CSFB Product Control Process Reengineering RFP

CSFB Product Control Process Reengineering RFP

Proposal

March 4th, 2005

25 BroadwayNew York, NY 10004212 618 4000

March 4, 2005CONFIDENTIAL

Ms. XYZ

New York, Dear Ms xyzy:

Thank you for the opportunity to propose on CSFB’s Product Control Process Reengineering RFP. The attached document outlines our understanding of the project requirements and our approach, as well as the project team resources and professional arrangements. We understand the importance of this initiative to CSFB through our work with ISIS and other functions, and believe that Deloitte is uniquely qualified to assist.

We look forward to discussing our response with you further and to working with you on this critical initiative. If you have any questions or would like to discuss this proposal further please do not hesitate to contact the undersigned. We would welcome an opportunity to arrange for a meeting with members of the proposed team upon your request.

The undersigned, being persons duly authorized to represent the Supplier, states that this Request for Proposal has been read and understood, and that the Supplier agrees to be bound by the terms and conditions contained within this RFP and proposal.

The individuals whose signatures follow represent and certify that they have the authority to represent and act on the behalf of Deloitte Consulting LLP, 25 Broadway, New York, NY 10004 “Company”. They recognize for themselves and for Company that the information contained therein the RFP, including Appendices, is CONFIDENTIAL and was released to Company to enable a response to the RFP. Company shall not disclose such RFP information – or the fact that Company has been asked to submit a proposal – to a third party for any reason. Without limiting the foregoing, Company is not authorized, without CSFB’s prior written consent, to publicize the fact that they are a potential Supplier to CSFB for PC Business Process Reengineering. The individuals recognize for themselves and for Company that at the request of CSFB, the RFP and any copies thereof, either hard copy or electronic copy, shall immediately be returned to CSFB. The individual also represents and certifies that the Proposal, including cost structures, was developed independently and with no collaboration of any other provider of firms and with no purpose of restricting competition. The RFP to which this Proposal relates has been read and its requested terms, except as indicated herein this Proposal, will be accepted should Deloitte Consulting LLP be selected as the provider of such Services to Credit Suisse First Boston LLC. Company certifies that such Proposal shall remain in effect for 90 days from Proposal due date.

Kindest regards,

Adam Broun Ken LandisPrincipal Principal

CSFB has initiated an assessment to identify opportunities to maximize the operational efficiency of the Product Control area. This initiative is critical to achieve cost and resource efficiencies, increase capacity and manage risk more effectively for the firm.

Based on preliminary assessments, it is CSFB’s opinion that a significant opportunity exists to rationalize Product Control processes, resulting not only in cost savings from reduced headcount, the simplification of processes, and the retirement of outdated or redundant applications, but also in “best practice” business processes, which will facilitate new business initiatives, improve internal client service, and create a more rigorous control environment.

CSFB plans to engage a partner to assist and collaborate on this reengineering assessment. The critical aspects in conducting the assessment are to determine the current business process flows, document key processes, identify opportunities to reengineer processes and recommend a migration plan to capture those opportunities. In addition during this phase, the team will identify minimum levels of acceptable efficiency and control with the aim of providing a potential “menu” of reengineering alternatives.

This document details Deloitte’s response to your request for proposal. Our proposed approach and assessment framework targets your specific needs and incorporates relevant insights from our experience in capital markets, accounting and regulatory advisory and large scale reengineering efforts:

Significant experience working with leading investment banks addressing complex business, operational, and technology challenges and opportunities

Recognized advisory and implementation experience as a strategic partner on a number of prominent reengineering efforts In-depth product knowledge to accelerate and drive a targeted and realistic assessment aligned with your strategic goals Access to relevant industry benchmarks on product and process costs Ability to apply best of breed tools and processes (i.e, lean, six sigma, etc) Experience in developing innovative solutions that can simultaneously deliver operational efficiency and provide for a

sustainable growth platform Combined expertise in accounting, control, risk and regulatory policies, practices and standards

- 4 -

Table Of Contents

I. Executive Summary

II. Introduction & Marketplace Perspectives

III. Our Approach

IV. “Test Driving” the Approach

V. Team Structure, Profiles & Fees

VI. Qualifications & References

VII. Available Tools

VIII. Appendices

IX. Required attachments:

Supplier_Assessment_Questionnaire.doc

CSFB_Master_Agreement.doc

I. Executive Summary

- 6 -

Executive Summary

Based on our industry experience and knowledge of CSFB we believe there is an opportunity to reduce the Product Control run rate by approximately 5%-12% per annum ($9-$21MM), within the scope defined, by reengineering the primary functions within the department. Significant additional savings might be possible with end-to-end changes in the operating and technology model across the trade cycle

To identify and achieve these benefits we will examine and utilize the following levers:- Policy/control adjustments- Redesigning processes- People effectiveness- Organization re-design- Selected system/technology enhancements

Reengineering can deliver the additional benefits of enhanced control, risk management and the ability to support increased trade volumes and new products – a critical consideration for support of CSFB’s business strategy

To extend this analysis across all products/functions and develop the business case, implementation roadmap and migration plan we propose a twelve week diagnostic with product aligned workstreams

The diagnostic would be conducted by a dedicated Deloitte team with extensive Product Control and reengineering experience. This team would be split between London and New York and supported by a number of product and subject matter specialists with deep product accounting experience

The middle office cost driver and process mapping work conducted within the ISIS transparency initiative would be the starting point of our analysis, along with other pre-existing documentation and analysis (e.g., Sarbanes-Oxley process documentation)

We measure our success on this engagement by CSFB’s success: in identifying measurable, sustainable 2006 cost savings without compromising risk or client service

II. Introduction & Marketplace Perspectives

- 8 -

The Product Control Function Faces A Number Of Emerging Environmental Challenges…

New business models Integrated approaches to

client coverage Greater complexity of

products

Client

“PC costs are often

driven by the # of

product types

traded, complexity

of products, # of

legal entities and

the # of

regulations” 2

War for talent Rising salaries

People

“Higher salary expectations for middle office staff - can expect to earn up to 30% more than a year ago” 1

Increased regulatory and legislative scrutiny

Increased demands on risk management

Control

“In the future, regulatory trends indicate that Product Control is likely to be split decisively

between the Front Office and imposed controls, typically those undertaken

within risk mgmt” 2

Lower margins Street expectations

Cost

“Product Control performs better where the business realizes that it is a significant, unavoidable fixed cost for operating a business line rather than something that can be skimped on early on” 2

Focus on Smartsourcing Move from silo to

commodity processing

Execution

“Outsourcing and

offshoring are

also

expected to take

their toll (across

the Middle

Office)” 1

1 eFinancial News , S. Butcher, 27 Jan 052 Balance Sheet, M Mainelli Vol 12 2004

- 9 -

…As Well As Gaps Versus Peers

ILLUSTRATIVE

Co

ntr

ol

Co

stE

xecu

tio

nP

eop

le

Dimensions Industry Observations Industry Direction

Client Aligned Functional AlignedMatched Integration Product Control is client versus functionally aligned Works closely with Finance as well as Trading

Organization StructureC

lien

t

Possible End State?

Deployment

High % Deployed

No DeploymentMedium % Deployed Moved to low cost locations where risk levels permit Highest quality personnel in highest value added activities ?

Performance Measures

Defined/Tracked

Not Defined/TrackedPartially Defined/Tracked Continuous improvement of the Product Control function Measures performance with KPIs and stringent quality

measures?

Globally StandardizedSystem

Highly Customized &

Fragmented

Centralized

Technology Moving towards global Product Control systems that produce

P&Ls in a more standardized manner Single source/Operating Data Store for all data

?

Relative Cost

Low HighMedium Minimized cost level Allows business expansion without increasing risk Relative peer cost performance graded against MIB analysis

?

Risk Standards

Dynamic/Forward Looking Standard ProceduresNeutral Comprehensive risk management standards Proprietary, customized tools and techniques Continually evolving control and measurement processes

?

Functions

Full Suite Limited ServicesMiddle Office Financial Control is a key function (risk management, G/L maintenance & reporting)

Product Control includes data integrity, traders’ P&L and some Middle Office (counterparty, confirmations)

?

- 10 -

Internal Needs To Deliver The Firm’s Overall Strategy Are Changing

2002 – 2004 Focus Areas

“Staying Out of Trouble & Generating Revenue”

2005 Strategy

“Win Where We Choose To Compete By Delivering A More Focused Franchise”

Demands On Product Control

Revenue GenerationProfitability /

Focus on High Margin Products Provide lowest cost, scalable support Increase capacity/handle complexity

Cli

ent

IndustryMandates

Client Alignment/Segmentation

Improve internal client alignment Ensure accuracy of underlying data

Co

ntr

ol Staying Out of Trouble

Structural Changes

Disciplined Risk Taking

ContinuousImprovement

Handle additional complexity/volume without diminishing control

Focus on continuous process improvement to extract efficiency

Cost Reduction

ROI

Co

st Prioritize IT/investment spend for best return

Getting It DoneImproved Execution Through Alignment, Accountability &

Performance Metrics

Deliver LocallyExecute Globally – Group

Synergies Through IntegrationExe

cuti

on Provide transparency of costs

Implement measurable metrics

Identify and support Group synergies

People ManagementEnhanced Ownership Culture –

Incentives Alignment

Peo

ple Release staff to focus on change

management initiatives

- 11 -

Product Control Needs To Change To Deliver The Firm’s Evolving Strategy While Simultaneously Supporting Growth And Efficiency Initiatives

Product Control must absorb increased volume and additional complexity…

…while reducing cost without compromising risk or degrading control

ABS Build out Equity Prop

capabilities within cross divisional prop group

Build out Prime Services Cash Equities – Plan ’06 CDO CMBS Commodities Build Out Credit Derivatives Desk-based Positioning Derivatives – Plan ’06 Emerging Markets Equity Syndication Desk FID Strategic Book GFX Growth in Asia, Japan and

Australia High Yield Insurance Structuring Interest Rate Products Rebuild Derivatives

Residential Mortgages Vertical Integration Strategy

Tax Structuring

ABS Build out Equity Prop

capabilities within cross divisional prop group

Build out Prime Services Cash Equities – Plan ’06 CDO CMBS Commodities Build Out Credit Derivatives Desk-based Positioning Derivatives – Plan ’06 Emerging Markets Equity Syndication Desk FID Strategic Book GFX Growth in Asia, Japan and

Australia High Yield Insurance Structuring Interest Rate Products Rebuild Derivatives

