T+2 shortened settlement cycle update
The biggest challenge in moving toward T+2 settlement? Testing
As the migration to the T+2 shortened settlement cycle gets closer, “testing” is the word of the hour. Organizations that don’t already have a plan to test how well they will operate in the post T+2 ecosystem may find themselves far behind the curve.
- The road to a shortened settlement cycle
- Test strategy and planning
- T+2 implementation
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The road to a shortened settlement cycle
To meet the targeted migration date of September 5, 2017, the T+2 Industry Implementation Playbook (T+2 Playbook) specifies that organizations should be completing internal system changes and process and procedure impact analysis by Q3 of this year. And planning should start now for the testing phase that follows. On the road to a shortened settlement cycle, testing the affected areas is the biggest challenge. Starting early will be important: The process will be prolonged, vast, and expensive. It will also require significant coordination across a number of stakeholders, applications, and business functions.
Testing will involve significant preparation and planning and will affect many parts of the organization. As part of test strategy and planning, testing roles and phases must be identified:
- Testing plans should be coordinated across applicable internal and external participants
- Test environments must be provisioned
- Test cases must be developed for the various testing phases
- Test data must be planned and provisioned
In addition, organizations must coordinate their software release management and testing plans with ongoing, parallel projects to be released on a T+3 settlement cycle. It’s important to approach T+2 testing not only from a technology change perspective, but also from an end-to-end process perspective that covers all affected business and operational functions.
Test strategy and planning
During the T+2 transition, it will be important to strike the right balance between testing too much and testing too little. Organizations should plan early and be deliberate about defining testing scope, requirements, and types of testing. Timing should be deliberate: When to start each type of testing, when external parties will be ready to test, and when the organization will be ready to participate in industry testing. A leading practice in addressing these timing concerns is “book-end test planning”—industry testing in 2017 at one end, change execution and coding completion at the other, and all other testing activities completed in between.
A central T+2 testing project management office (PMO), or command center, with federated execution leads can help mitigate risks throughout the testing process. The command center will require industry knowledge and an understanding of T+2 concepts and testing depths so it can govern overall testing strategy formulation. PMO staff should also have a top-down understanding of the application landscape and strong awareness of application functionality.
T+2 testing should take place in phases: systems testing, integration testing, F2B testing, and industry testing. Each organization should assess its T+2 book of work to determine the sequencing for internal testing phases, assess cross-phase dependencies, and develop a master test strategy and test plan. Testing phases should also integrate across work streams and lines of business.
How Deloitte can support your T+2 implementation
Numerous leaders across the financial services industry have engaged Deloitte to assist with their organization’s T+2 initiatives. Our deep knowledge of the T+2 playbook approach—combined with our advanced tools and in-depth understanding of cross-functional impacts—can help accelerate implementation and migration. Also, our approach to testing and our ability to manage and sequence complex dependencies reduces implementation risk and lays a strong foundation for success.