Organisation & Governance Design

Organisational Design Principles

Organisational design is the dimension of TOM design that determines how people are structured to deliver the operating model. It is not simply about drawing an organisational chart — it is about making deliberate decisions regarding structure, layers, spans of control, specialisation, and the relationship between different parts of the organisation. In banking, organisational design is further complicated by regulatory requirements, multi-jurisdictional operations, and the need to balance efficiency with effective risk management.

Span of Control

Span of control — the number of direct reports a manager supervises — is a fundamental design parameter. A wider span of control means fewer management layers (a flatter organisation), lower management overhead, and faster decision-making. A narrower span means more management layers, more oversight, and higher management cost.

In banking operations, optimal span of control varies by activity type:

• High-volume, standardised processing (e.g., payment processing, trade matching): Spans of 12-20 are achievable because the work is routine, well-documented, and performance is easily measured.
• Complex, judgement-based activities (e.g., credit analysis, complex reconciliation breaks, regulatory reporting preparation): Spans of 6-10 are appropriate because the work requires oversight, coaching, and quality review.
• Client-facing activities (e.g., relationship management, client service): Spans of 5-8 reflect the need for managerial involvement in client issues and the strategic importance of the client relationship.

The TOM should define target span of control guidelines for each activity type, recognising that these are guidelines rather than rigid rules. A common pitfall is applying a single span of control target across the entire organisation — "all managers will have 10 direct reports" — without considering the nature of the work.

Organisational Layers

The number of layers between the front-line operator and the COO or CEO is a critical design decision. Each layer adds management cost, slows decision-making, and creates communication filters. Best practice in banking operations is typically 4-6 layers from front-line staff to the COO:

1. Operator / Analyst
2. Team Leader / Supervisor
3. Manager
4. Director / Head of Function
5. Managing Director / Regional Head
6. COO

Organisations with more than 6 layers should critically examine whether intermediate layers add value or simply create bureaucratic overhead.

Specialisation vs Generalisation

The TOM must decide the degree to which roles are specialised (focused on a single activity) or generalised (covering multiple activities). This decision has significant implications for efficiency, resilience, and career development.

Specialisation creates deep expertise in a single function. A specialised settlement team, for example, will develop deep knowledge of settlement processes, CSD procedures, and fail management. However, specialised teams create key-person risk, are less flexible when volumes fluctuate, and offer limited career variety for staff.

Generalisation creates broader capability across multiple functions. A generalised post-trade team might handle settlement, reconciliation, and corporate actions. This provides better resilience (staff can cover for each other), more career variety, and greater flexibility. However, it risks shallow expertise and may not be appropriate for highly complex or regulated activities.

The optimal approach in banking is typically a hybrid model: specialisation for complex, high-risk, or regulated activities (e.g., derivatives clearing, regulatory reporting) and generalisation for related, standardised activities (e.g., combined settlement and reconciliation for simple instruments).

Location Strategy: Onshore, Nearshore, Offshore

Location strategy is one of the most impactful decisions in banking TOM design. Where the bank locates its operations teams affects cost, talent availability, regulatory compliance, operational risk, and service delivery. The TOM must define a clear location strategy that balances these factors.

Onshore

Onshore locations are in the bank's primary market — typically the same city or country as the headquarters and primary regulatory jurisdiction. Onshore operations benefit from proximity to clients, trading desks, and senior management; full regulatory alignment; and access to deep talent pools in financial services. However, onshore locations are the most expensive, with the highest salary and real estate costs.

Activities typically retained onshore include:

• Client relationship management
• Complex exception handling requiring market knowledge
• Senior management and governance functions
• Activities where the regulator expects local presence and control
• Front-office support and real-time decision-making

Nearshore

Nearshore locations are in a nearby country with lower costs, compatible time zones, and a sufficient talent pool. For European banks, popular nearshore locations include Dublin, Warsaw, Lisbon, and Budapest. For UK banks, Belfast and Edinburgh have historically served as nearshore centres.