Residential Mortgages Vertical Integration Strategy

Tax Structuring

Capture Derivatives Productivity

Establish Integration Derivatives Structuring

Finance Control Efficiency Improvement

GAD Transparency ISIS MO & Coverage Model ISIS Tactical Efficiency

Capture ISIS Transparency Mortgage Change Program New Capital Markets

Structure Product Control Improvement Unified FID/Equity

Proprietary Group Vertical Integration of FIG

Capture Derivatives Productivity

Establish Integration Derivatives Structuring

Finance Control Efficiency Improvement

GAD Transparency ISIS MO & Coverage Model ISIS Tactical Efficiency

Capture ISIS Transparency Mortgage Change Program New Capital Markets

Structure Product Control Improvement Unified FID/Equity

Proprietary Group Vertical Integration of FIG

Supporting Growth

Alignment of Equity Research/Sector Focus

Cash Equities Execution Platform

Client Segmentation – Europe

Client Segmentation - US European Secondary

Credit Trading Extend Trading

Analyst Function FID Syndication Desk Global Top Account

Strategy Increase integration of FID

Business Lines Migrate HOLT small-cap

coverage to sectors Options – Automated

Market Making

Alignment of Equity Research/Sector Focus

Cash Equities Execution Platform

Client Segmentation – Europe

Client Segmentation - US European Secondary

Credit Trading Extend Trading

Analyst Function FID Syndication Desk Global Top Account

Strategy Increase integration of FID

Business Lines Migrate HOLT small-cap

coverage to sectors Options – Automated

Market Making

Cross-CSG Synergies Data Centers Finance Deployment GTI Transparency IPO7 & AD07 Efficiency

Programs ISIS Singapore Migration IT Phase 2 Deployment IT Tactical Cost Reduction Non-IT Purchasing Spend Phase 1 Deployment

(ISIS & IT)

Cross-CSG Synergies Data Centers Finance Deployment GTI Transparency IPO7 & AD07 Efficiency

Programs ISIS Singapore Migration IT Phase 2 Deployment IT Tactical Cost Reduction Non-IT Purchasing Spend Phase 1 Deployment

(ISIS & IT)

Reducing Cost/Increasing Efficiency

Higher PC Impact Lower PC Impact Higher PC Impact Lower PC Impact

- 12 -

To Address The External & Internal Challenges Facing the Product Control Function, CSFB Has Launched A Number Of Initiatives Over The Past Three Years

End StateTimeframe

2002 2003 2004 2005 2006

Current & Past PC Initiatives (Highlights)

To be determinedProduct ControlReengineering

Initiative #1

Reengineer processing of repo instruments globally with the goal of providing STPRepo Reeng.

Implement Opera data store for all CSFBi trades and positionsOpera for CSFBi

Migrate UK Equity business to a new entity providing greater capital management flexibility

Entity 320 Elimination

OTC Trade Capture (DOMAN/DTD)

Migrate OTC trade population to DTD/DOMAN infrastructure to increase transaction volumes

Rationalize P&L/FOBO system through rollout of FIREPL and FIRE to selected areas of FID

FID Europe FOBO & P&L Rationalization

Ensure FAS 133 compliance by developing HAGAR to replace existing tactical applications

FAS133

Replace current FO P&L and risk management spreadsheets with a scalable risk management system

Panorama IRP – OTC Risk Mgmt System

Roll out of BB technology to mitigate control and Op risk for Flow Credit spreadsheets

BB Template Flow Credit Derivatives

Provide a consistent and validated approach for generating P&L/Risk measurement within Equities

Hydra – OTC Equities Risk Mgmt System

……

The reengineering initiative must understand

the implications of the current book of work

April 1st , 2005 Solution design and sequencing will build on and complement these initiatives

New & Forthcoming Initiatives

- 13 -

Our Experience Suggests 5%-12% Savings Are Achievable Through Policy, Process And Organizational Improvements That Are Not Dependent On Fundamental Technology Change

1 Savings are estimated as a percentage of spend (CSFB Global 2005 Budget - $175MM). Savings opportunities are interconnected and overlap, therefore totals are not additive

30%0%

Policy/Control Adjustments

Redesigning Processes

People Effectiveness

Organizational Redesign

System/Technology Enhancements

Indicative Total

0% 30%

0% 30%

0% 30%

0% 30%

0% 40%

Lower Bound Upper Bound

Remove non-Product Control tasks from the Product Control domain

Require FO to stop writing manual tickets

Eliminate redundant/duplicate MO functions

Automate workflow

Straight-Through-Processing (STP)

De-layer product support structure

Deployment

Re-align core MO functions to business architecture

Centralize product support services

Interface development to downstream applications

Use of Single-Source of data

Use of operational data store for cross-product data

Potential Initiatives

Improve FTE allocation across product groups

Increase spans of control

‘Tactical’ process and workflow improvements without significant technological change

Technology platform rebuild intermixed with wholesale reengineering

Range of Cost Savings1Levers

5%3%

18%14%

15%9%

5%2%

16%12%

9%5%

7%3%

19%13%

3%

30%20%

12%5%

25% 40%

1%

Lower Bound – Savings through process, policy and organizational changes without fundamental system enhancements

Upper Bound – Transformational changes that have wide-reaching implications for technology and groups external to Product Control

$21MM$9MM

$70MM$44MM

- 14 -

This Effort Will Improve The Way Business Is Conducted Within Product Control And Result In Benefits For Your Key Internal Clients And Partners

Technology

Internal Audit

Treasury

Tax

OperationalRisk Mgmt

Product Control

SalesProduct Control,

Operations & Technology

Trading FinanceTradingLegal &

Compliance

Better balance sheet management

Operational Data Store Streamlined MIS Better applications/system

reliability Reduced cost/heightened

efficiency Decreased maintenance of

multiple applications

Improved client service/delivery

Increased transparency in sales commissions and client revenues

More precise and timely risk assessment

Accurate product/ business P & L

Enhanced forecasting ability

Clients/Users of PC Data & Reports

Legend

InvestmentBanking

Enhanced financial control Compliance with

regulatory requirements Improved accuracy of

financial statements

Improved trade information More timely settlement and

clearing Reduced errors and trade

breaks

Strengthened compliance

Improved data quality

Credit Risk Management, HR,

Corporate Services

Accurate risk exposure

Improved risk position awareness/ mgmt of enterprise risk

We have worked with many institutions to deliver programs which yield ancillary benefits across the organization, as well as identify and manage the risks that come with executing a large-scale transformation of this nature

Suppliers/Inputs To PC

Operations

Finance

III. Our Approach

- 16 -

Our approach is designed to generate an implementable, fact-based set of tested reengineering opportunities, with the implications and trade-offs for Product Control and other functions clearly understood and discussed

ExamineBuild the Baseline

‘Unwind’ and AssessExplore and Validate Opportunities

Recommend

Build a Roadmap and Prepare for Implementation

The first weeks involve collaborative data gathering to build on our existing CSFB

fact base1 for future decisions and to enroll a broad set of CSFB team

members whose assistance and buy-in for implementation will be critical

During this period, the broadest set of possible reengineering opportunities are examined across all products to test and

refine them, and to clearly understand the range of options and tradeoffs

available to Product Control

In this phase, we assemble the selected opportunities, identify the resources for implementation and create the detailed plans needed to enable rapid transition to execution and delivery of savings.

This period also provides time for additional communication and buy-in

both internally and externally

3-4 weeks 5 weeks 3 weeks

Stage 1 Identify

Stage 2 Implement

Go/No Go Decision

Stage 1 Disaggregates Your Current Processes, Identifies Inefficiencies And Designs A Customized Solution To Fix The Gaps

1See appendix

- 17 -

Building An Accurate Baseline Is Critical To Locking Down Project Scope And Ensuring Credibility Of Analysis

Stage 1 Stage 2

Go/No Go Decision

Strong CSFB team involvement from all in-scope areas will help ensure ownership of process and savings, as well as put any concerns on the table early

Deloitte will leverage existing internal organizational and CSFB Product Control financial knowledge to accelerate data collection. Senior sign-off on the baseline will help focus efforts on solutions later

Week 1 Week 2 Week 3 Week 4

Examine

Confirm What’s ‘In and Out’

Build The Baseline For Comparison

Factor In Other Key Information (internal, benchmarks, etc.)

Mobilize project team

Identify and confirm key stakeholders

Hold working sessions (PC functional reps) to confirm initial scope of the project, e.g. functions/staff to be reviewed

Identify “big rules” to guide/filter future opportunities (e.g., 1 person per process for commoditized products, ‘4 eyes’ principle, dedicated structured products group)

Gather other organizational information as needed (e.g., ongoing initiatives, project updates)

Gather external benchmark data on functions, processes and roles to enable gap analysis and quantification of opportunities

FID/Equities – Cash (NY)

FID/Equities – Cash (LN)

FID/Equities – Derivatives (LN)

Structured Products (NY)

Conduct interviews with managers at various levels of the organization to better understand the organization, its functions and processes and begin pin-pointing issues

Collaborative effort with a joint CSFB/Deloitte team: will obtain the ‘coal-face’ view of the

processes, escalate latent opportunities and enable the team to aggregate and synthesize

common themes for broader applicability

Conduct One-on-One Process/Workflow Reviews

Update financial data by function (e.g., cost center, product, location)

Update headcount data (e.g., staff details – grades/location/salaries by function)

Facilitate sessions with key personnel

Review organizational charts

List of open requisitions by function

Collect quality metrics by product (e.g., cycle times, error rates, adjudication time)

Create system topography charts

Map baseline (e.g., by cost center, product, location)

Verify and validate baseline with key stakeholders

Preparation

Deliverable

Working Meeting/Decision Point

Senior Management Progress Report

- 18 -

A Methodical, Iterative Assessment Of The Current State Will Generate The Set of Possible Opportunities

Week 4 Week 5 Week 6 Week 7 Week 8

Full spectrum of opportunities ranging from ‘Quick Hits,’ near-term requiring minimal investment/change and to longer term requiring more significant change or investment

“Unwind” and Assess

Stage 1 Stage 2

Go/No Go Decision

Disaggregate Processes And Workflows Into Core Components

Trace and analyze workflows through each process and key controls

Identify and refine the underlying drivers of work and complexity and assess the ability to influence workflow (e.g., policy changes to drive down iterative review processes; IT ‘quick hits’ to affect complexity)

Validate mapping and drivers with process owners

Compare performance and contrast processes to industry practices

Identify ‘Pain Points’ - sources of inefficiencies, redundancies, extraneous work across functional lines, and control weaknesses (e.g., cross functionally by product, FTEs, and activities)

Test Alternatives And Generate Points Of View

Generate top-down and bottom-up savings hypotheses (top-down for areas of greatest relevance, bottom-up for clear breaks and consistencies, control faults, and other transgressions)

Test opportunities with key process owners and management; refine set

Build a more in depth aggregation and quantification of potential benefits, economics, and opportunity costs/tradeoffs (e.g., risk, control, interdependencies etc.)

