rmwide. With dramatic evolutions in infrastructure, IT architecture, and external party needs, rms are undergoing an evolution in the organization and responsibilities of their CTOs and COOs. CTOs are no longer focused solely on the back ofce. Now, due to the heavy regulation of the nancial industry, CTOs can be found dealing with the front ofce, compliance, regulators and COOs. With roots rmly planted in computer engineering and technology, the traditional CTO was responsible for planning and choosing the proper technology platforms and solutions that would enable the funds portfolio managers, traders and accountants to efciently carry out their day-to-day tasks. For most funds, the CTO typically decides the funds internal policies for using technology and organizes the funds technological infrastructure. While still highly necessary today, these skills alone are no longer sufcient to effectively fulll the role of CTO. In an industry that is undergoing a period of unprecedented change, the new CTO must be as dynamic as the litany of requirements facing the industry. Reporting and Regulation: the Catalyst for Change With an industry-wide increase in regulation and scrutiny, a number of new time-consuming reports and data collections are now needed on a semi-quarterly basis. CTOs must have an understanding of the regulations facing their rms and the automated platforms that are needed to complete these lings. The unique challenges facing nancial institutions due to these continuously evolving regulations have

Princeton Financial Systems (PFS), a State Street company, is a leading provider of investment accounting, investment compliance, data management, performance measurement and reporting solutions to the global investment industry. 2013 by Princeton Financial Systems. All rights reserved. Specications subject to change without notice.

CTO: THE NEW C-SUITE GLAMOUR POSITION? BELIEVE IT!

far-reaching implications. Product development, quality assurance and auditable controls are critical in providing the record-keeping, accounting and reporting data needed for compliance with the new regulations. Changes such as those proposed by both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) rewriting their nancial instrument accounting, the Securities and Exchange Commission (SEC) recommending that the riskiest money market mutual funds adopt a oating share price, and the Congress-initiated Foreign Account Tax Compliance Act (FATCA) requiring improved tax compliance, all place a signicant emphasis on systems. OTC Derivative Trades Illustrate the Complex Impact of Dodd Frank One of the many new regulatory requirements which stems from the Dodd-Frank act and affects CTOs of insurance rms is clearing and reporting OTC derivative trades. With an overhaul of the swaps market as well as concerns for counterparty risk, insurance rms will now have to be focused on daily reconciliation of their collateralized portfolios with all counterparties to mitigate risk exposure. This increased focus on real-time reporting promotes transparency in who holds what exposure, daily automated reconciliations of collateral and derivative positions, and an overall shift from an opaque bespoke market structure to a central clearing model. The new infrastructure and rules push for an infrastructure that provides an automated, scalable, seamlessly integrated middle and back ofce OTC derivative operation. These regulatory and C-suite changes present an opportunity for nancial institutions to rethink

their business architectures and nd ways to not only lower their operating costs by becoming more automated and completely integrated, but also to invest in their specic long term strategy support. No longer are the CCOs and accountants solely responsible for the end-of-day bookkeeping; they are now looking to the technology implemented to provide the track records, data and lings needed. This shifts the responsibility onto the CTO. Infrastructures must be in place to organize, drill down, trail and collect data for audits. Accountants and CCOs are relying on their CTOs and systems in place more than ever before. Business strategy is now directly affected by the type of infrastructure an institution has in place. CTOs have become pioneers of business growth through their recommendations and innovative thinking. With larger budgets and more rmwide responsibility, the role of the CTO has transitioned and will continue to evolve as the position moves farther from the back ofce.

Princeton Financial Systems (PFS), a State Street company, is a leading provider of investment accounting, investment compliance, data management, performance measurement and reporting solutions to the global investment industry. 2013 by Princeton Financial Systems. All rights reserved. Specications subject to change without notice.

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