My Experience Creating A Business Architecture

1. My Experience Creating A Business Architecture Doug Schmidt Director, Application Architecture MCAP Doug.Schmidt@MCAP.com Doug.Schmidt@Sympatico.ca November 25 2009

2. Contents: What is a Business Architecture ? What does a Business Architecture Look Like ? How do we do this ?

3. What is Business Architecture ?

4. Putting Business Architecture In Perspective • Business Architecture is the process of developing the business model, processes and organization structure from the strategic and tactical business plans, mission, vision. • eg. We will focus our growth based on increasing wallet share. • eg. We will provide a service that allows customers to easily view up-to-date information of their portfolio across all product lines. • Some of the roles involved are: • Business leaders • Business analysts • Application architects

5. Putting Business Architecture In Perspective • Application Architecture is the process of translating business requirements into technical requirements to develop a technical strategy that supports the business architecture. • eg. Develop a customer data warehouse to provide consolidated reporting. An Internet based reporting tool will be used to request and present the reports. Middleware will be used to pull the data from several systems. • Some of the roles involved include: • Data architects • Application architects • Business analysts

6. Putting Business Architecture In Perspective • Technical Architectureis the process of developing the software and hardware technical design based on the technical requirements. • eg. The data warehouse will use Oracle and will reside on EMC DASD. An application will be developed in Java that will merge the data and send it to Business Objects Webi for presentation and security management. • Some of the roles involved include: • Technology experts ie. DBA’s, Server support, Middleware experts, etc… • System design experts ie. Java developers, etc… • Technical architects

7. Putting Business Architecture In Perspective • Enterprise Architectureis the process of developing the application and technical framework which supports the corporate architecture and facilitates reuse and economies of scale. Also, it provides standards and guidance to the Application and Technical architectures. • eg. The UNIX database standard is Oracle. All statutory reporting will be based on the Corporate data warehouse unless there is good reason not to do so. All outside access to data must go through 2 levels of firewall and authorization based on data in the LDAP database. • Some of the roles involved include: • Enterprise architect. • Security architect. • Senior application and technical architects.

8. Putting Business Architecture In Perspective • Corporate Architecture is the company wide standards, guidelines, goals which guide each business unit and the overall enterprise architecture. • eg. All divisions must be able to produce their statutory reports within 12 hours upon request and all divisional statutory reports must be in agreement with the overall company statutory reports. • Some of the roles involved include: • Senior business management. • Senior IT management.

9. Putting Business Architecture In Perspective Organization Strategy & Vision • What is a business architecture ? • It’s a set of documents covering the following: • Organizations strategic vision & objectives. • Business model. • To Be Processes • Organizational design • Implementation considerations Business Model Business Processes Infrastructure Detailed Business Processes Application Architecture Methodologies Human Capital Data Architecture

10. What does a Business Architecture Look Like ?

11. What does a Business Architecture Look Like ? • Example: Organization Strategy & Vision • “A global entrepreneurial investment management services organization that delivers excellent investment performance through • the expertise of it’s people, enabled by superior analytical tools and risk management processes” • What can we derive from this vision? • The vision statement suggests a need for business agility and the ability to proactively pursue new market opportunities: • Agility: Is the ability to quickly and easily implement new products, features, or reports (i.e. components), with minimal or no impact to • business processes or existing system components. The ability of Investments to react quickly to new opportunities, new business • or competitive threats in a cost effective manner through the reuse of business and technical infrastructure. • Proactive: Is the ability of the Investments business to anticipate opportunities in the business environment from product concept • to product delivery and be able to offer these services to the customer. In addition, “Enterprises that can react quickly to changes in • business requirements have a durable competitive advantage over those with more rigid processes and infrastructure”. • After discussion with senior management, there were five underlying principles considered in the development of the To Be environment: • Investments Focus: Operate more like a competitive investment management company. Recognize some functions will remain • insurance oriented • Processing Efficiency: Eliminate redundant process and roles where possible. Move towards Straight Through Processing • Reduced Cycle Times: Moving from quarterly to monthly reporting. Need to begin moving toward daily and intra-day cycles. • Risk-based Orientation: Risk management and controls need to become core competencies. • Leverage Technology: Technology should be used to enable the business but will need to be phased in. • The organization cannot support multi-year, high budget projects with end-loaded benefits. • Need to protect investment in legacy as new tools are implemented

12. What does a Business Architecture Look Like ? • Example: Business Model • Organization’s Mission Statement: • Based on the vision, the mission of the Investments division is to maximize the return on investment while complying with the defined • regulatory requirements and internal investment objectives. The business function is to maintain the information and processes needed • to support the investment products. • Investment Division’s Values: • Provide high quality, timely investment data. • Responsive to customer and shareholder requirements. • Streamlined straight through business processes supported by an agile systems environment. • Adaptable systems that can support dynamic market driven investment products. • An entrepreneurial approach and commercial mindset to product development. • Leverage the skills of our people to capitalize on market opportunities. • Efficiently execute and deliver new system / product capabilities. • Agility at adapting to a rapidly changing business environment. • Foster a business environment dedicated to teamwork, partnerships and continual learning