Develop and document an interim list of program improvement opportunities including ‘Quick Hits’. Examples could include:

Identification of common data sources to integrate risk incident reporting across silos and enhance hedge accounting processes

Develop a standard method for the implementation of GL/Financial Balance Sheet controls from both a financial and US GAAP perspective

Validate Recommendations

Transform aggregated set of activities into “strawman” future state

Review “strawman” structure with Functional representatives, validate assumptions and obtain feedback

Create model of “final” future state and high-level recommendations

Communicate findings to Steering Committee and external stakeholders (e.g., EXB, Finance)

Preliminary AssessmentInitial reengineering set, first-cut priorities to share with stakeholders

High-Level ‘Future State’ Functional Model

Iterative process promotes buy-in among the functional managers related to the initiatives and mitigates resistance to

proposed changes

“As-Is” Process MapsWith regional variances, handoffs, high-level systems mappings etc.

Deliverable



- 19 -

Finally, A Detailed Roadmap Will Provide Management With The Guidance Necessary To Execute Effectively Against Plans

Week 8 Week 9 Week 10 Week 11 Week 12

Outline Implementation “Waves” And Sequence

Develop Implementation/Migration Plan

Work with CSFB to prioritize ‘waves’ of implementation

Assess and document implications for internal and external user groups (e.g., organizational, technology, procedural, control, reporting, regulatory, trade life cycle)

Develop high-level Migration Plan to execute on the recommended and prioritized process improvement opportunities

Develop detailed Implementation Master Plan with dependencies

Identify initiative ownership, define roles and responsibilities of resources

Develop metrics and benefits tracking approach; identify supporting tools

Work with management team to ensure buy-in

Develop organizational readiness plans

Syndicate and adjust plans with external stakeholders

Detailed planning, continued organizational commitment, and regular communication and follow-up are crucial to realize the full benefits of the implementation planning process

Validate key business case inputs and assumptions with functional representatives/process owners

Build business case (financial and non-financial) for priority initiatives

Create tracking and reporting infrastructure for progress and achievements

Develop Supporting Business CasesBusiness Cases

High-level Migration Plan

Implementation Waves

Implementation Plan

Recommend

Performance Metrics

Strategic planning stage to ensure all aspects of the process are considered from Front Office to IT

Connect business case benefits to other parts of the organization

Stage 1 Stage 2

Go/No Go Decision

Deliverable



- 20 -

If A Go Decision Is Reached, Activities Transition To Execution Of “Quick Wins” And Detailed Design For High Priority Projects

NOTE: ILLUSTRATIVE NOT WITHIN SCOPE OF THIS RESPONSE

Stage 1 Stage 2

Go/No Go Decision

Implement

First 3 months Wave 2 Wave 3

Manage Program, Facilitate Change, Track Outcomes

Continue “waved” implementation approach:

For broad process improvements (e.g., structured trade review consolidation), pilot in select platforms/geographies

Transfer knowledge across BUs, platforms, and geographies

Periodically re-evaluate plan and re-sequence to maximize value

Next 3 months

Detailed Designs For ‘Quick Wins’

Begin Roll-out of ‘Quick Wins’

Begin Conceptual Designs For Priority Projects

Detailed Designs For Priority Projects

Begin Pilot/Rollout Wave 1

Teams focused on a small number of high priority initiatives across BUs/platforms

Detailed Design

Conceptual Design

Detailed Design

Develop detailed plans

Develop functional design document

Design End-State business architecture

Syndicate with stakeholders

Reconfirm business requirements

Develop functional specifications and design documents

Develop rollout plans

Design Wave 2 Pilot/Rollout Wave 2

Design Wave 3

Execute against plans

Establish program management office

Implement progress tracking system

Develop and implement reporting tools and metrics

Develop functional specifications and designs documents




Pilot/Rollout Wave 3

Develop functional specifications and designs documents



Deliverable



IV. “Test Driving” The Approach

- 22 -

Build the financial business

case

Figure out top down

opportunities

Our Approach Is Best Demonstrated By Working Through An Example

Today: Apr 4, 2005Monday

Kick off the project

Today: April 25, 2005 Monday

Work with team to

finalize the baseline

Today: May 9, 2005 Monday

Today: May 27, 2005 Friday

Meet with team to

prioritize and sequence

opportunities

Today: June 17, 2005 Friday

Project Day 1 Project Day 67Project Day 56Project Day 35Project Day 21


Work with team to build

bottom up initiatives

Project Day 42

ExamineBuild the Baseline

‘Unwind’ and AssessExplore and Validate Opportunities

RecommendBuild a Roadmap and Prepare for

Implementation

The first weeks involve collaborative data gathering to build on our existing CSFB

fact base1 for future decisions and to enroll a broad set of CSFB team

members whose assistance and buy-in for implementation will be critical

During this period, the broadest set of possible reengineering opportunities are examined across all products to test and

refine them, and to clearly understand the range of options and tradeoffs

available to Product Control

In this phase, we assemble the selected opportunities, identify the resources for implementation and create the detailed plans needed to enable rapid transition to execution and delivery of savings.

This period also provides time for additional communication and buy-in

both internally and externally

3-4 weeks 5 weeks 3 weeks

1See appendix

- 23 -

Day 21: Derivatives Baseline Completed With Areas Warranting Further Scrutiny Identified

Today: April 25, 2005 Monday

Day 21: Finalize the

baseline

US Credit Derivatives & IRP: D.49HX2A

Location: London

Owner: Ahmed Kubba

Headcount: 38

UK Credit Derivatives: D.20H

Location: London

Owner: Ahmed Kubba

Headcount: 38

Day 21: April 25th

Day 21: April 25th

The data collection effort will be significantly

streamlined by leveraging existing data

UK IRP: D.59H/D.80H

Location: London

Owner: Ahmed Kubba

Headcount: 38

Data IntegrityEnrichments

& Adjustments

Size

Vol. Sensitivity (%)

Risk Profile

Control Procedures

Business Constraints

Tech enabled

External Interaction

ValidationManagement &

Change

Tra

inin

g &

Dev

elop

men

t

Pro

ject

s

MIS

Rep

ortin

g

Day 21: April 25th

FO

BO

s

Oth

er R

ecs

Str

uctu

red

Tra

de R

evie

ws

3.3

71

X

X

X

X

X

2.9

82

X

X

X

X

X

8.6

98

X

X

X

X

X

Pro

visi

on &

Val

uatio

ns

GA

AP

Adj

ustm

ents

5.9

72

X

X

X

X

X

1.8

74

X

X

X

X

X

P&

L V

alid

atio

n

Pric

e T

estin

g

Acc

ount

Ow

ners

ip

Mod

el V

alid

atio

n

2.2

78

X

X

X

X

X

1.6

90

X

X

X

X

X

0.6

61

X

X

X

X

X

0.2

100

X

X

X

X

XM

anag

emen

t

2.3

80

X

X

X

X

X

0.5

80

X

X

X

X

X

1.4

76

X

X

X

X

X

2.3

80

X

X

X

X

X

Financial Analysis & Reporting

P&

L A

naly

sis

3.0

80

X

X

X

X

X

Create Trial Balance

Cre

ate

Tria

l Bal

ance

0.9

78

X

X

X

X

X

Dat

a C

olle

ctio

n

0.7

63

X

X

X

X

X

Day 1: April 4thDerivatives PC Data Elements

BottlenecksOrg

ChartsFinancial

Headcount

Controls MetricsProcess

MapsTech

D.59H CTRS FID IRP ExoticsAhmed Kubba

D.80H CTRS FID IRP VanillaAhmed Kubba

D.20H CTRS FID EuropeAmin Bilal

D.49HX2A NY FID Prod Ctrl IRPSui-Pak Ho

ExternalInteraction

A value stream map will identify bottlenecks and control breaks as well as identifying opportunities for improvement

Front Office/Back Office Reconciliation

Cash Reconciliation

I/C Reconcilliation

Handoffs – 1Controls – 3

Complexity - xProcessing Time – 10 mins

Set Up Time – x minsQueue Time


Complexity - xProcessing Time – 7 mins

Set Up Time – x minsQueue Time – x hours


Complexity - xProcessing Time –5 mins





Criteria: Deal size% exception: 20%




Front Office/Back Office Reconciliation

Cash Reconciliation

I/C Reconciliation


Processing Time – 10 mins

Queue Time – x hours


Processing Time – 7 mins


Processing Time –5 mins

Price TestingPrice Testing



Structured Trade Review (Exception)Criteria: Deal size% exception: 20%



Opportunity identification from both a process/control and cost perspective will have been driven out across the products

Detailed product specific

baselines will be created to

determine pain points and major

areas of focus

1

2

3

Price TestingStructured Trade Reviews (Exception)

ILLUSTRATIVE

- 24 -

The cost of structured trade reviews should be able to be reduced by:

1)Reducing the cycle time

2)Reducing the complexity associated with the STR

Derivatives

Data Integrit yEnrichments

& Adjustments

Size


Risk Profile

Control Procedures


Tech enabled


Validation Management & Change

Tra

inin

g &

De

ve

lop

me

nt

Pro

jec

ts

MIS

Re

po

rtin

g

FO

BO

s

Oth

er

Re

cs

Str

uc

ture

d T

rad

e R

ev

iew

s

21

74

X

X

X

X

X

19

80

X

X

X

X

X

25

92

X

X

X

X

X

Pro

vis

ion

& V

alu

ati

on

s

GA

AP

Ad

jus

tme

nts

10

66

X

X

X

X

X

5

79

X

X

X

X

X

P&

L V

alid

ati

on

Pri

ce

Te

sti

ng

Ac

co

un

t O

wn

ers

ip

Mo

de

l V

alid

ati

on

13

56

X

X

X

X

X

13

56

X

X

X

X

X

5

75

X

X

X

X

X

1

100

X

X

X

X

X

Ma

na

ge

me

nt

10

49

X

X

X

X

X

1

65

X

X

X

X

X

16

69

X

X

X

X

X

9

42

X

X

X

X

X


P&

L A

na

lys

is

16

60

X

X

X

X

X


Cre

ate

Tri

al

Ba

lan

ce

1

78

X

X

X

X

X

Da

ta C

olle

cti

on

1

63

X

X

X

X

X

Derivatives

Data Integrit yEnrichments

& Adjustments

Size


Risk Profile

Control Procedures


Tech enabled


Validation Management & Change

Tra

inin

g &

De

ve

lop

me

nt

Pro

jec

ts

MIS

Re

po

rtin

g

FO

BO

s

Oth

er

Re

cs

Str

uc

ture

d T

rad

e R

ev

iew

s

21

74

X

X

X

X

X

21

74

X

X

X

X

X

19

80

X

X

X

X

X

19

80

X

X

X

X

X

25

92

X

X

X

X

X

25

92

X

X

X

X

X

Pro

vis

ion

& V

alu

ati

on

s

GA

AP

Ad

jus

tme

nts

10

66

X

X

X

X

X

5

79

X

X

X

X

X

5

79

X

X

X

X

X

P&

L V

alid

ati

on

Pri

ce

Te

sti

ng

Ac

co

un

t O

wn

ers

ip

Mo

de

l V

alid

ati

on

P&

L V

alid

ati

on

Pri

ce

Te

sti

ng

Ac

co

un

t O

wn

ers

ip

Mo

de

l V

alid

ati

on

13

56

X

X

X

X

X

13

56

X

X

X

X

X

13

56

X

X

X

X

X

5

75

X

X

X

X

X

1

100

X

X

X

X

X

1

100

X

X

X

X

X

Ma

na

ge

me

nt

10

49

X

X

X

X

X

1

65

X

X

X

X

X

1

65

X

X

X

X

X

16

69

X

X

X

X

X

16

69

X

X

X

X

X

9

42

X

X

X

X

X

9

42

X

X

X

X

X


P&

L A

na

lys

is

16

60

X

X

X

X

X

16

60

X

X

X

X

X


Cre

ate

Tri

al

Ba

lan

ce

1

78

X

X

X

X

X

1

78

X

X

X

X

X

Da

ta C

olle

cti

on

1

63

X

X

X

X

X

1

63

X

X

X

X

X

Decrease Workflow Cycle Time Decrease Complexity of Review Process

Process

Organizational Structure

People

Risk/Policies/ Procedures

Technology

Control Policies

Service Policies

Quick Wins/BoW Modification

Large Scale

Redesigning/ Reengineering

Elimination of Low Value Added Activities

Relocation

Functional Consolidation

Utilization

Span of Control

Resource Mix

Limited impact

Standardize FO adjudication procedures

Streamline back through front office interface applications

Operational Data Store will enable high integrity data extraction

Reduced number of breaks will reduce complexity and time spent on reconciliations

Restructure the STR work flow process

Limited impact

Consolidate like STR activities

Reallocation of specialists’ time to proportional focus areas

Limited impact

Reduce errors by better matching resource skill levels to value added activities


Day 35: Top Down

Opportunities

Structured trade reviews have the highest sub process headcount allocation and one of the highest variable % across derivatives warranting further investigation

Hypothesis

Increase risk filters and customize risk thresholds for individual derivative products

Modify FO operating procedures to reduce the number of breaks

Align technology processing to workflow management

Implement single source of data to reduce the number of breaks

Redesign data capture to reduce the number of breaks

Limit number of ad hoc/redundant reports

Limited impact

Limited impact

Limited impact

Limited impact

Limited impact

Potential Impact Hypothesis

Potential Impact

4

5

Key hypothesis warranting further investigation

Day 35: Hypotheses Developed To Reduce The Cost Of Structured Trade Reviews Within Derivatives

Using a top-down approach, the baseline is unwound around the primary cost reduction levers to identify areas with the biggest “bang-for-the-buck”

ILLUSTRATIVE

- 25 -

Key STR hypotheses developed from a derivatives perspective are applied against Interest Rate products to develop specific opportunities

Day 42: Opportunities For Interest Rate Derivatives Have Been Outlined


Day 42: Build Bottom

Up Initiatives

STRs within Interest Rate Derivatives8.8 FTEs96% Variable>100 per month

Decrease Complexity of Review Process

Reconciliation/ Booking Review(50%)

Valuation Model Review & Accounting

(50%)

Dis

aggr

egat

e S

TR

Pro

cess

Decrease Workflow Cycle Time

Hypothesis 1Risk filter

Hypothesis 2Modify FO procedures

Hypothesis 3 Tech modifications

Hypothesis 1Redesign STR

workflow

Hypothesis 2Consolidate STR

activities

Hypothesis 3 Align resource

mix

Opportunity N/A

Standardize spread-sheets, adjudication process. Book trades on server/no manual tickets

Expedite Panorama rollout enforcing FO migration from spreadsheets

Implement STR tracking process

Consolidate IRP STR rec/booking review with other products subject to STRs

Utilize low cost labor to conduct recs/ booking reviews

Impact N/A5% - 15% reduction of STR cycle time due to fewer breaks

10% - 30% reduction of STR cycle time due to fewer breaks

Reduce STR processing time; increased capacity

Centralized function reduces overlapping FTEs

Cost per FTE reduction

Additional Considerations

N/ACost of change management

Scarce technology resources

Scarce technology resources

Additional handoff created

Must maintain quality control

Control & Risk Considerations

N/AReduced operational risk

Reduced control cycles

Revisit key control checkpoints

Heavy reliance on key personnel

Increased operational risk

Opportunity

Adjusting risk filters will drive down cycle times for vanilla IRPs

N/A N/AImplement STR tracking processing

Limited consolidation opportunities due to required product specific knowledge

Utilize higher cost labor to conduct value add activities

Impact2% - 10% reduction of STR cycle time

N/A N/AFacilitate enhanced interactions with the VRG

N/ATargeted use of high cost labor

Enhanced morale

Additional Considerations

Risk expertise required to ensure control adequacy

N/A N/A Technology options N/A N/A

Control & Risk Considerations

Increase risk filter checks

N/A N/A Increase controls N/AIncreased operational risk

Applying the top-down hypothesis from a bottom up perspective identifies the practical implications of a change

Bottom-up initiatives need to be aggregated across products, geographies, and entities. Validating and assessing the impact of the aggregated opportunities will facilitate the sequence of implementation

6

7

ILLUSTRATIVE

- 26 -

Successful Execution In Stage Two Of The Reengineering Initiative Will Be Predicated On The Foundation Built In Stage One

Strategy The overall business strategy must drive the areas of focus for this initiative so that

reengineering enables the development of a ‘clean’ platform to support the aggressive business growth that CSFB plans

Financial

Short-term and long-term savings targets must be clearly defined Clear performance metrics to track progress are required Stick to the overall plan; adjustments (e.g., milestone slippage) will impact the

business case

Operational Execution

Waves must be planned in short, manageable intervals Resources must be committed flexibly so they can ‘shrink’ or ‘grow’ depending on the

requirements of the task Global variations must be understood and accommodated Technology implications must be addressed and managed (e.g., prioritization of the IT

Book of Work)

Stakeholders

Customer impacts must be understood Success is predicated on key managers buying into and actively championing

outcomes More comprehensive reengineering requires a multi-disciplinary approach in which

FO, Product Control, Operations, IT and Financial Control act as an integrated, cohesive team

Risk Management

Timing and composition of waves should be determined by the need to balance speed, cost savings and risk

Demands of regulatory, tax and legal requirements must be factored in All moving parts of the plan must be synchronized before finalizing implementation

plans

V. Team Structure, Profiles and Fees

- 28 -

Proposed Team Structure

FID/Equity Cash & Derivatives/Structured Products (D)

NY LondonNY Team (3-4 CSFB)

1 Manager (D)1 Sr. Consultant (D)

1 Analyst (D)

London Team (3-4 CSFB)1 Manager (D)

1 Sr. Consultant (D)1 Consultant (D)

Product Specialists

Project Oversight – ‘Setting Direction’

Execution Team – ‘Getting It Done’

Functional Specialists

Audit, Tax, Regulatory, Risk, Quantitative, Reengineering & Valuation (D)

Make key decisions, sign-off on major deliverables and act on recommendations

Identify and assign appropriate resources to the assessment

Deloitte’s cross-functional support to be leveraged as needed – from reengineering ‘heavy lifting’ Adam) to deep product control expertise (Lisa) to audit/risk advisory (Sal) to day-to-day CSFB navigation acceleration (Liz)

Meet objectives within timing and scope outlined by the

Project Leadership

Manage day-to-day activities – project communication, analysis

and deliverable development

Develop recommendations and drive issue resolution

Resources with deep knowledge of a particular product area

Work hand-in-hand with core team during interviews, workshops and to

formulate and test opportunities Provide additional deep

expertise on specific issues and questions as needed

Own the overall financial and process models

Drive consistency of approach across products and regions

Aggregate and prioritize opportunities

Governance Committee

Global Project Manager(s)

D – Deloitte

TBD – Primarily PC representatives

- 29 -

Fees, Expenses, Deloitte’s Team And Diversity

This project will be led by Deloitte Consulting LLP, with assistance from Deloitte & Touche and affiliated entities as needed to bring the right resources, expertise and experience to this effort

We estimate our fees for this project to be xxMM. A breakdown of our levels and daily rates is on the following page We are committed to continuing our relationship with CSFB. We believe our pricing reflects the market value of our

services, and would be pleased to discuss this pricing proposal with you

Fees

Deloitte’s Team

Oversight for Deloitte’s team will be by Adam Broun, Ken Landis, Liz Healy, Lisa Choi & Sal Davide leveraging relevant expertise as needed throughout the process

Shahzad Shah and Nick Blake will form the on-site, day-to-day leadership in New York. We have proposed a team split between New York and London, aligned with CSFB’s resources and products

The remainder of our team will be assembled before commencement of the work and will bring a blend of analytical, process mapping and reengineering skills, along with in-depth product knowledge for each of CSFB’s businesses and subject matter expertise on matters such as regulatory requirements, valuations and operational risk.

We have based our team structure on our understanding of the RFP and other provided information. We are happy to discuss alternate team structures and how to make them effective

Diversity We are pleased to present a team that reflects the diversity of our Firm The Supplier Questionnaire describes our commitment to diversity and inclusion in greater detail

Expenses We will make every effort to minimize expenses, and believe they will not exceed 15% of our fees unless extensive

international travel is required. Please note that the teams working in London and New York will be staffed by practitioners from those countries. Actual expenses will be charged as incurred

- 30 -

Engagement Fee Summary

As requested in the RFP, outlined are the rates used to calculate our pricing estimate. In recognition of our relationship with CSFB, these rates continue to reflect a significant discount from our standard rates. Our rates are based on a 10-hour day; our custom is considerably greater.

Our estimate includes leadership and oversight from our partners and principals. We generally dedicate time over and above that estimate at no additional cost in order to provide the quality of service that CSFB has come to expect from Deloitte.

