7 Critical Calypso Challenges

February 3, 2021

The start of the new year always sees a rash of predictions and top trends. Rather than add to this we’ve gathered together the most pressing challenges that our clients and partners have told us they will be focused on over the coming year.

Automated Testing and CATT – time to fully embrace

Building out automated testing has become a hot topic over the last number of months especially with the shift by Calypso to move more frequent maintenance releases. A constant theme emerging out of our conversations is the recognition that managers simply cannot afford the spend in man-hours and cost in having to manually test a more frequent upgrade release cycle.

The good news is that Calypso’s rollout of CATT has greatly improved the efficiency and quality of Calypso testing. CATT-based test services include test case compilation and prioritization, test planning and strategy, test execution, issue remediation, CATT training and defect fixing. If you haven’t the in-house expertise, make sure you engage with someone who is familiar with CATT. As a primary partner for Calypso supporting this tool, we can expedite time to market for our clients by offering our own set of CATT test cases which have been built out by our consultants with CATT expertise across numerous engagements and integrations and our in-house CATT training.

Calypso Maintenance Releases – striking the balance between implementation and capacity planning

Calypso are pushing clients to adopt a more frequent upgrade policy with the rollout of their monthly release program. Changes are being introduced incrementally and Calypso are advising clients to move away from the traditional big bang upgrade approach. Having led countless upgrades over the last few years (including eight v16 upgrades in the last 2 years), we at First Derivatives welcome the move away from large scale, costly and time-consuming upgrades. We also know that this move is not without its challenges for many of our clients.

The trade-off between the benefits of new releases and the risk of upgrades has always been a challenge. As software development evolves and as DevOps collaboration increases agility for internal projects, the same is happening on the vendor side as suppliers begin to increase the frequency of their maintenance releases. With Calypso, in particular, moving to an increased release cycle places particular stress on our customers in-house support teams to implement and test and deploy the roll out of these more frequent upgrades. An additional complication is that the decision on deploying maintenance releases will be selective, based on relevance and business needs, and as a result the timetable will be less predictable than for traditional upgrades. That poses a challenge for capacity planning.

One of the ways to overcome this capacity challenge, and which our clients are adopting, is a Shared Services model. Using a Maintenance Release Upgrade Team from our Calypso Centre of Excellence, our customers can utilise a fixed number of maintenance releases in a specific period with the ability to leverage Calypso resources as and when is required. In parallel to utilising our maintenance release shared service model, clients can leverage FD’s Testing as a Service to build-out customers regression capabilities – either using CATT or a custom testing tool – which will reduce the overall spend on testing for both cyclical and maintenance releases. We believe that this flexibility in approach to upgrades will accelerate in 2021.

Collateral Management – ISDA SIMM requirements looming large

In March 2020, in response to a request from ISDA and other industry associations, global regulators agreed to delay phases 5 and 6 of the initial margin documentation and operational requirements. With revised dates of September 2021 and 2022 now looming large finding the resources with the knowledge of the required collateral management changes and the ability to implement them is becoming an urgent priority for many.

In anticipation of that need, and based on discussions with our clients, we have invested heavily in training our Calypso resources in Collateral Management and the ISDA SIMM requirements and where required have partnered with other firms specializing in margin reforms in order to bolster our expertise and scalability in this area. In 2020 FD delivered three Calypso collateral management implementations. FD has the know-how and the Calypso collateral resources who can help, now.

Libor Reforms – meeting the end of year deadline

The transition to the new RFRs should be completed by end of 2021 and many of our partners and customers will are starting to discuss determining the required changes to existing processes, software and configurations due to these changes. Some may contract Calypso to implement the required changes while others may undertake them independently or with a partner.

Whatever route you decide to take be aware that there are significant challenges in implementing, testing and verification overhead that will, in the short term, require specialist knowledge of the underlying regulations and business needs. Many of the organizations we’ve spoken to over the last few months are unsure of what the impact of LIBOR reforms will be to their current operating model. For that reason, I’d recommend that you carry out a LIBOR Impact Analysis. For our clients who don’t have an internal resource with specialist knowledge of LIBOR and to help provide clarity we are offering a LIBOR impact analysis undertaken by our senior vendor SME advisory team.

Cloud – managing the migration

Calypso, like many other applications, is taking to the cloud where both users and vendors benefit from the flexibility, cost-benefit and scalability it offers. Moving to the cloud can take many forms from the relatively simple “lift and shift” to the more strategic re-platforming or retiring an existing solution. As Calypso offers solutions for web-based operations like Collateral Management and supporting back office microservices, FD’s considerable experience in cloud migration and partnerships with AWS, Azure and Google cloud can greatly help in the migration process. For further information on insights on moving to the cloud read our blog providing observations and tips on cloud migration.

SWIFT MX Messages Upgrades – be aware significant testing required!

SWIFT will introduce further MX messages to replace or complement their MT equivalents in this year’s release. As with previous upgrades, both message types will co-exist and therefore systems will have to cater for both types, sending and receiving, based on counterparty adoption profiles. While some may undertake system-level changes, others may use middleware to perform the required translations between formats. In both cases, significant testing will be required for what remains a critical step in the transaction lifecycle and requires an in-depth knowledge of SWIFT messaging for debugging and exception management.

3 Reasons to Consider Moving to Managed Services. Cost. Capability. Continuity.

A common theme we see across many organizations is increased interest in the use of Managed Services. The reasons vary. For some it may reflect a strategic decision to refocus on core competencies. For others it may be an acknowledgement that the current in-house model is not optimal, or it may simply be a recognition that it is not suitably robust and scalable for future business plans. Whatever the specific motivation, it will almost certainly be a decision driven by considerations around cost, capability and continuity. We have considerable experience in providing Managed Services and our first on-boarded client 10 years ago remains a client.

Managed Services specifically address three key areas:

Cost: Operating from low-cost centers provides optimum services at reduced rates while still retaining the benefits of physical proximity and cultural alignment. Physical proximity enables swift, ad-hoc, on-site deployment of resources where required for specific tasks or projects while cultural alignment ensures the communication process is as streamlined and efficient as possible – a critical component of any service provision.

Capability: A managed services resource pool has the elasticity to respond to changes in demand, meaning that service delivery is predictable in terms of cost, quality and timeliness. Plus, your organization can access staff who are highly trained with first-hand expertise on client sites across a variety of systems and product areas so that a wealth of knowledge and experience is brought to bear on each assignment.

Continuity: Follow-the-sun 24/7 availability coupled with streamlined best–practice processes ensure optimized, repeatable and high-quality service delivery. Combined with the ability to ramp-up and scale down resources in line with peaks and troughs in service demand, this enables organizations to meet their internal targets, client commitments and regulatory obligations in a sustainable and repeatable manner.

Moving forward in 2021

The capital markets are premised on progress and growth, so standing still is actually moving backward. The challenge for 2021 based on what our Calypso clients and partners are telling us is to not just address what has been delayed from 2020 but to ensure that new opportunities are explored. Both are equally important and can be significantly accelerated by applying the right resources with the right skills to the right projects.

Talk to us today about how our people, processes and technology can help you to successfully meet these challenges this year.

Relevant case studies that you can download:

1. Upgrades

2. CATT Implementation

3. Collateral Implementation

4. Managed Services