13. What does a Business Architecture Look Like ? • Example: Business Model • Strengths of the Investment Division: • The core competencies of the Investments Group are listed below. • The ‘To Be’ architecture must enhance and optimize the core competencies through the implementation of streamlined • processes and by leveraging current technology. • Core Competencies: • Integrated Asset Management: • Main source of superior returns. • Consistently top ranked payout annuity writer in Canada. • Integrated ALM: • Asset Managers understand Investment risks created by Liability products. • Flexible liability pricing reflects current asset-market conditions. • Private Placement Debt: • Very experienced team of professionals. • Commercial Mortgages: • The integrated system of origination, underwriting and review provides better than industry results. • Speed of response, execution and structuring flexibility. • Dedicated and committed staff:

14. What does a Business Architecture Look Like ? • Example: Business Model • Customers: • For Investment Services the customer is defined as the people, departments or organizations that receive information and/or • services from any area within the Investment Division. In order to be successful in fulfilling the vision and mission, Investment Services • needs to be responsive to its customers. • Customers are divided into three categories: • Those within the Investment Division, • Those within other areas of the organization • Future customers. • Internal Customers and Products / Services: • Investment Management: (Includes Portfolio and Business Analysis) • Cash projections, cash flow information • Timely, accurate, relevant reporting and analysis • New product introduction support • Treasury: Cash flow activity, trades, security lending deals • Financial Reporting: Details required for statutory and regulatory reporting (also includes ad hoc requests) • Control & Compliance : Details required for reporting / analysis of results, Annual Plan, performance measurement, compliance • with regulatory requirements and internal policies • External Customers and Products / Services: • Board of Directors: Audit and Risk Committee / External Audit Business Conduct Review Committee • Investment Policy Adherence Review / risk management reporting • Quarterly reporting, Compliance activity reporting • Senior Management / Decision support information, Risk management reporting, Results / performance measurement • Finance Committee: MIS investment package information, Annual Plan information

15. What does a Business Architecture Look Like ? Example: Business Model Customers cont…… Future External Customers and Product / Services: Servicing Happy Life Co:Administrative services such as cash projections, trade entry and settlement, income and principal collections, custodial reconciliations, accounting and reporting. Treasury services such as bank account reconciliations for investment accounts and monitoring and administering bank accounts. Institutional Investors / Investment management solutions, for example: hedge funds, interest rate management, FX, ALM, Insurance Companies/ CMBS, Euro GICs, Annuities Pension Plans/ High Net Worth Individuals:

16. What does a Business Architecture Look Like ? Example: Business Model Business Drivers for Change: There are a number of internal and external drivers compelling the Investment Division to change the organization, processes and technology in order to become more agile, customer-focused and market-driven. External drivers were determined by using current market conditions and industry trends. Internal drivers are based on the Investment Division’s analysis of existing investment operations and systems as well as observations by consultants of the current environment. The table below identifies major drivers for change, their potential impacts, and the tactics that could be implemented to respond to those drivers.

17. What does a Business Architecture Look Like ? Example: Business Model

18. What does a Business Architecture Look Like ? • Example: Business Model • Corporate Capabilities: • Based on the Investment Division’s strategic vision and drivers for change, the ‘To Be’ business model requires specific capabilities to be • developed: • Information Management: • Providing timely, accurate, relevant, comprehensive data to both internal and external customers. Organizations that provide accurate information efficiently (i.e. real time in flexible formats and multiple mediums), will have a competitive advantage over organizations who rely on manual processes to compensate for system (both technology and business process) inadequacies. Critical issues which must be addressed: • System interoperability and flexibility. • Efficient business processes. • Elimination of traditional manual dependencies through technology solutions, STP initiatives and streamlined • (as well as integrated) business processes. • Adherence to industry standard protocols (e.g. XML, ISO 15022) to facilitate transactions with business partners. • Customer Service: • The development of flexible, cost effective investment services will be required to capitalize on changing customer needs. As the industry becomes more ‘commoditized’, organizations that excel at client service and adapting/responding to changing customer preferences will have a competitive advantage. • Product Development: • The ability to leverage investment capabilities and produce market-driven products that help clients invest assets and mitigate risk is essential in the ‘To Be’ environment. This is a core competency that requires an external focus and a flexible, agile support infrastructure. • Process Management: • In the transition to a straight through processing environment, processes must be actively managed and monitored. This includes clearly defining roles and responsibilities and periodically reviewing all processes for further streamlining and automation while ensuring appropriate controls are in place. This will reduce processing cycle times and optimize the use of resources. • Application Integration Architecture: • Establish the technical skills and acquire the tools needed to quickly integrate new applications into the technology environment in order to provide business capabilities and respond to the marketplace very quickly. The technical architecture design will facilitate the integration of legacy applications with leading edge systems that will provide clients with competitive capabilities.

19. What does a Business Architecture Look Like ? • Example: Business Processes • Business Functions: • The Investment Division performs a number of business functions and processes that are critical to the ongoing and future success of the • organization. At a high level, these functions include: • Investment management • Investment operations • Trade settlement • Compliance • Investment technology support • Regulatory and statutory reporting • Securities pricing • Performance reporting • Custodian reconciliation and management of various external relationships (custodians, banks, etc.). • Business functions for the ‘To Be’ environment have been grouped into three functional areas: • Front office • Middle office • Back office. • This grouping reflects the major activities related to each stage of the investment selection, order execution and settlement/reporting • processing while providing separation of responsibilities.

20. Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Portfolio Managementand Pre-Trade Compliance Investment Data and General Oversight Investment Data and General Oversight Investment Data and General Oversight Investment Data and General Oversight Investment Data and General Oversight Investment Data and General Oversight Investment Data and General Oversight Investment Research andSelection Investment Research andSelection Investment Research andSelection Investment Research andSelection Investment Research andSelection Investment Research andSelection Investment Research andSelection Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Settlement, Reconciliation and Reporting Order Management Order Management Order Management Order Management Order Management Order Management Order Management Accounting Accounting Accounting Accounting Accounting Accounting Accounting Front Office Front Office Front Office Front Office Front Office Front Office Front Office Middle Office Middle Office Middle Office Middle Office Middle Office Middle Office Middle Office Back Office Back Office Back Office Back Office Back Office Back Office Back Office What does a Business Architecture Look Like ? Example: Business Processes The primary investment business functions are identified and classified below. The associated major business processes are listed below each major function. Look at the flow of money through the organization as a starting point process. • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • NOE Management & Communication • Trade Order Monitoring • Allocation Management • Matching & Confirmation • NOE Management & Communication • Trade Order Monitoring • Allocation Management • Matching & Confirmation • NOE Management & Communication • Trade Order Monitoring • Allocation Management • Matching & Confirmation • NOE Management & Communication • Trade Order Monitoring • Allocation Management • Matching & Confirmation • Investment Data Management • Cash processing • Performance Attribution • Risk Management • Investment Data Management • Cash processing • Performance Attribution • Risk Management • Investment Data Management • Cash processing • Performance Attribution • Risk Management • Portfolio Accounting • Corporate Actions, Interest, Dividend Processing • Mortgage Processing • Real Estate Processing • Reconciliation • Portfolio Accounting • Corporate Actions, Interest, Dividend Processing • Mortgage Processing • Real Estate Processing • Reconciliation • Trade Exceptions • Clearing and Settlement • Cash Management (Settlements • Securities Lending • Regulatory • Management /Client • Performance • Tax • Forecasting

21. What does a Business Architecture Look Like ? • Example: Business Processes • Front-Office: • The front office activities encompass various investment decision processes that include investment research and portfolio management • functions such as portfolio construction and asset allocation. In addition, it includes pre-trade compliance functions, such as checking • restricted securities, portfolio and security risk guidelines, credit rating limits, etc., that should be performed before an order is presented for • execution. The characteristics of front-office processes in the target environment include (but not limited to): • Investment research is available on-line and accessible via a web browser. Brokers and other research sources will only provide their research via the web as well. • Portfolio construction tools will integrate compliance and investment guidelines. Orders will automatically be generated and sent for execution after all pre-trade compliance rules have been checked. • With the automation of order management capabilities many buy-side trading activities will be absorbed by portfolio managers and their assistants. This will initially be the case for equities, with fixed income and other asset classes following. • Front office ‘To Be’ functions are performed by portfolio managers and their assistants, research analysts, credit analysts and compliance officers. • Middle-Office: • The middle office applications include trade order management, communications with trading partners (brokers, custodians, agents, etc.), and • risk management. It also…. • Back-Office: • The back office processes include portfolio accounting (inclusive of corporate actions, interest and dividend processing) mortgage and real • estate processing…

22. Market Data Providers Broker / Dealers Custodian External Money Managers Matching Utility NOE Allocation Confirm Affirm Settlement Inter-corporate Trade Processing Middleware/Messaging Hub Trading Matching/Clearing/Settlement Reporting Accounting Performance Portfolio Management Reconciliation Research Order Preparation NOE Management and Communication Trade Exception Processing Tax Centre of Excellence Risk Reporting Attribution Credit Analysis Trade Order Monitoring Allocation Internal Performance Measurement Regulatory Reporting Management Reporting Order Execution Risk Analytics Corporate Actions, Interest, Dividend Pre-Trade Compliance Data Management Pre-Trade Compliance Post-Trade Compliance Portfolio / Fund Accounting Performance Reporting Compliance Reporting Shareowner/ Client Reporting Matching and Confirmation Cash Management Asset Allocation Modeling Forecasting ALM Investment Strategy Private Debt Completion Clearing and Settlement External Performance Measurement Private Placement Processing Securities Lending Processing Real Estate and Mortgage Processing Management Functions: IT, Finance, HR, etc. Internal Rules-Based Middleware / Messaging Hub Interest Rate Risk Data Store Credit Ratings Data Store Operation Risk Data Store Product Master CounterParty Master Market Data Equity & Fixed Income (Holdings) Data Store Mtg., Deriv. Real Estate (Holdings) Data Store G/L Data Product-Based Data Cross-Product Data Reference Data What does a Business Architecture Look Like ? Example: Business Processes

23. Identify Needed Research Information Obtain and Analyze Information File for Later Access Research Apply Compliance Check Finance Committee Guidelines Obtain Portfolio and Product Risk Information Assess Portfolio, Product and Individual Trade Risk Receive a Notice of Non-Compliance Risk Analytics Review Market Data (Benchmarking, Pricing, etc.) Determine Modeling Types Populate Modeling Tools Identify Necessary Changes to Portfolio Generate Preliminary Trade(s)/Trade List Review and Analyze Modeling Results Review Reference Data (Holdings) Determine whether to Proceed Modeling Portfolio Management Obtain Internal Performance Measures Information Review and Analyze Performance Review Liability Information Confirm Trade(s)/Trade List Performance Measurement Investment Data Management Pre-Trade Compliance Generate Attribution Statistics Review, Analyze, and Document Performance Variances Attribution What does a Business Architecture Look Like ? What does a Business Architecture Look Like ? Example: Business Processes Portfolio Management