Nearshore locations are well-suited for:

• Shared services processing (payments, settlements, reconciliation)
• Client service and reporting
• Operational risk and compliance monitoring
• Technology development and support
• Functions requiring the same or similar working hours as the primary market

Offshore

Offshore locations are in distant countries with significantly lower costs — typically India (Mumbai, Chennai, Bangalore), the Philippines (Manila), or Poland for European banks. Offshore centres offer the greatest cost reduction but introduce challenges: time zone differences, cultural differences, language barriers, regulatory complexity, and the risk of losing direct control.

Activities suitable for offshore include:

• High-volume, rule-based processing
• Data entry and validation
• Reconciliation (standard matching)
• Report generation and distribution
• Testing and quality assurance

Regulatory Considerations

Regulators have significant views on location strategy. The ECB has made clear that eurozone banks must maintain substance in their booking entity jurisdiction — meaning that key decision-makers, risk managers, and critical operational functions must be physically present, not merely nominally assigned. The PRA expects firms to demonstrate that they retain adequate control over outsourced and offshored activities, with clear governance, escalation paths, and audit rights. The FCA's operational resilience framework requires firms to ensure that their important business services can continue to be delivered regardless of disruption — including disruption at offshore locations.

Any TOM that involves material offshoring must include a regulatory engagement plan — proactive discussions with supervisors about the proposed changes, their rationale, and the control framework that will govern the offshored activities.

Shared Services vs Business-Aligned Structures

A fundamental structural decision in banking TOM design is whether operational functions should be organised as shared services (centralised functions serving multiple business lines) or business-aligned (embedded within each business line).

Shared Services Model

In a shared services model, operational functions — such as settlement, reconciliation, payments, and client reporting — are consolidated into a single organisational unit that serves all business lines. The shared services centre operates as an internal service provider with defined service level agreements (SLAs) for each business line.

Advantages:

• Economies of scale: A single team processing settlements for all business lines is more efficient than multiple teams processing settlements for individual business lines.
• Process standardisation: A shared services model naturally drives standardisation because all business lines use the same processes.
• Talent concentration: Shared services creates a larger team with more career opportunities, better succession planning, and reduced key-person risk.
• Technology consolidation: A single operations team supports a single technology platform, reducing technology cost and complexity.

Disadvantages:

• Distance from the business: Shared services teams may lack deep understanding of specific business line requirements.
• Prioritisation conflicts: When multiple business lines compete for shared services capacity, prioritisation becomes challenging.
• Service level rigidity: SLA-based relationships can become transactional, lacking the flexibility and responsiveness of embedded teams.

Business-Aligned Model

In a business-aligned model, each business line has its own operations team, dedicated to that business line's specific needs. The equities business has its own settlement team; the fixed income business has its own settlement team; the derivatives business has its own.

Advantages:

• Deep business knowledge: Embedded teams develop specialised expertise in their business line's products, clients, and processes.
• Responsiveness: The team is dedicated to one business line and responds to its priorities without competing for capacity.
• Accountability: Clear line-of-sight from business performance to operations performance.

Disadvantages:

• Duplication: Multiple teams performing the same function across business lines creates cost duplication.
• Inconsistency: Different teams may develop different processes for the same function, creating control gaps.
• Scale limitations: Smaller, dedicated teams are less resilient to volume spikes and staff absences.

The Hybrid Approach

Most modern banking TOM designs adopt a hybrid approach: shared services for standardised, high-volume, rule-based activities (reconciliation, payment processing, standard settlement), with business-aligned teams for complex, judgement-intensive, or client-specific activities (structured product processing, complex derivatives lifecycle management, bespoke client reporting).

Governance Frameworks

Governance is the mechanism through which decisions are made, performance is monitored, risks are managed, and accountability is enforced. In a TOM, governance design must cover decision rights, committee structures, escalation paths, and the three lines of defence.