Level Daily Rate ($)

Partner / Principal

Senior Manager

Manager

Senior Consultant

Analyst

Partner/Principal

Senior Manager

Manager

Senior Consultant

Consultant

New

Yor

k Lo

ndon

VI. Qualifications & References

- 32 -

We Have Significant Experience In Defining And Implementing Programs At CSFB

Records RetentionAssisted with the management, structuring, and execution of CSFB’s IT Record Retention Strategy

ISIS Business Reviews

Conducted a review of the IT and ISIS organizations that included mid-year performance to budget, ‘deep dive’ analysis of the project portfolio and detailed org and work driver analysis

ISIS Transparency

Developed comprehensive transparency reports detailing progress towards goals, costs, headcount, project and work driver information to the Front Office

Trade Services Developed business requirements and transaction walk-throughs for Trade Services

Middle Office Cost Driver Analysis

Performed an in-depth cost driver analysis of the Middle Office organization in the Americas and Europe

Business Continuity Planning Operating

Model

Developed a global operating model for BCP that defined roles and responsibilities and established governance

Plan ’06 Impact Assessment

Performed a comprehensive impact assessment of the Front Office Plan ’06 initiatives on the resources and costs of the IT, PC and Ops organizations

Product Control Strategic Plan

Assisted with the development of the Product Control Strategic Plan and book of work for 2004

Basel IIPerformed an in-depth assessment of the completeness of the implementation requirements and technology solution for Basel II reporting

Data Center Strategy & Implementation

Developed a global data center strategy focusing on BCP, DR and recent regulatory environments. Also assisted in setting up the PMO for the implementation

Mortgage Change Program

Established a program management office to monitor and track the execution of the Mortgage Change Program

IT StrategyDeveloped the structure, vision and the processes required to support the launch of CSFB’s IT organization

HR COOAssisted the COO of HR in establishing a program management office and in baselining strategic initiatives

Infrastructure StrategyDeveloped a global Infrastructure strategy for the newly appointed CTO

Sample Recent Engagements

IT Deployment

In support of the IT Deployment initiative, we conducted a resource inventory of 4,000 IT and infrastructure positions and developed detailed “wave” plans for deployments

European Support Strategy

Performed a comprehensive impact assessment of and defined initiatives to support Plan ’06 for European FA&O

Prime ServicesAnalyzed and documented daily overnight processing cycle and established service level agreements

Broker/Dealer LiteAssisted in completing regulatory application and initial SEC review. Developed technical policies and procedures

- 33 -

We Have Built A Number of Relationships Across Various Functions Based On Project Delivery At CSFB And Have Recently Worked With Multiple Managers Across Product Control During The Middle Office Work Driver Project

Blue = CSFB Project Sponsor

IT/ ISIS/ORM

ISIS

IT

ORM

Financial Control

HR

SPI/PSD

Corporate Services

CSG

FA&O - Europe

RMM

Equities

ISIS - Product Control

- 34 -

Recent Highlights Of Our Work In The Global Financial Services Sector

Other Back Office

Functions

Process Re-engineering

Banking Technology OptimizationCost Reduction

Migration Planning/

Implementation

Operational Transformation

Controlling Functions

National Commercial Bank #2

http://www.bearstearns.com/bear/bsportal/Info.do?left=Bear%20Stearns

- 35 -

Qualifications – Product Control

Deloitte was engaged to conduct a review of a global investment bank’s Product Control function, operational and valuation models, and work processes for the equity derivatives business.

Results: Assisted Product Control in scheduling, managing and completing their

annual model review Established baseline valuation model review procedures Set annual review standards

For a global investment bank, Deloitte was engaged to assist in documenting the firm's risk and pricing models to assure they met the firm's CSE readiness initiatives. Products included fixed income derivatives, MBS and equities.

Results: Completed all model documentation within 60 days and submitted to

senior management Established model standards still in use Ensured/documented that risk and pricing models were CSE ready

Global Investment BankMulti-Line Global Investment Bank - NY

For a global investment bank, Deloitte was engaged to conduct an evaluation of whether the firm should re-enter the physical and financial energy trading markets. The Project Sponsor was Global Head of Product Control and the firm’s considerations included the expansion of trading operations, risk control and product management.

Results: Created a strategy document for Product Control’s expansion Developed a business case and metrics that indicated the process was

viable Created a high level infrastructure and roadmap for conducting the new

trading activity

Global Investment Bank – NY & London

Senior Management engaged Deloitte to assist with a gap analysis of business metrics for Product Controllers. We collected source documentation across the firm and created an overall Product Control metrics inventory. The inventory was coded and placed in a database for integration into an OLAP tool that was implemented by another area in the bank. Our goal was to obtain consolidated enterprise wide reporting of key risk variables to support senior management reporting needs.

Results: Reviewed key metrics and created standardized views by metric

definition, reporting type, business, and region Benchmarked business units against business group metrics i.e. Fixed

Income, Equity, OTC Calculated metrics gaps by business unit for eventual standardization of

reporting

Global Investment Bank

Note: Due to confidentiality agreements signed with client we are not able to provide some client names on qualifications

- 36 -

Qualifications – Process Improvement & Cost Reduction

Deloitte undertook a significant cost reduction exercise for overall operations, seeking to reduce the cost base by around £175m and reduce the workforce by up to 25%. Deloitte worked closely with the client in a highly collaborative manner to rapidly identify and deliver tactical/quick win results.

Results: Savings of £177m delivered within 12 months:

IT Services £80m Procurement: £21m Support Services: £49m Customer Services: £27m

All savings externally audited – final audited result was £201M

Deloitte was engaged to redesign and improve IT and operational functions which included enabling enterprise-wide shared services, enterprise-wide management information strategies, and improved cost identification, cash management, reporting and procurement. Our work resulted in significant cost reductions.

Results: Completely reengineered the finance function including cash

management, procurement and sourcing, general accounting, cost management, and reporting and analysis

Measurable recurring annual benefits were estimated to be over 100 % of the total project cost

Deloitte was engaged to design and implement a strategic cost reduction initiative to remove 350m Yen from the cost base of the operations function. A 5 step approach to the design was used, capturing current operating model and process, base-lining and developing performance metrics. We were then engaged in iterative re-design of process and organization.

Results: Streamlined and re-engineered processes (segregating simple/complex

tasks, reducing rework and managing waste in linear processes) Introduced performance management techniques across the

organization (people, process and systems performance management) The joint client/practitioner team re-designed the operations group in just

under 12 weeks enabling the implementation team to deliver against the new operating model and processes in 14 weeks

Deloitte was engaged to redesign and improve IT and Operational functions. This included: the replacement of outdated legacy systems; elimination of duplication and unnecessary reconciliation and manual processes; and automation of information reporting.

Results: Reengineered infrastructure and processes from settlement systems to

General Ledger Consolidated functions and processes from multiple accounting streams

to one integrated system utilizing SAP enabled re-engineering Restructured the role of finance to encompass business support and

analysis rather than solely reporting of historic information

- 37 -

Qualifications – Process Improvement & Systems Implementations

Deloitte was engaged to assist senior management in the reengineering of BNP-Paribas Capital Market activities. This involved implementing a new back office system to manage derivatives in a centralized manner.

Results:

Focusing on the reengineering of Back Office processes resulted in: Integration of all derivatives products in Murex Integration of Murex Back Office into the BNP-BFI environment

(Accounting, Risk, FO systems...) Reengineering and redefining back office processes and procedures Creating a new front-to-back office organization Rollout: Defined the go live strategy and migration plan. Successfully

managed the migration into Murex G2000

Deloitte implemented a new treasury and derivatives system:

Merrill Lynch bank - Deloitte conducted a front-to-back implementation for the treasury activity products including bonds, money markets, loans, swaps, CDs, commercial paper and repos

Merrill Lynch - Deloitte provided implementation assistance for a Summit system installation to provide front-to-back office support for emerging market bond trading and foreign exchange business globally

Results:

Provided full program and project stream management

Designed business processes, developed and executed acceptance tests and implemented plan (including validation of FX module newly added by Summit for Merrill)

Set-up accounting and testing

Global US Investment Bank

As part of a strategic project, Deloitte provided assistance for selection and development of a global multi-entity derivatives trading system capable of supporting all major types of derivatives.

Results: Phase I - strategy feasibility study which considered high level business

systems architecture, detailed business case, application architecture, detailed development and migration planning, detailed functional design, business process redesign and sizing and analysis of technical options

Phase II - detailed evaluation of various risk management software packages to assess their functionality against the requirements identified in phase I. This focused on information technology issues, including leading edge analysis of the use of the Sybase database product

Phase III - provided implementation assistance, detailed design and architecture planning

Supranational Bank

Deloitte was appointed to implement a new front to back office organization plus accounting solution for treasury, fixed income and derivatives (IRD,CD) activities.

The large-scale project covered virtually all departments of the bank over an 18 month period, and involved a significant level of process re-engineering.

Results: Provided program and project stream management; defined user

requirements and enhancements to the software; designed a new target organizational structure and redefined transaction processes

Configured and integrated SUMMIT and SAP; built interfaces to the existing data warehouse and risk applications; conducted testing and user training


- 38 -

Deloitte was engaged to develop a complete operating model re-design for a major banking division. The new model was designed to facilitate the migration of the division to a new operating platform and several internal functions to new locations. Deloitte collaborated closely with client management to prioritize actions, make decisions and resolve major issues

Results: The Target Operating Model became the focal point of all change, in

particular the complex re-organization of processes, functional responsibilities and costs over several sites

The TOM enabled all involved to clearly understand the blueprint for the future, and for management to clearly see how the cost imperatives would be met through the re-organization

Qualifications – Operating Model Transformations

Deloitte was engaged by ABN Amro to design a global operating model to combine FX and Money Markets. Key objectives included reducing cost, enhancing transparency, driving consistency of attributable activities and adding missing mission critical capabilities. Our work helped define a global operating model and standardized set of global processes.

Results: Increased efficiency with centralized desk management and more

consistent pricing Increased central control and reduced operational risk (simplified the

current operating model, provided greater transparency for local trading activities)

Reduced cost of operational infrastructure (centralized operational systems and back office)

Provided for costs avoidance and increased flexibility to take advantage of future market opportunities

Deloitte was engaged to develop a Target Operating Model to lead re-integration of credit cards businesses into to the group in combination with lending as part of a new Consumer Finance division. Analyzed the two prevailing operating models for loans (Bank of Scotland Direct and Halifax loans) and credit cards and created a financially viable model.

Facilitated workshops with key participants so consolidation opportunities could be identified and quantified. In a validation phase, we investigated all identified opportunities. Working in teams with the client, we developed business cases and a high level implementation plan.

Results: Identified consolidation opportunities of £21m £20m in cost reduction was subsequently realized

Deloitte was engaged to set up the Umbrella PMO for the equities and fixed income Operating Model Transformation Program. Priorities included short-term focus on optimizing cost reduction and improving internal controls and a medium-term focus on service improvements (both internal and external). The Program was responsible for generating a minimum of €212 million savings by the end of 2005.

Results: Refocused equities and fixed income to create a robust, competitive and

cost-effective platform Defined mapping rules to determine interim location of functions in the

operating model Devised business architecture principles underpinning the operating

model Conducted functional mapping of the operating model including a FTE

analysis to support the design effort Repositioned the group to take advantage of future growth

Global Investment Bank


- 39 -

Qualifications – Bank Wide Integration/Design

Deloitte was engaged after the merger to assist in the integration of diverse business practices and technology infrastructures, including Capital Markets, and to provide PMO and resources to support integration activity.