24. Matching/Clearing/Settlement Portfolio Management Trading Accounting Performance Reporting • Aggregate and Transmit Individual Portfolio Risk Information • Aggregate and Transmit Position Risk • Aggregate and Transmit Settlement Risk • Aggregate and Transmit Operation Risk • Aggregate and Transmit Credit Risk Aggregate Risk at Total Fund Level Review Aggregated Portfolio Level Risk Data Identify Risk Criteria Update with Latest Risk Information Review Credit Risk Data Aggregate Credit Risk Analyze Risk Report Risk Exposure Mitigate Risk Exposure Review Operational Risk Aggregate Operational Risk Risk Management: Market, Credit, and Operations Internal Rules-Based Middleware / Messaging Hub Interest Rate Risk Data Store Credit Ratings Data Store Operation Risk Data Store Product Master CounterParty Master Market Data Equity & Fixed Income (Holdings) Data Store Mtg., Deriv. Real Estate (Holdings) Data Store G/L Data Product-Based Data Cross-Product Data Reference Data What does a Business Architecture Look Like ? Example: Business Processes Risk Management

25. All Asset Types (Money Market T+0 others T+1) Trade to broker via Order Management System Trade fill from Externally Managed and RT Capital Trade decision broker (Notice of Execution) Trade via Order Management System Electronic update Cash blotter to books and Completed trade reconciliation records (security, Investment (Trade Admin) Accounting blotter detail between trading cash trade detail to parties security system and portfolio) Instructions wired Debit/Credit bank to bank and Treasury (Cash Management) Corporate account investment manager Set up new security (as required) Maintenance) Security Services (Data Security reconciliation with custodians Flow Manager Transaction (TFM) TFM returns trade Trade match not Trade detail for to counterparties successful settlement What does a Business Architecture Look Like ? Example: Business Processes You may find external service processes do not fit well into the model, you’ll need to document these processes differently. External Partner Trading Service - Process

26. Front Office Key Implications / Challenges Process Name and Definition Proposed To-Be State As-Is Constraints Process Description: PM/ Trader determines when additional research/ information is needed and determines how best to obtain it. Research information is received from both internal and external sources. It includes a combination of electronic and paper-based information. Internal research analysts will utilize Outlook (or tool determined by technical architecture) to input research opinions and notes with integrated e-mail alert. External sources will be electronic and integrated into the research repository as they are received. Paper-based research (or faxed material) can be ‘attached’ and filed electronically into the repository. Investment Research: Process of acquiring and analyzing the necessary data and intelligence to make an informed and quality investment decision. Research analysis aids in security selection and analysis. The ability to perform complex analysis is a critical component of an investment manager’s distinguishing capability • Manually intensive processes (compromise data integrity) • Standards for timeliness of information (holdings, security prices) do not exist • No benefit from sharing receiving information • Book of Record information available monthly at best • Implications: • The organization must have the technical infrastructure in place for the analysis, consolidation anddissemination of research information • The organization could replace manual efforts to collect and distribute research information • Challenges: • Some interfacing with other systems/tools will be necessary • Change behavior to encourage information sharing • Convert paper-based subscriptions to electronic versions • To-Be Process Attributes: • Centralized research repository housing raw, analyzed and final report data • Alerts for breaking news on holdings (also via pager or cell phone) • Secure web accessibility to information • Integration of portfolio holdings with investment research data • Automated real-time access to performance, risk, market data, and news • Accurate and quality market information • Streamlined process to incorporate both the “push” and “pull” of research information • Standardized reporting • Historical storage for analysis and reviews What does a Business Architecture Look Like ? Example: Business Processes It’s not enough to come up with a To-Be, you also need to consider how to make the To-Be happen.

27. What does a Business Architecture Look Like ? • Example: Supporting Infrastructure • Supporting Infrastructure: • In order to respond to the significant changes that will be required to remain competitive, guiding principles for designing the supporting • infrastructure (i.e. organization, processes and technology) need to be adopted and communicated broadly. These include: • Information, of any type, should only be entered at a single point in the integrated systems environment. • Integration of the business processes within the technology architecture is critical. ‘One off’ systems and their associated supportingprocesses need to be minimized or eliminated if possible. • Select business partners (brokers and custodians) that implement equivalent levels of automation in order to eliminate ‘specific’incremental processes for partners that cannot support the organizations business and technical requirements. • Adhere to the technology and business process architecture that has been designed for straight through processing principles andinstitute a rigorous approach to selecting applications that are consistent with that architecture. • Following these guiding principles, the development of the Investments Division ‘To Be’ environment should incorporate the following • strategies: • Business processes and technology projects will need to demonstrate business value in the approval process • Investment in staff through continual learning, leveraging the skill sets of the existing staff, and attracting new staff with complementaryskill sets must occur. • The organizational structure design will be dynamic and flexible in order to continually respond to requirements of a highly competitivemarketplace. • Communication of key decisions will be delivered both vertically and horizontally through the organization on a timely basis • Business processes will be streamlined so that technology can be applied to achieve straight-through processing and marketresponsiveness • Proactive business process management will be adopted that allows Investments to adapt and react quickly to changing market conditions as well as optimize use of resources. • The technology architecture will be designed for rapid development, application integration and flexibility. • A disciplined project management methodology will be adopted in order to assure reliable and cost-effective delivery. The methodology will be ‘thin’ so that it enables short (six months or less) projects while maintaining milestones and gate reviews. • An environment will be established that is externally focused with a commercial mindset, including periodic benchmarking against worldclass financial firms to validate operational performance. • Recognize that decisions made at one point in time will need to be re-evaluated and changed, if necessary, to accommodate a rapidlychanging and unpredictable marketplace. • Project management will be centralized in order to leverage existing assets and optimize limited resources • Risk management processes will be established to provide a balanced view of business and technical change • Continual learning and leverage of existing skill sets will be complemented by recruiting people with skills in new technologies to beimplemented

