Reforming Payment and Securities Settlement Systems - Manama, Bahrain, March 15-17, 2005

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• Reforming Payment and Securities Settlement
  Systems - Manama, Bahrain, March 15-17, 2005
• Building a strategic framework
• Philip J Tromp Managing Director
• Perago Financial System Enablers

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Definition of a strategic framework

• Document describing an envisaged new environment
  or dispensation
• Description of strategic intent on holistic and
  conceptual level
• Provides context within which the transformation
  to the envisaged environment will take place
• Presents consensus view of all key stakeholders

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Why go to the trouble?

• Important reference in moving an industry to a
  new dispensation
• Enhances chances of successful implementation
• directs realignment of business processes and
  practices
• avoids repetition of arguments
• reduces time wastage and implementation costs
• facilitates solution selection and acquisition
• enables stakeholders to prepare their budgets,
  plans and strategies
• enhances potential utilization of new
  infrastructure
• reduces indecisiveness
• basis for problem and dispute resolution

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Components of a strategic framework
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Vision the desired scenario

• Ideal, unconstrained by current realities
• Highly desirable, advantageous scenario
• Aspiration subscribed to by all stakeholders
• Describes end state as a reality
• Examples
• Man on the moon John F Kennedy
• Computer on every desk Bill Gates
• Democratic South Africa Nelson Mandela
• Single currency for all countries in Europe EU
• Secure electronic cash purse for unbanked
  community Reserve Bank of Malawi

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Fundamental principles the non negotiables

• Relates to key issues
• Describes how it is
• Consensus is key
• Described as commandment
• Examples
• Everybody is equal under the law constitution
• Simultaneous settlement of funds and financial
  instrument ownership transfer is effected on a
  gross basis
• ACH payments cost the same in all EU countries
  EU
• All financial institutions that have access to
  credit facilities of the central bank are able to
  participate in their own right in the financial
  infrastructure as direct participants SA NPS
  Framework and Strategy

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Critical success factors outcome measures

• Describes what needs to be achieved
• Should be assessable as achieved or not
• Described as a wish - should
• Examples
• Medical services should be available in rural
  areas
• Sufficient liquidity should be available to
  facilitate a smooth functioning RTGS
• The businesses and the general public should have
  access to appropriate and affordable payment
  instruments
• The money market infrastructure should enable all
  issuers of financial instruments to issue their
  instruments, in real-time, directly into an
  instrument ownership register SA money market
  blueprint

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Strategies the how

• Describes steps that need to be taken to move
  from current to ideal scenario
• High level, conceptual description of action
  required
• Action-orientated description starts with verb
• Examples
• Build a canal to bring water to the farming
  community in the east of the country
• Implement an RTGS system to address systemic risk
  and to modernize payment services
• Introduce legislation to combat money laundering
• Implement measures to reduce the use of debit
  pull instruments

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Methodology for consensus building
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Developing the strategic framework
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Prepare the high-level action plan

• Step 10
• Decide and agree on target implementation dates
  for strategies
• Determine parties responsible for coordination
  and delivery of strategies
• Get consensus from key stakeholders on high-level
  plan

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Marketing the concept

• Step 11
• Prepare first draft of strategic framework
  document
• Get consensus that contents have not shifted from
  original ideas
• Step 12
• Develop and conduct a comprehensive marketing
  plan, including roadshows, presentations and
  publications
• Step 13
• Obtain official signoff from key stakeholder
  groups
• Step 14
• Publish the reform blueprint

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Obstacles

• Getting the right people involved
• Peoples experience typically narrow and
  specialized
• Best people not readily accessible
• Attempts to derail the process
• People who think they know better
• Maintaining momentum over long period
• People can loose interest
• Need to advertise successes, have regular interim
  deliverable, reports, newsletters, seminars, etc
• Letting the cat our of the bag
• Balance between informing and alarming by
  publicizing information that is not yet been
  finalized
• Low level of commitment and potential resistance
• Formally requesting or demanding compliance
  though project owner

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Conclusion

• Time consuming and taxing task, requiring
• an open mind
• facilitating skills
• a collaborative approach
• patience
• perseverance
• a firm belief in the process itself
• Holds the promise of a smooth transformation and
  a lasting solution