Decision Rights

Decision rights define who can make what decisions and at what level of authority. A well-designed decision rights framework prevents both decision bottlenecks (everything escalated to the top) and decision fragmentation (decisions made without appropriate authority).

In banking operations, decision rights are typically structured around:

• Operational decisions (processing exceptions, client queries): Made by team leaders and managers
• Process changes: Approved by process owners, with material changes escalated to the operating committee
• Technology changes: Approved by the technology governance board, with major investments escalated to the executive committee
• Organisational changes: Approved by the COO, with significant restructuring requiring board approval
• Risk acceptance: Aligned with the bank's risk appetite framework and delegated authority matrix

RACI Framework

The RACI matrix (Responsible, Accountable, Consulted, Informed) is the standard tool for documenting decision rights and role assignments in a TOM. For each key process, decision, or deliverable:

• R (Responsible): Who performs the work?
• A (Accountable): Who is the single person ultimately answerable for the outcome? There must be exactly one A per activity.
• C (Consulted): Who provides input before a decision or action?
• I (Informed): Who is notified after a decision or action?

The RACI matrix prevents ambiguity about who does what, particularly in cross-functional processes where multiple teams are involved.

Committee Structure

A TOM governance framework defines the committee structure for operational management:

• Operating Committee (OpsCom): Chaired by the COO, meeting weekly or fortnightly. Reviews operational performance, addresses strategic issues, approves significant changes, and manages cross-functional issues.
• Process Governance Board: Reviews process performance, approves process changes, and ensures process documentation is maintained. Meets monthly.
• Technology Steering Committee: Reviews technology roadmap progress, prioritises technology investments, and governs platform changes. Meets monthly.
• Risk and Control Committee: Reviews operational risk events, control effectiveness, audit findings, and regulatory issues. Meets monthly.
• Change Advisory Board: Reviews and approves changes to production systems and processes, managing the risk of change introduction. Meets weekly.

Role Design and Job Families

The TOM must define the roles that staff will perform in the target state. This goes beyond listing job titles — it requires designing role profiles that specify responsibilities, competencies, decision authority, and career progression.

Job Families in Banking Operations

A job family groups similar roles across the organisation, enabling consistent talent management. Typical job families in banking operations include:

Operations Processing: Roles focused on executing transactional processes — settlement operators, payment processors, reconciliation analysts. These roles require attention to detail, system proficiency, and process adherence.

Operations Management: Team leaders, managers, and directors who oversee operational teams. These roles require people management, performance monitoring, and escalation management skills.

Operations Control: Roles focused on quality assurance, exception management, and control monitoring. These roles bridge operations and risk management, requiring analytical skills and regulatory awareness.

Business Analysis: Roles focused on process analysis, requirements definition, and change management. These roles require analytical thinking, stakeholder management, and the ability to translate business needs into operational and technical requirements.

Data and Reporting: Roles focused on data management, reporting production, and analytics. These roles require data proficiency, knowledge of reporting frameworks, and attention to data quality.

Each job family has a defined competency framework — the skills, knowledge, and behaviours expected at each level — and a career path showing how staff can progress within and between families.

Banking Example: Designing a 3-Location Operations Model

Consider a global bank — let us call it Atlantic Investment Bank (AIB) — redesigning its securities operations as part of a broader TOM programme. AIB currently has operations staff scattered across 8 offices in Europe, with significant duplication, inconsistent processes, and high costs. The TOM programme is tasked with designing a consolidated, efficient operating model.