28. What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions The Front Office: For the organization, the primary objective of the “front office” is to implement investment decisions that are designed to achieve both the tactical and strategic performance objectives. In order to achieve this goal, several processes are required. In the table below, we have identified core processes, provided a series of tasks that comprise each, and then provide a summarized commentary on the qualifications and/or skills needed to perform these tasks. Furthermore, the commentary on qualifications/skills are not meant to be discrete to individual processes i.e. some qualifications/skills will have cross over coverage to other processes. Given the pace of change facing the investment management and insurance industry, we would anticipate that all individuals, no matter what their specific process or task, possess a fundamentally broad understanding of the critical drivers impacting the organizations ability to deliver competitive investment management services and insurance products to their current and future clients. From an organizational perspective, the level of understanding of these drivers could be described as the need to “be current” with a wide range of industry trends and events that will continue to shift the investment management and insurance landscape for years to come. We have described specific processes, tasks and essential skills that we believe will be common among all world-class investment management companies, notwithstanding the fact that in this case the supporting infrastructure (i.e. investment operations) currently exists within a large insurance company. The scope of this project was limited to “investment operations” and did not accordingly require/allow for us to provide observations / recommendations relating to an organizational structure for the “front office” of the future. Instead, we have characterized the future requirements of the front office by functional requirements or processes. This is appropriate given the fact that the organization may wish to determine whether current and future strategic business requirements and challenges necessitate any change to the current organizational construct.

29. What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions Start with each part of the business and the key business processes.

30. What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions For each key process, identify the key tasks and the skills/knowledge required in the To-Be world.

31. Vice President & Chief Corporate IT Investment Officer CFO, Investment Division Risk Management PMO Process Technology ALM-Investment Strategy (Credit, Operational, Market Interest Rate) FrontOffice Corporate Compliance Cash Management Investment Resource Management Compliance Mgmt. InvestmentIT Services Portfolio Services Client Services Marketing Performance Investment Data Group Legacy Support Measurement Group/ Legacy Support Security Reference Data Set Attribution Up & Verification Management Reporting Pricing/Data Verification Ratings Application New functionality/immediate need = Changes needed for ‘To Be’ transition = Longer term needs = Existing functionality = Trading Systems Regulatory Reporting Order Mgmt/Custody Securities Lending Trade Settlement Order Mgmt Portfolio Shareholder & Client Systems Reporting/ Forecasting Portfolio & Fund Accounting Corporate Actions/Dividend Data Processing Warehouse/ Reconciliation Fund Valuation Tax Centre of Excellence Data Marts Tax Reporting Reporting Web Delivery Group What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions

32. What does a Business Architecture Look Like ? • Example: Key Success Factors Regarding Project Implementation • Implementing substantial change throughout the Investment Division, including simultaneous organization, process and technology changes, • will require significant commitment to achieving success from all levels of the organization. They key factors to achieving success are as • follows: • Executive management support must be visible throughout the course of the project • Project goals, and expected benefits, need to be articulated and communicated throughout the organization • Internal and external resources to implement the ‘to be’ projects must be available while supporting the day-to-day business • Project management responsibilities and individual roles must be understood at all levels. • Teamwork must be fostered and encouraged to facilitate communication and attainment of a common goal. • Clear, consistent communication of the project status and requirements must be delivered • Immediate ‘quick hits’ to demonstrate project business value and potential for change must occur • Qualitative and quantitative measures of project success need to be established at the start of the project. • Projects need to be centrally coordinated to optimize resources and ensure the integrity of the architecture and consistency with the vision. • These success factors must be emphasized and adhered to throughout the course of the project. While these factors are not in priorityorder, the most critical factor is executive management support. A clear commitment to the project and the change it will bring is critical to achieving success and gaining the benefits of the new environment.

33. What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions Immediate Needs: Project Management Office: In order to centralize project management, budgeting and reporting of the many initiatives required to implement the ‘To Be’ organization, a project management organization (PMO) should be established and it should report to the CFO, Investment Division to give it the required visibility and leverage. The PMO can exist for the life of the ‘To Be’ migration and then could be integrated into Investment Technology. The PMO will need to serve several critical purposes during the course of the implementation program. In addition to project management and control, the PMO will need to enforce technology architecture standards for vendor selection, manage and report on budget variances, identify process improvements and recommend automation of processes utilizing the new systems capability. Risk Management: Currently risk management functions are dispersed throughout the investment organization. A Risk Management function responsible for monitoring market, credit and operational risk should be established. The position will also be responsible for developing guidelines and policies in the risk areas mentioned. This function should report to the Chief Investment Officer due to the nature and level of responsibility. Changes for ‘To Be’ transition: Front Office: The front office, primarily investment management, is coded yellow because specific resources in the PBA support group should be re-allocated into the Investment Technology group in order to establish a coordinated approach to the ‘To Be’ technology implementations. No other changes are recommended although Investments will want to revisit organization and processes (i.e. the ‘front office’) as new technology is implemented. ALM Investment Strategy: The ALM-Investment Strategy Group, further described in the Process and Summary Roles and Responsibilities document, functions as the interface between ALM and the Product Managers to collect income and duration information for the purpose of benchmark matching. This function will require technology support to be fully functional but definition/formation of the group can be initiated early in the migration.

