OMS Upgrades/Conversions – Why Budgets Fail, Part 1

If you are planning an OMS conversion next year, you’ll likely be working on the budget this fall. And, unless you have firm’s requirements right, that budget will only cover about 50% of your project.

Most investment teams will tell you that they know their requirements. After all, they do this stuff every day, so they can easily rattle off their “requirements” in a 30 minute meeting. Once you invest that time with them, you may have a long list of what they do.

What you won’t have is the “how,” and it is the HOW that will eat the budget. Here’s a quick example:

Requirement: Need to be able to create FX spots to cover out-of-currency purchases in USD accounts.

Test Case: Create a buy (long) trade in a USD account for a security denominated in another currency. Use the OMS FX function to create a spot FX that buys enough of the foreign currency to cover the buy.

Time Estimate for Project: ~.5 hours, based on 15 minutes to setup and test, and another 15 minutes to document.

Unfortunately, here are parts of the Requirement that were not mentioned:

• The settlement date for the spot should automatically synch with the settlement date of the buy.
• In specific markets, we have an agreement with the custodian to have the cash in the account one day earlier.
• Also, we have multiple strategies for certain sub-advised clients. Currency balances for those accounts should be netted across multiple strategies, by client, before we go to market for the FX. (This leaves open the question of how we are currently identifying these groups of accounts to the OMS).

Revised Time Estimate for Project: ~3 hours. Document the full requirement, create test cases for all three scenarios, test and capture results.

The good news is that underestimating the budget is entirely avoidable. Check out our blog this Thursday for the key tactics you’ll need to build an accurate budget.