Target Location Model: London — Dublin — Mumbai

After extensive analysis of cost, talent, regulatory requirements, time zones, and strategic fit, AIB's TOM defines a three-location operating model:

London (Onshore)

London remains the primary onshore hub, hosting:

• Front-office support: Real-time trade support, booking oversight, and P&L explanation for the trading desks
• Complex exception handling: Resolution of complex settlement fails, corporate action elections requiring client or trader input, and bespoke client reporting
• Senior management and governance: The COO, Heads of Operations for each asset class, and all governance committees
• Regulatory engagement: Regulatory reporting oversight, supervisory interactions, and compliance functions
• Client relationship management: Senior operational contacts for key institutional clients

Headcount: 120 FTEs (reduced from 200 in the current state) Activities: High-complexity, high-judgement, client-facing, and regulatory-sensitive

Dublin (Nearshore Shared Services)

Dublin is established as the nearshore shared services centre, hosting:

• Settlement processing: Standard DVP/RVP settlement for equities, fixed income, and exchange-traded derivatives across all European CSDs
• Reconciliation: Cash reconciliation (nostro), position reconciliation (depot), and trade reconciliation (front-to-back)
• Client reporting: Standard client reporting production, NAV calculations, and regulatory reporting generation
• Corporate actions: Standard corporate actions processing (mandatory events, simple voluntary events)
• Operational control: First-line control functions including daily control checks, break investigation, and exception monitoring

Headcount: 180 FTEs (new centre, absorbing staff from 5 European offices being closed) Activities: Standardised, rule-based, moderate complexity Why Dublin: Same time zone as London, EU jurisdiction (regulatory alignment for a eurozone-booked entity), strong English-speaking talent pool with financial services experience, and established financial services infrastructure

Mumbai (Offshore Processing Centre)

Mumbai serves as the offshore processing centre for high-volume, rule-based activities:

• Data management: Reference data maintenance, static data set-up, and data quality monitoring
• High-volume reconciliation: Automated matching oversight, break identification and initial categorisation
• Report distribution: Client report formatting, distribution, and archiving
• Testing and quality assurance: System testing, UAT support, and regression testing for technology changes
• End-of-day processing: Batch processing oversight, fail monitoring, and position reporting for the next London business day

Headcount: 250 FTEs (expanded from 80 in the current state) Activities: High-volume, rule-based, lower complexity Operating hours: Shift pattern providing 18-hour coverage (Mumbai morning shift overlaps with London afternoon; Mumbai evening shift provides coverage into the Asian business day)

Governance of the 3-Location Model

The governance framework is designed to ensure that the three locations operate as a single, integrated operations function rather than three independent units:

• Single process ownership: Each process has a single global process owner (based in London), with process stewards in Dublin and Mumbai who ensure local execution conforms to global standards
• Integrated reporting: A single operational dashboard consolidates KPIs from all three locations, reviewed daily by the London management team
• Escalation framework: Clear escalation paths from Mumbai to Dublin to London, with defined thresholds and response times
• RACI for cross-location processes: Every process that spans locations has a detailed RACI matrix defining responsibilities in each location
• Quality oversight: Dublin and London perform quality checks on Mumbai output; Dublin output is subject to London oversight for complex activities

Transition Planning

The TOM design includes a phased transition plan:

• Phase 1 (Months 1-6): Establish the Dublin centre, recruit and train initial team, begin parallel running of reconciliation and standard settlement
• Phase 2 (Months 7-12): Expand Dublin to full scope, close 3 European satellite offices, expand Mumbai data management capability
• Phase 3 (Months 13-18): Complete migration, close remaining satellite offices, establish full 18-hour coverage model, and embed continuous improvement

The total annual cost saving from the 3-location model is projected at GBP 28 million (30% of current operations cost), driven by:

• Salary arbitrage: Dublin average salary is 25% below London; Mumbai average salary is 75% below London
• Headcount reduction: Total headcount decreases from 620 to 550 through process automation and elimination of duplicate roles
• Real estate savings: Closing 5 European offices
• Technology consolidation: Migrating to a single settlement and reconciliation platform

In the next module, we will explore the technology and data architecture dimension of TOM design — how to assess the technology landscape, make build vs buy decisions, rationalise platforms, and design the data architecture that underpins the operating model.