34. What does a Business Architecture Look Like ? Example: Organization Structure & Descriptions Longer Term Needs: Investment Services Marketing: With the implementation of the ‘To Be’ systems and processes environment, it will be necessary to continually communicate the new capabilities, solicit client feedback and ‘market’ these capabilities to clients. Once the ‘To Be’ environment is in place, the organization may be in a position to service external clients. At that time, the marketing function will take on an external focus. Web Delivery Group: Web based delivery of client information, particularly for institutional investment clients, is becoming a standard delivery channel. In addition, market and reference data is increasingly being offered on a web-only basis. The purpose of this group is to deliver and implement web-based capabilities utilizing the existing organizations web architecture. This group will be focused on delivering or acquiring business capabilities for the Investment organization by utilizing the web. Existing Functionality: While these functions have not been ‘redesigned’ in the recommended organization changes, each will be impacted to varying degrees. As new processes are implemented, the relevance of the existing organization design should be revisited. Based on expected changes and improvements, the following changes will occur: Cash Management/Treasury: The ‘To Be’ environment will be designed to perform intraday cash position reporting. This will require interfaces to a wide range of systems and communication with departments across the enterprise. This will shift the function of the department from reporting on cash positions toward forecasting and projecting cash positions and requirements. Portfolio and Fund Accounting: The portfolio, mutual fund and segregated fund accounting function(s) will become much more automated and streamlined as a result of the implementation of new, integrated accounting systems. This will eliminate most manual processing as well as standardizing and automating calculations being performed currently. The emphasis in the ‘To Be’ environment will be exception-based reporting. Order Management: The order management function will also move toward a more automated processing environment. This function will continue to support securities lending and custodian communication. Legacy Support: While the transition to the ‘To Be’ environment takes place, it will be essential that legacy systems are supported and maintained. This function will eventually shift services to maintenance, conversion and critical functionality changes to the current systems. Once the conversion is complete, this function will be shifted to support the new systems within a different organization structure.

35. How Do We Do This ?

36. How Do We Do This ? • Like any project, it’s all about good project management. • Here’s the approach we took: • Create an opportunity proposal.ie. We should perform a business architecture for these reasons. • Set objectives, a project plan, budget, resources (internal & external). • You need people who see out of the box or who can stimulate such thinking. External resources may be required to achieve this. • You need people with broad industry knowledge and expertise. • Collect information:You will need to collect some information about the current state but that’s not what this is about. The focus here is on the future, the “to-be”. Leave work on understanding the current state for the implementation initiatives. It would likely be a waste of effort at this point in time. • Business strategy & vision. • Business objectives. • Drivers for change, external & internal. • Industry direction. • Opportunities. • Industry best practices. • What does the business do well that it wants to retain and improve upon. • What are the key success factors. • Who are the customers, internal, external and future. • What services do you provide. What’s the value add for all your customers. • Boundaries - Regulations and/or restrictions that must be adhered to. • Seek out other sources of information like, operation manuals, requirements documented in RFP’s, etc..

37. How Do We Do This ? • Analyze the information: (easier said than done) • Business Strategy & Vision: • This sets the stage it tells you what the organization wants to be. • What does it have to do, be good at ? • What of these things does the organization do today and is it good at it ? • Business Objectives: • Evaluate these to ensure they are not addressing problems or symptoms of problems that this architecture is planningto address. If so, they are likely key pain points that need to be addressed sooner than later. • Ensure the business architecture supports achieving the objectives. • Drivers for change, external & internal: • Observe and interview, what is working well and what is not working well. • What is happening in the industry and what is or could be the a impact on the organization and its plans. • Processes not working well or staff with insufficient training or can’t handle more business. • What is the organizations response or planned response to these drivers. • What opportunities lie before the organization either externally or internally. • What are the industry best practices. • Paperless ? • Straight-thru processing. • Increased risk management. • Outsourcing certain aspects of the business. • What does the organization do really well that it wants to continue doing and/or improve upon. • Are there things the organization wants to stop doing. • What are the key success factors. • How will you measure the success of this architecture. • Who are the organizations customers. • Customers internal to the organization. • Customers external to the organization. • Are there new types of customers you want in the future. • What services do you provide. What’s the value add for all your customers.

38. How Do We Do This ? • Continued…………..Analyze the information:With the analysis you are trying to gather information to identify the following: • Key high level design considerations. • Factors for success. • Core competencies the organization wants to keep and build on. • The key customers and their requirements and the services we want to provide and how we want to provide them. • Process requirements. • Functional requirements. • Non-functional or Infrastructure requirements (this includes people). • Develop a structure to provide a cohesive way of managing all the information collected and the results of the analysis.On the next few slides, I’ll present you with some of the structures we used that you may find helpful. • Look at the diagrams and tables provided in the previous section describing a Business Architecture. • The details of your interviews and research belong in an appendix or supplementary document. • I generally use 3 types of documents: • Executive summary. • Detailed summarization and analysis. • Raw information and details.