Results:

Deloitte deployed an experienced team to assist JP Morgan Chase in various parts of the merger, focusing on: Synergies identification: prioritization of integration of high value

activities Merger risk management: identification and quantification of potential

risks PMO: managed the creation and issuance of deliverables and overall

project communication. Used PMO net to escalate key issues

The bank proposed a global re-organization of its current operating structure. Deloitte was engaged to define an operating model for each client-facing business line, support and control function. Design of the new structure included: a review and assessment of existing Arab Bank strategy; process and organization; modelling of generic best practices in operations; assessment of key business issues; and the presentation of action alternatives for further discussion.

Results: Created a high-level transition roadmap, capturing major risks and

obstacles associated with implementation of Head Office Charters Presented a newly defined mission statement to align the activities of

each business line/ function Defined and refined new regional responsibilities and intra-

organisational relationships

- 40 -

Project(s): Reengineering Front To Back & Systems Implementation

Project Role: Person.. served as the BNP Paribas project sponsor and was a member of the project’s steering committee

Clients Who Are Willing To Share Their Experiences

Managing DirectorBusiness Management – Global Markets

National Commercial Bank #1 UK,

SENIOR MANAGING DIRECTOR

Managing DirectorManaging Director

FRANCEFRANCE

Previous clients of Deloitte are available to speak to CSFB Evaluation Committee Members to provide insights into their reengineering experience

Project(s): Various Transformation Programs

Project Role: Person..t served as the project sponsor and was a member of the project’s steering committee

Project(s): Deloitte & Touche is the independent auditor

Project Role: Person.. served as the senior business unit controller for Equities

If you wish to speak to any of these references, please contact Adam Broun, +1 781 354 3231, [email protected] who will be pleased to arrange a conversation

mailto:[email protected]

http://www.bearstearns.com/bear/bsportal/Info.do?left=Bear%20Stearns

VII. Available Tools

- 42 -

Sample Tools – Process & Initiatives Prioritization

Cause & Effect Analysis

Fishbone analysis, used to force teams to focus beyond symptoms to root causes. Provides a structure to cause identification effort, and balanced list of ideas. Utilized once the problem is identified to determine the cause.

Fishbone analysis, used to force teams to focus beyond symptoms to root causes. Provides a structure to cause identification effort, and balanced list of ideas. Utilized once the problem is identified to determine the cause.

Inappropriate Swift Frequency

Inappropriate Message Levels for Client’s

Message System Limitations

Implications of Closure Process

Why are Erroneous

Swift Statements

Sent ?

Historically, lack of procedure for

creation of & cancellation of Swift Message

ReportingLack of

ownership of Swift message

costs

Ownership of Swift costs not with CS who set up reporting

Economic climate did not require close

scrutiny of Swift costs

Reporting selected by people not aware of

costs involved

Lack of training / awareness

No specific info on the system for cost

implications of Message Reporting

EFRITS model does not include

realistic Costs for Swift

reporting in Client Profit

profile

No formalised training related to closing

customer reporting

System maintains reporting level unless specifically changed

Closing clients have no RM or group responsible for

exiting procedures

Customer’s set up with multiple Cash

Accounts and Blanket Daily Reporting to

these

Accurate DATA on Swift

reporting not available

Lack of accountability to

analyse data

Business assumed that aggregate charges

accurate and does not profile costs for different

client usage

Current Reporting limited to daily, weekly, monthly

and not necessarily focused on customer

needs

System does not flag accounts that are closing as receiving erroneous

messages

Costs owned by IS not CS (who decide appropriate reporting)

Inappropriate Swift Frequency

Inappropriate Message Levels for Client’s

Message System Limitations

Implications of Closure Process

Why are Erroneous

Swift Statements

Sent ?

Historically, lack of procedure for

creation of & cancellation of Swift Message

ReportingLack of

ownership of Swift message

costs

Ownership of Swift costs not with CS who set up reporting

Economic climate did not require close

scrutiny of Swift costs

Reporting selected by people not aware of

costs involved

Lack of training / awareness

No specific info on the system for cost

implications of Message Reporting

EFRITS model does not include

realistic Costs for Swift

reporting in Client Profit

profile

No formalised training related to closing

customer reporting

System maintains reporting level unless specifically changed

Closing clients have no RM or group responsible for

exiting procedures

Customer’s set up with multiple Cash

Accounts and Blanket Daily Reporting to

these

Accurate DATA on Swift

reporting not available

Lack of accountability to

analyse data

Business assumed that aggregate charges

accurate and does not profile costs for different

client usage

Current Reporting limited to daily, weekly, monthly

and not necessarily focused on customer

needs

System does not flag accounts that are closing as receiving erroneous

messages

Costs owned by IS not CS (who decide appropriate reporting)

Information Space Maps

“As-Is” Information Space “To-Be” Information Space

Eng-DesignProgram Off ice

Conf iguration Management

Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control

ReleaseMaterial Planning

Eng-ProductionEng-Design Chief

Process Planning

Data Management

Reproduction

Reproduction-Data Entry

Reproduction-Lead

Reproduction-Photographer

Reproduction-Copy

Reproduction-Distribution

CSC

-Data Entry

-Lead


Reproduction-Copy


CSC CADS

CODS

CODS

CODSCVS

PADR

CODSCADS

CADS

PADRCADS

PADR

TSOMACPAC

CODSCODSCODS

CODS

CADS

CADS

CADS

TSOSan Diego

Denver



Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control



Process Planning

Data Management

Reproduction


Reproduction-Lead


Reproduction-Copy


CSCEng-Design

Program Off iceConf iguration Management

Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control



Process Planning

Data Management

Reproduction


Reproduction-Lead


Reproduction-Copy


CSC

-Data Entry

-Lead


Reproduction-Copy


CSC

-Data Entry

-Lead


Reproduction-Copy


CSC CADS

CODS

CODS

CODSCVS

PADR

CODSCADS

CADS

PADRCADS

PADR

TSOMACPAC

CODSCODSCODS

CODS

CADS

CADS

CADS

TSOSan Diego

Denver

Procurement

Bus-Mgt

Eng-Production

Material-Planner

Site-RepEng-Labarge

InitiatorCPE

Eng-Chief

Eng-Systems

EPDMEPDM

EPDM

EPDMPro E

Pro Interlink

EPDM

EPDM

EPDM

EPDM

EPDM

MACPACEPDM

EPDM

Eng-Design

Procurement

Bus-Mgt

Eng-Production

Material-Planner

Site-RepEng-Labarge

InitiatorCPE

Eng-Chief

Eng-Systems

EPDMEPDM

EPDM

EPDMPro E

Pro Interlink

EPDM

EPDM

EPDM

EPDM

EPDM

MACPACEPDM

EPDM

Eng-Design

“As-Is” Information Space “To-Be” Information Space



Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control



Process Planning

Data Management

Reproduction


Reproduction-Lead


Reproduction-Copy


CSC

-Data Entry

-Lead


Reproduction-Copy


CSC CADS

CODS

CODS

CODSCVS

PADR

CODSCADS

CADS

PADRCADS

PADR

TSOMACPAC

CODSCODSCODS

CODS

CADS

CADS

CADS

TSOSan Diego

Denver



Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control



Process Planning

Data Management

Reproduction


Reproduction-Lead


Reproduction-Copy


CSCEng-Design

Program Off iceConf iguration Management

Eng-Checking

Admin

Saf ety

Eng-Systems

Model Control



Process Planning

Data Management

Reproduction


Reproduction-Lead


Reproduction-Copy


CSC

-Data Entry

-Lead


Reproduction-Copy


CSC

-Data Entry

-Lead


Reproduction-Copy


CSC CADS

CODS

CODS

CODSCVS

PADR

CODSCADS

CADS

PADRCADS

PADR

TSOMACPAC

CODSCODSCODS

CODS

CADS

CADS

CADS

TSOSan Diego

Denver

Procurement

Bus-Mgt

Eng-Production

Material-Planner

Site-RepEng-Labarge

InitiatorCPE

Eng-Chief

Eng-Systems

EPDMEPDM

EPDM

EPDMPro E

Pro Interlink

EPDM

EPDM

EPDM

EPDM

EPDM

MACPACEPDM

EPDM

Eng-Design

Procurement

Bus-Mgt

Eng-Production

Material-Planner

Site-RepEng-Labarge

InitiatorCPE

Eng-Chief

Eng-Systems

EPDMEPDM

EPDM

EPDMPro E

Pro Interlink

EPDM

EPDM

EPDM

EPDM

EPDM

MACPACEPDM

EPDM

Eng-Design

Comparison of information space maps demonstrates a reduction in the complexity of the information exchange by analyzing the key components of the process under review.

Information Space Map benefits include:

• Reduction in information handoffs

• Reduction in organizations involved

• Reduction in systems used

Is a collection of Industry specific, enterprise wide process models that incorporate best practices for key business and support functions

IndustryPrint is used to:– Jump start projects by providing a starting point for

as-is and to-be modelling – Integrate industry best practices, to inform process

redesign and reveal performance improvement opportunities

Is a collection of Industry specific, enterprise wide process models that incorporate best practices for key business and support functions

IndustryPrint is used to:– Jump start projects by providing a starting point for

as-is and to-be modelling – Integrate industry best practices, to inform process

redesign and reveal performance improvement opportunities

IndustryPrint PriorITTM

Is a highly flexible tool that enables teams to define their own prioritization criteria and unique weightings to each project to profile their risk/value tradeoff and thereby facilitate sequencing

Applying the prioritization criteria to each project yields a user-friendly view of the Risk/Value relationship, rendering the low risk, “quick win” projects readily visible

Is a highly flexible tool that enables teams to define their own prioritization criteria and unique weightings to each project to profile their risk/value tradeoff and thereby facilitate sequencing

Applying the prioritization criteria to each project yields a user-friendly view of the Risk/Value relationship, rendering the low risk, “quick win” projects readily visible

Provides ability to view the impact project portfolios have on enterprise improvement levers

Provides ability to view the impact project portfolios have on enterprise improvement levers

MapITTM

- 43 -

Sample Tools – Industry Best Practice & Statistical Analysis Tools

Graphical comparison of the importance of potential root causes of problems/defects. The Pareto Principle is based on the fact that 80% of the problems are caused by 20% of the sources

Determine how problems or defects will be categorized; Gather data on frequency of problems or defects for each of those categories; Establish a scale for the y-axis to record the frequency for each category; List each category of problem or defect along the x-axis in descending order of frequency; Draw bars (columns) to show the frequency for each category of problem or defect; Categories with very small contributions may be combined as “others”

Graphical comparison of the importance of potential root causes of problems/defects. The Pareto Principle is based on the fact that 80% of the problems are caused by 20% of the sources

Determine how problems or defects will be categorized; Gather data on frequency of problems or defects for each of those categories; Establish a scale for the y-axis to record the frequency for each category; List each category of problem or defect along the x-axis in descending order of frequency; Draw bars (columns) to show the frequency for each category of problem or defect; Categories with very small contributions may be combined as “others”

