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The unsung heroes of investment banking.

The operations division is also known as the “back office”. Unlike the traders, sales people, capital markets bankers and corporate financiers of the “front office”, people working in operations don’t liaise with customers to generate revenues and profits for the bank. Instead, the division is a support function – operations professionals support people in the front office to make sure everything works smoothly and the bank gets paid.

The business of operations covers everything from IT to human resources, accounting (finance) and risk management. Its functions are so broad that operations specialists typically specialise in only one of these areas. At its centre is the core function of clearing and settling trades.

Clearing trades involves looking at the records made by the bank’s traders when they buy and sell shares or other financial products, and checking that they match the records kept by people from whom or to whom the shares were bought or sold (the counterparties).

People who work in settlements “settle” trades or ensure the stocks or shares bought and sold by the bank’s traders are exchanged for the correct amount of money. “Settlements” covers everything from preparing the documentation required for a sale, to making sure the bank has been paid for all the shares it has sold and bought.

Trends

The operations division may not be where banks make their profits, but it is certainly where they can lose them. The more efficient a bank is at conducting its business, the greater the percentage of revenues that will feed into the bottom line. Banks have belatedly realised this and are now looking for a higher calibre of person to work in operations.

In Australia, many of the lower end back office operations are moving offshore, largely to Asia and India, which has resulted in less growth, but there are still opportunities, particularly in niche areas such as product control and office operations in the financial markets, where specialist knowledge is needed.

The move offshore has been paralleled by increased use of technology. Twenty years ago, clearing and settlements were labour- intensive businesses involving a lot of form filling and large filing systems. Today, they are mainly dominated by computerised settlements facilities that transfer financial products electronically. None of this bodes particularly well for jobs in operations, which are taking a hit, as processes are electronically streamlined and business moves offshore. The good news, however, is that the jobs left behind tend to be more interesting and higher paid.

One of the most interesting areas of operations is hedge fund operations, or so-called “prime brokerage”. Prime brokers act at the back office for hedge funds, offering everything from clearing, settlement and custody facilities to help in managing relationships with investors and assistance with raising new funds. Prime brokers are a lucrative part of large investment banks.

Key players

There’s no such thing as a “key player” in the operations world – all banks have operations divisions. However, some are more efficient than others. Every year, research company Z/Yen ranks banks’ operations departments in terms of their efficiency and accuracy at confirming and settling trades and managing data. In Australia, the largest organistaions for back office operations is at UBS, and Merrill Lynch, who offer some client portfolio management roles. Prime broking in Europe is dominated by Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Deutsche Bank.

Roles and career paths

Electronic systems have vastly increased the speed with which simple trades are processed. But derivative trades are often too complex to be settled electronically and tasks are still done manually. Trades are often confirmed by fax, for example. The large number of documents required for derivatives transactions creates roles for documentation specialists.

Whether you work with derivatives or not, most operations jobs also have a strategic element – banks use operations staff to analyse ways of making processes more efficient and project managers implement their suggestions; the more senior you become, the more likely you will be assigned to this kind of strategic or project management role.

Pay

As non-revenue generating staff, operations professionals earn less money and lead a less glamorous existence than the highly paid corporate financiers, sales people and traders, who inhabit the front office. Operations staff are a cost centre and banks are mindful of this. Unlike traders or successful sales people, who can receive a bonus equal to many multiples of their salary, people working in operations typically receive a fraction of their salary as a bonus.

At a management or head of operations level, you can earn up to AU$100K. Operations staff also have two things in their favour – they usually go home before 6pm and they rarely work weekends.

Skills

• Amanda Williams, Director of finance and Professional Services, Australia, for Hudson says while operational roles may not be perceived as high profile, they can be important, and good organisational skills are key to working in operations. “Desired skills include good attention to detail, the ability to multi-task and meet deadlines,” she explains. “Although it may be behind the scenes, these roles are often part of a very pressurised environment. Some operational roles require customer-facing skills, dealing with issues or complaints. In the finance market in particular, numerical skills are also crucial.”

• While many roles have been streamlined by technology, Mathew Gowan form Hays says that there are still a range of different operational roles that require specialised skills. “You could work in treasury, or in stockbroking, and use skills that cover account management and tracing transactions from an accounting and administration sense,” he explains. “While it can be a good field to enter, at the moment in Australia it can be hard to progress. It’s a very specific skill set which can make it difficult to change roles.”

• Jo Scott, the head of European graduate recruitment at Morgan Stanley, says the bank looks for operations people who have strong analytical and problem-solving skills. “Prioritising work to meet deadlines is key. Operations is also a very team-based environment, so you’ll need to be able to work well with other people,” she says.