39. Constituents Who is Involved / Impacted? Functional Process Key Elements and Processes / Activities Link Input Output Step 1 Step 2 Step 3 Technology Data Management Product-Based Data Cross-Product Data Reference Data How Do We Do This ? This structure is good for containing information on the business structure, key processes, services, internal/external parties/services.

40. Information TechnologyImplications Drivers • Continued deregulation of the Insurance industry leading to a highly-competitive business environment. • New products developed quickly with increasing complexity • Customers becoming more sophisticated. Market driven investment products need to be continually developed to remain competitive. • Increasing complexity and changing business (e.g. Trust). • Industry move to Straight-Through-Processing. • Information must be accurate, timely and shareable • Consolidation of information across business units • Applications are becoming highly specialized • Application infrastructure must be tightly integrated to support Straight Through Processing (STP) • Scalability is critical as increase in transactions cannot impede transaction processing or access to information • IT architecture must be flexible and capable of evolving as business requirements change. What does this means for the organization? • Increased competition. In some cases CL is competing with newer low cost organizations (no legacy). • Current business and system processes not able to support existing business. • Business cycle and reporting cycles/time frames vastly reduced. Need daily management. • Development and implementation cycle times must be reduced. • Need to attract, retain and educate staff to support a changing environment. • Introduction of new applications to better support risk management function. • Integration across systems will be a priority, but must be done safely. Business must continue to run. • Minimize manual processing and associated costs through automation to support STP. • Require an application architecture that allows for quick implementation and adaptation to business change. • Information technology staff must acquire knowledge of new tools and changing business environment. How Do We Do This ? This structure is good one page summary view of the drivers and the implications on the organization.

41. Banks Banks Market Data Market Data UK Division Irish Division Custodian Custodian Insurance Insurance UK - PM&T 3rd Party PM&T Canadian Division Investment & Pension / Trust Banks Corporate Financial US Division Group & Individual (Insurance) Insurance Banks Investments Consolidated Reporting US-Mortgage Market Data (Prices, reference data, etc.) Canada PM&T US PM&T Other Internationals (Germany,Brazil, HK, etc.) Investment Services Custodians Insurance 3rd Party Investment Mngr How Do We Do This ? This structure helps put the Investments Division into perspective. Help identify its customers and partners and sources of information.

42. Portfolio Managementand Pre-Trade Compliance Investment Data and General Oversight Investment Research andSelection Settlement, Reconciliation and Reporting Order Management Accounting Front Office Middle Office Back Office How Do We Do This ? • Build the “To-Be” business processes. • Break the business down into key areas of functionality starting from the top.Eg. Front, Middle, Back office and Governance.Also, identify all key external parties/services. External means they could be within the organization, just out of scope of your Business Architecture. • Investment Research • Portfolio Modeling • Portfolio Risk Analytics • Asset Allocation • Credit Analysis and Monitoring • Order Preparation • Compliance guidelines • Document filing (private placements) • Mortgages • Order Execution • Liability matching • NOE Management & Communication • Trade Order Monitoring • Allocation Management • Matching & Confirmation • Investment Data Management • Cash processing • Performance Attribution • Risk Management • Portfolio Accounting • Corporate Actions, Interest, Dividend Processing • Mortgage Processing • Real Estate Processing • Reconciliation • Trade Exceptions • Clearing and Settlement • Cash Management (Settlements • Securities Lending • Regulatory • Management /Client • Performance • Tax • Forecasting When developing the new To-Be process you don’t yet need to figure in detail how it will work but you do need to determine what the new To-Be process will do and roughly how it will work. You need to develop a solution to the requirements assuming, this process needs to be changed or is a new process. Keep in mind the key design considerations that you have developed as part of your analysis. The next few pages will show you how detailed you need to be.

43. Market Data Providers Broker / Dealers Custodian External Money Managers Matching Utility NOE Allocation Confirm Affirm Settlement Inter-corporate Trade Processing Middleware/Messaging Hub Trading Matching/Clearing/Settlement Reporting Accounting Performance Portfolio Management Reconciliation Research Order Preparation NOE Management and Communication Trade Exception Processing Tax Centre of Excellence Risk Reporting Attribution Credit Analysis Trade Order Monitoring Allocation Internal Performance Measurement Regulatory Reporting Management Reporting Order Execution Risk Analytics Corporate Actions, Interest, Dividend Pre-Trade Compliance Data Management Pre-Trade Compliance Post-Trade Compliance Portfolio / Fund Accounting Performance Reporting Compliance Reporting Shareowner/ Client Reporting Matching and Confirmation Cash Management Asset Allocation Modeling Forecasting ALM Investment Strategy Private Debt Completion Clearing and Settlement External Performance Measurement Private Placement Processing Securities Lending Processing Real Estate and Mortgage Processing Management Functions: IT, Finance, HR, etc. Internal Rules-Based Middleware / Messaging Hub Interest Rate Risk Data Store Credit Ratings Data Store Operation Risk Data Store Product Master CounterParty Master Market Data Equity & Fixed Income (Holdings) Data Store Mtg., Deriv. Real Estate (Holdings) Data Store G/L Data Product-Based Data Cross-Product Data Reference Data How Do We Do This ? • Build the “To-Be” business processes. • Map the breakdown of the Front, Middle, Back Office and Governance to your structure diagram