Pareto Analysis

Best Practice banking operating models by product and product group, covering Front to Back Office

Used to determine functional groups and reorganization opportunities as well as control and process breaks

Best Practice banking operating models by product and product group, covering Front to Back Office

Used to determine functional groups and reorganization opportunities as well as control and process breaks

Target Operating Models

Target Operating Model

Front Office(Securities, Derivatives, Cash Products)

Enabling Technology

Client Technology

Core Operations Core Controlling

Business Control andSupport

Front Office

CFO

Target Operating Model

Front Office(Securities, Derivatives, Cash Products)

Enabling Technology

Client Technology

Core Operations Core Controlling

Business Control andSupport

Front Office

CFO

Statistical analysis of metrics collected from the business to be used for analysis:

Six Sigma Metrics: Defects (incorrect mapping); Errors (repeated mistakes);

Straight Through Processing rates; Variation within process

Lean Metrics: Cycle times; Customer service levels (for example., late

orders, delivery performance); Handoffs in critical processes; Distance information travels; Workforce skill sets; Labor content of work; Percent of employee suggestions implemented; Attrition rate of staff

Statistical analysis of metrics collected from the business to be used for analysis:

Six Sigma Metrics: Defects (incorrect mapping); Errors (repeated mistakes);

Straight Through Processing rates; Variation within process

Lean Metrics: Cycle times; Customer service levels (for example., late

orders, delivery performance); Handoffs in critical processes; Distance information travels; Workforce skill sets; Labor content of work; Percent of employee suggestions implemented; Attrition rate of staff

Minitab - Metrics Collection

% o

f Tra

des

Requ

irin

gN

o In

vest

igat

ion

100-

90-

80-

70-

60-

82 (M ean)

97 (+3 *S igma)

88 (M ean)

80 (-3*s igma)

S cat terplot of M ON TH 1, M ON T H 5 vs Day of M onth

% o

f Tra

des

Requ

irin

gN

o In

vest

igat

ion

100-

90-

80-

70-

60-

82 (M ean)

97 (+3 *S igma)

88 (M ean)

80 (-3*s igma)


% o

f Tra

des

Requ

irin

gN

o In

vest

igat

ion

100-

90-

80-

70-

60-

82 (M ean)

97 (+3 *S igma)

88 (M ean)

80 (-3*s igma)


Is a structured, experience-based Financial Impact Template & Business Case Consolidator Tool designed to assist in determining the true business value of investments

ValuePrint is used to:– Systematically identify and analyse investment costs

and benefits – Outline tangible and intangible project benefits,

tracking them against defined measures

Is a structured, experience-based Financial Impact Template & Business Case Consolidator Tool designed to assist in determining the true business value of investments

ValuePrint is used to:– Systematically identify and analyse investment costs

and benefits – Outline tangible and intangible project benefits,

tracking them against defined measures

ValuePrint

Is a knowledge management tool used to gather benchmarking information globally and focus on specific opportunities and issues confronting business

Global INSite is used to:– Obtain industry specific quantitative and qualitative

performance measurement data – Identify innovative industry best practices to improve

overall process performance

Is a knowledge management tool used to gather benchmarking information globally and focus on specific opportunities and issues confronting business

Global INSite is used to:– Obtain industry specific quantitative and qualitative

performance measurement data – Identify innovative industry best practices to improve

overall process performance

Global INSite

Deloitte ConsultingDeloitte Consulting

VIII. Appendices

A: Middle Office Work Driver Approach

B: Middle Office Work Diver Sample Output

- 45 -

Appendix A: Middle Office Work Driver Overview

Inputs Outputs Description

Interviews

Work DriverAnalysis

Fixed vs. VariableAssessment

I. PROCESS MAPS – What we do? How we do it?Processes Documented In Hyperknowledge

Documents infrastructure processes including:

- What are the major processes, sub processes and activities

- How do they do them

- Why - what they're trying to achieve

Process / ActivitySummary

III. INFRA COST DRIVERS & METRICS – What costs are fixed? What are variable?

What are the major drivers of cost?For ISIS Dashboard

FIXED VS. VARIABLE ASSESSMENTFX/MM

4.5750.1 1.17 1.8 0

2.72

30.4425

2.9435 0

0.285

0.2011.875

0.83.1

0

5

10

15

20

25

30

35

40

1_TradeProcessing

2_PositionValidation

3_Reconciliation &Control

4_SharedServices

5_Client Services 6_Project Work 7_Training &Development

8_Management &Support

Variable HC

Fixed HC

II. ACTIVITY SUMMARY – How much resource does it take to do it?

HC by activity / product

Understand the relationship between various product/functional processes and their resource consumption pattern

Identify the distribution of processing capacity and constraints

Identify and document a meaningful set of productivity measures that accurately describe Infra activities (id key measures 3-5)

Determine the drivers of time / cost within each activity for each business or division

Establish a set of metrics to track performance against

Benefits

Meets regulatory / audit requirements (e.g. Mortgages)

Available to assess / prep for deployment analysis

Leverage for reengineering assessment

Captures differences by product line / region at a more extensive level than labor allocation study

Could be used to adjust allocations to represent more accurately activities

Transparency on cost drivers by area

Identifies areas that business can influence costs

Identifies areas for investment

Identifies areas of constraint

- 46 -

Appendix A: Middle Office Work Driver Scope

Middle Office June 2004

Actual Headcount

1,252 131

377

ISIS/ORM

228

Asia

64

Regional

11

Out of Scope & Adjustments1

(SCM/Mgmt/ Other)

In-Scope

59

131 131

665

456

145

77

222

886

Asia

Europe

Americas

The “In-Scope” headcount represents 71% of the Global Middle Office June 2004 headcount and 79% of the Americas and Europe June 2004 headcount

Zero HC/Closed

70Cost Centers

509

1Adjustments includes headcount changes that occurred post June 2004

24

13

- 47 -

Appendix A: Middle Office Work Driver Scope – Cost Center SummarySub Cluster Americas Cost Center HC Sub Cluster Europe Cost Center HC

D.0P52 - CTRS NY FID1 CCnDIST DIST ASST 7 D.29H - CTRS FID GMM LON BRANCH 17

D.0N76 - CTRS NY FID LEVERAGED FINANCE (HY) 3 D.25Y - CTRS LDN FID n SPG CAT [25Y] 14

Michael Gallagher D.0P49 - CTRS NY FID IRP BOND 6 D.25H - CTRS FID IRP CSFB Europe Ltd 12

James Farrell D.0R58 - PC GLOBAL REPORTING & ANALYSIS 25 D.24H - CTRS FID Credit n Dist CSFB Eu 10

D.0P55 - NY FID LISTED DERIVATIVES 2 D.22Y - CTRS SPG EMG CSFB Europe Ltd 16

D.0N76 - CTRS NY FID LEVERAGED FINANCE (LOANS) 4 D.H5R - EMG- LONDON(CSFBi) 7

D.AJ55 - Ctrs NY FID Syndicate Acctg 4 D.24Y - CTRS Treasury CSFBi [24Y] 3

D.0K52 - CTRS NY TRES 11 D.26Y - CTRS Treasury London Branch 2

D.0P53 - CTRS NY FID MONEY MARKETS 4 D.71C - CTRS Treasury CSFB Europe Ltd 5

D.0060 - PC NY FID 1EMG LATAM-NY 3 D.AY3 - CTRS FID 1 EMG MOSCOW [AY3] 2

D.F84HX2A - NY FID CTRS EMG 6 D.82H - CTRS SPG OTC CSFBi [82H] 30

D.F87HX2A - EDCU-FP CTRS 14 D.H7Z - OTC EDCU Middle Office 9

D.0021 - Equity Middle Office 8 D.R80 - OTC Equity Finance Settlements 9

D.0A67 - CTRS NY EQUITIES 5 D.23N - CTRS EDCU CSFB Europe Ltd 8

D.0Q30 - CTRS NY EDCU (Reporting) 4 D.P8K - PC EQUITIES PRIME SERVICES EXC 5

D.0Q30 - CTRS NY EDCU (EDCU/M&A) 1 D.23Y - CTRS EDCU CSFBi [23Y] 5

D.0Q30 - CTRS NY EDCU(Index/Risk Arbitrage ; Program Trading) 4 D.F13 - CTRS Equities Cash CSFB Europe 11

D.0Q30 - CTRS NY EDCU (Prime Services) 7 D.P7K - PC EQUITIES MANAGEMENT 7

D.0Q30 - CTRS NY EDCU (Convertible Bonds) 3 D.81H - CTRS IBD London Branch [81H] 4

D.0052 - CTRS NY IBD BROKER/DEALER 19 D.F14 - CTRS IBD Europe Ltd [F14] 8

D.0N74 - CTRS NY IBD BRANCH/CORP BANKNG 7 D.59H - CTRS FID IRP Exotic CSFBi 19

DSG PC D.F49HX2A - Ny Fid Prod Ctrl Interest Rate 18 D.80H - CTRS FID IRP Vanilla CSFBi 19

Eileen Yin D.FW14X2A - NY OTC Ops (Documentation) 31 D.20H - CTRS FID Europe CSFBi [20H] 41

Tom Decker D.FW14X2A - NY OTC Ops (Settlement) 21 D.55H - Mgmt/GLC/Business Mgmt 16

Donatina Trotter D.FW14X2A - NY OTC Ops (Watson) 17 Dom Amura D.C7K - OTC Documentation 75

D.AM57 - NY OTC Middle Office 18 Steve Hunter D.W46 - OTC Settlements/CFGs 65

Tang / Marcello / Tran D.0U66 - CTRS NY FID1 CCnDIST QNT SUPP 11 Dave Watson D.61H - OTC Front Office Support Group 31

Wozencroft / Honkanen D.0639 - CTRS NY FID1 CCnDIST QNT SUPP (ABD, CDO, RMBS) 13 D.H2U - OTC Fixed Income Middle Office 17

D.0575 - Residential Mortgage Securitie 39 David Weeks D.75H - FLP Product Control 18

D.AB28 - Residential Whole Loans 61 Stewart De Carle D.E7U - FLP Middle Office 18

D.AI19 - Mortgages Reporting 3 Edel McGinley D.T1A - FLP Transaction Management 6

377 509

886

Reason HC Reason HC

1

2 2

AMERICAS REGIONAL 2 2D.0W33 - PC SCM 28 3D.AN78 - Mortgage Change Program 6D.R8K - America DCP 6 3D.0P57 - CTRS NY FID1 MGMT 7D.0D92 - Client Pricing and valuations 4D.0P58 - CTRS NY Reporting 1 D.C6G - CONTROLLERS ISTANBULD.BR27B00 - BUS UNIT CONTOL RETEN POOL 10 EUROPE REGIONAL 11D.F86HX2A - Ny Fid Prod Ctrl Quantitative 6 D.49I - CTRS LONDON US GAAP 2