44. Identify Needed Research Information Obtain and Analyze Information File for Later Access Research Apply Compliance Check Finance Committee Guidelines Obtain Portfolio and Product Risk Information Assess Portfolio, Product and Individual Trade Risk Receive a Notice of Non-Compliance Risk Analytics Review Market Data (Benchmarking, Pricing, etc.) Determine Modeling Types Populate Modeling Tools Identify Necessary Changes to Portfolio Generate Preliminary Trade(s)/Trade List Review and Analyze Modeling Results Review Reference Data (Holdings) Determine whether to Proceed Modeling Portfolio Management Obtain Internal Performance Measures Information Review and Analyze Performance Review Liability Information Confirm Trade(s)/Trade List Performance Measurement Investment Data Management Pre-Trade Compliance Generate Attribution Statistics Review, Analyze, and Document Performance Variances Attribution How Do We Do This ? • Build the “To-Be” business processes. • Proceed to break down these components into the key processes.Eg. Portfolio Management can be broken down into Research, Risk Analytics, Modeling.

45. All Asset Types (Money Market T+0 others T+1) Trade to broker via Order Management System Trade fill from Managed and Externally RT Capital Trade decision broker (Notice of Execution) Trade via Order Management System Electronic update Cash blotter to books and Completed trade reconciliation records (security, (Trade Admin) Investment Accounting blotter detail between trading cash trade detail to parties security system and portfolio) Instructions wired Debit/Credit bank to bank and Treasury (Cash Management) Corporate account investment manager Set up new security (as required) Maintenance) Services (Data Security Security reconciliation with custodians Flow Manager Transaction (TFM) TFM returns trade Trade match not Trade detail for to counterparties successful settlement How Do We Do This ? • Build the “To-Be” business processes. • So, where do you stop breaking things down ? • We found that for internal processes, we had to go down to the 4th level. • If you are at the point where you need to use swim lanes you’re probably too detailed. • An exception would be interactions with external parties/services where a swim lane might be a good tool to use to document the process.

46. How Do We Do This ? • Build the “To-Be” business processes. • For each component and level of your breakdown: • Document the To-Be process as shown below.

47. How Do We Do This ? • Build the “To-Be” organization: • Determine your design considerations.It might look like this: Design Principles The design principles for the ‘To Be’ organization structure are focused on instituting the following characteristics into the Investment Operations organization: Investment focus: Migrate the current environment to operate more like a competitive investment management company. While certain functions, regulatory reporting for example, will need to be insurance-oriented, all other functions need to be comparable to world-class investment management organizations. Processing efficiency: Eliminate redundant processes and roles wherever possible and institute straight-through processing principles throughout the organization. Reduced cycle times: The organization has been migrating from quarterly to monthly processing and reporting cycles and must begin moving toward daily and intraday cycles. Risk-based orientation: In order to provide strong support for core competencies, risk management must be integrated into the design, selection and implementation of all investment technology and business processes.

48. How Do We Do This ? • Build the “To-Be” organization: • Determine your design approach.It might look like this: • Design Approach Guidelines • The design of the ‘strawman’ organization is based on a top-down approach to identify the required services and support that will be provided by Investment Operations. The ‘To Be’ processes required by the straight-through processing-based architecture were used as a basis to identify these services. Once the services were identified, recommendations were developed for potential high-level reporting relationships. • The design approach is also based on the fact that the organization will be ‘in transition’ during the 2-3 years defined in the implementation plan to convert all the major system components. This is a significant change from the current environment and will require working relationships between and within Investments, Technology, Operations and other areas of the organization. In an environment that has been well-defined and relatively static, this will demand increased levels of flexibility and cooperation within the Investments Division. Dynamic organization structures and reporting relationships designed to support these requirements are included in the strawman organization design. • Matrix reporting: The implementation of new systems and processes will require functions, such as technology and operations, to work closely with and report to areas of the organization that are directly involved in the implementation of new processes and capabilities. In many cases this will require multiple reporting relationships in order to be effective and maintain the required level of communication. In the strawman design, an example is Investment IT reporting to both the CFO, Investment Division responsible for the overall project and Corporate IT, responsible for technology architecture standards. • Dynamic organization structures: The implementation of new systems and processes, while maintaining the legacy environment, requires the creation of temporary organization functions. In some cases this is for the purpose of developing a capability that will migrate to another……….

49. How Do We Do This ? • Build the “To-Be” organization: • Continue with the development of your approach. Design Organization Structure Identify Service Requirements Develop ‘To Be’ Process Flows Processes • Identify business requirements for a straight-through processing-based environment • Interview Investment staff in various functions • Interviews with internal clients • Review of RFPs describing requirements • Assess current organization preparedness • Integrate observations based on industry experience • Develop ‘strawman’ organization chart • Identify prioritized organization requirements • Identify the ‘to be’ investment services requirements • Describe key roles and requirements • Identify transition services

50. How Do We Do This ? • Build the “To-Be” organization: • Evaluate the current environment and how the To-Be will be different. Essentially, you are determining how you are going to address the current issues.