AMERICAS SCM / MGMT / OTHER 68 D.55U - PC SCM 22AMERICAS POST JUNE 2004 HC ADJUSTMENT -9 D.72H - LL/Graduate Program - OTC 2

D.85T - CTRS LDN FID1MGMT PROJECTS 14D.92N - DSG Ops Management 4D.C7R - OTC Projects 6D.J1K - Europe OTC Derivs Chnge Prgmme 49D.J6A - FLP Strategic & Legacy 14D.P1T - PSESP Historic 8D.P9S - PSESP Current 9D.22H - Infrastructure mgt and admin 4D.47I - CTRS FID Management CSFB Europ 6D.67T - FLP Management & Control 5D.42T - CTRS LDN REPTG ARC [42T] 1D.44T - CTRS LDN REPTG CUST PRIC [44T] 2D.76H - CTRS LDN FID1MGMT QUANT SUPP 6

EUROPE SCM / MGMT / OTHER 154AMERICAS POST JUNE 2004 HC ADJUSTMENT 9

OUT OF SCOPE REGIONAL TOTAL 13OUT OF SCOPE SCM / MGMT / OTHER TOTAL 222

TOTAL INSCOPE

OUT OF SCOPE

D.0895419 - CTRS ZUR FID MONEY MARKETSD.A045X14 - CTRS FID 1 EMG MOSCOW

SCM / MGMT / OTHER

D.0895049 - CTRS ZUR EQUITIES/EDCUD.0895053 - CTRS ZUR IBDD.0895057 - CTRS ZUR FIDIRPD.0895418 - CTRS ZUR FID FOREIGN EXCHANGE

Equities PC

EMEA Cost Center

D.0895033 - CTRS ZUR TRES

D.0895048 - CTRS ZUR REPTGRegional

Regional

Sal Sorce / Tracey Cerone/Kim Cuozzo

Contact

FID PC

Adam Johnson

Art Leonetti

Art Leonetti

James Langan

Shaun Williams

Adrian Kemp

John Sweeny

Virgilio Montano

Bill Wiegand

Blaise Jenkins

Shane Durkin

Shane Durkin / Stephen Bailey

Rob Austin

DSG PC

IBD PC

EQUITIES PC

Mortgage Operations

Frank Malarkey

Betty Verri

Tom Camoia

IBD PCJohn Goodnough

Gregg Krieger

Siu-Pak Ho

Mortgage PC Willie Pest

Greg Florek

Stephen Axbey

IN SCOPE (AMERICAS &

EUROPE)

Americas Cost Center

Ian Herrod

Chris Peratides

Kevin Borrett

AMERICAS INSCOPE TOTAL EUROPE INSCOPE TOTAL

DSG Ops

DSG Ops

FID PC

DSG FLP

Augustine Vargetto

Contact

Charles Fitzgerald

Charles Fitzgerald

James Whale

Mike Harvard

Paul Tickle

Michael Kelly

Greg Florek

Ahmed Kubba

Amin Bilal

Gordon McDermid

Karen Newton

SCM / MGMT / OTHER

D.AK50952 - CTRS FID Mexico Broker Dealer

D.AN31953 - PC - Mexico

- 48 -

Appendix A: Middle Office Work Driver Analysis Overview

ID Division RegionCost

Center Desc

Activity Details

PC Major Function

PC Sub Process Cost Center Activity 1)

Fixed HC

3) Variable

HC

Grand Total

Cost Driver High Level Cost Driver

Group

Medium Level Cost

Driver Group

564Equities/IBD Product

AmericasEDCU FP CTRS

Equities Derivatives


Create complete trial balance

Ensure Integrity of overnight process

0.50 0.50# Books & Reliability of FO books # Books





Create complete trial balance

Ensure Integrity of overnight process

0.00 0.00No fixed component Other

No Fixed Component

565Equities/IBD Product Control



PC

Validation & Control

Reconciliation's & resolution between FO systems and non-Settlement systems

Complete FOBO reconciliation (including booking issue resolution)

3.50 3.50# Books; # Positions; Trading Volume books # Books




PC


Reconciliation's & resolution between FO systems and non-Settlement systems

Complete FOBO reconciliation (including booking issue resolution)


No Fixed Component




PC


Collation of data from fragmented systems to one source Post Subledger toTREX

0.50 0.50# Books; # Positions; Trading Volume books # Books




PC


Collation of data from fragmented systems to one source Post Subledger toTREX

0.00 0.00 No fixed component Other

No Fixed Component





P&L validationComplete P&L Validation

1.00 1.00# Books; # Positions; books # Books





P&L validationComplete P&L Validation


No Fixed Component





Front office & back office spreadsheet

Conduct Front office spreadsheet improvement

0.25 0.25# Books books # Books





Front office & back office spreadsheet

Conduct Front office spreadsheet improvement


No Fixed Component





Price testingComplete Price Testing (monthly)

1.32 1.32# Positions Positions # positions





Price testingComplete Price Testing (monthly)

0.33 0.33Reporting Requirements Reports

Report Development





Account ownershipConduct Account ownership activities

0.25 0.25# Books books # Books





Account ownershipConduct Account ownership activities


No Fixed Component





Model validationComplete Model Validation (2 monthly)

0.25 0.25# trades Trades # trades





Model validationComplete Model Validation (2 monthly)


No Fixed Component





Structured Trade Reviews

Conduct Structured Trade Reviews (2 monthly)

1.80 1.80# trades Trades # trades





Structured Trade Reviews

Conduct Structured Trade Reviews (2 monthly)

0.20 0.20Administration Employees # Admin




PC

Enrichments & Adjustments

Provisions & Valuation adjustments

Complete Provision/ Valuation adjustments (monthly)

0.36 0.36# Adjustments

Breaks / Exceptions # adjustments




PC

Enrichments & Adjustments

Provisions & Valuation adjustments

Complete Provision/ Valuation adjustments (monthly)

0.04 0.04Administration Employees # Admin

Sample Database ComponentsData Views

Organizational

- Derivatives PC (Equities, FID and FLP)

- Cash PC (FID and Equities)

- IBD PC

- Structured PC

- Operations (Derivatives, Mortgages, FLP)

Regional

- Americas

- Europe

Functions / Activities (three grouping levels)

- PC Major Function: Validation & Control; Reporting; etc

- PC Sub Process: Price Testing; FOBOs; Sox; etc

- Cost Center Activity: Generate FOBO report; Acquire market prices

Cost Driver (three grouping levels)

- High: Trades; Reports; Breaks; etc

- Medium: # Reconciliations; # tickets; # positions; etc

- Detailed: Portfolio size; # FOBO Breaks, # system updates, etc

The middle office work driver database allows a variety of cuts on the data facilitating detailed analysis and comparison across the multiple views

- 49 -

Appendix B: Middle Office Activity Summary

Middle Office Activities (886 FTEs)

14 / 2%

21 / 2%

39 / 4%

70 / 8%

101 / 11%

128 / 14%

Client Services

PositionValidation

FX Hedging / P&L Remittance


Marketing & Sales

Shared Services

FinancialAnalysis

Enrichments& Adjustments

Projects

Reporting

55 / 6%

129 / 15%Data Integrity 68%32%

30%

64%

39%

49%51%

53%

Trade Processing

81%19% 135 / 15%

21 / 2%

13 / 1%

4 / 0%

70%

80 / 9%Management

& Support59% 41%

36%

61%

47%

36%

64%

41%

59%

50%

50%

52%

48%

74%

26%

Fixed: 41%

Variable: 59%

Activity Descriptions

Data IntegrityFOBOs, structured trade reviews, BOBOs, journal entry review, other reconciliations, hedge accounting documentation, front office and back office spreadsheet control

Trade Processing

Trade capture (manual & automated), document management, trade confirmation, process conversions, cash and security management, etc

Client ServicesInquiries and support – internal & external clients, external client cash transfers & balances, maintain client relationships, etc

Position Validation

Confirm & process firm cash positions (NOSTRO), confirm & process trade positions (DEPOT), monitor asset allocation ratios


FX hedging, P&L remittance


Data collection, create trial balance (P&L)

Marketing & Sales

Counterparty valuation statements, sales credits

Management & Support

Management activities, training, administrative, BCP & risk management, etc

Shared Services

Client account maintenance, corporate actions, process mandatory & voluntary events, manage securities borrowing & lending events

Financial Analysis

Clean P&L. legal entity analysis, expense analysis, P&L analysis


Provisioning & valuation adjustments, GAAP/accounting adjustments, expense allocation, etc

Projects New business activities, Sarbanes Oxley, strategic projects, lights on projects

ReportingMIS reporting, consolidations & group reporting, regulatory reporting, control reporting, customer information delivery, ad hoc reporting, etc

Validation 55% 45%

77 / 9%

Validation Price testing, account ownership, P&L validation, non-trading data validation, model validation

- 50 -

Appendix B: Middle Office Cash Product Control Activity Summary

Cash PC Activities (209 FTEs)

2 / 1%

3 / 2%

6 / 3%

13 / 6%

28 / 13%

33 / 16%

Client Services



Marketing & Sales

Shared Services

FinancialAnalysis


Projects

Trade Processing

11 / 5%

34 / 16%Validation 43%57%

53%

67%

60%

49%51%

52%

Reporting 26%74% 38 / 18%

3 / 2%

1 / 1%

47%

19 / 9%Management

& Support65% 35%

33%

40%

48%

67%

33%

91%

9%

61%

39%

17%

83%

Fixed: 61%

Variable: 39%

Data Integrity

50% 50%

18 / 9%

4.1 FTEs are driven by Front Office requests/activities

- 1.7 FTEs conduct front office reporting with 93% of these heads being variable

- 2.4 FTEs driven by other front office activities such as sales credit calculations, P&L analysis, and WSS brokerage calculation and allocation

11.5 FTEs are currently performing FOBO reconciliations and investigating breaks

Front Office Opportunities To Influence Cost

Variable Cost Drivers

Drivers FTEs % Drivers FTEs %

1 # Trades 6.8 14% # Books 11.7 34%

2 # Projects 5.7 12% # Reconciliation Breaks 4.8 14%

3 # Reconciliation Breaks 4.6 10% # Employees 2.9 8%

4 # IPOs & Secondary Offerings 3.7 8% # Projects 2.8 8%

5 # FO Requests 3.6 8% # Trades 2.7 8%

Top 5 Variable Drivers 24.4 51% Top 5 Variable Drivers 24.9 73%

Other Variable Drivers 23.4 49% Other Variable Drivers 9.4 27%

Total Variable Drivers 47.7 49% Total Variable Drivers 34.4 31%

Total Fixed Drivers 50.7 51% Total Fixed Drivers 76.4 69%

Total Drivers 98.4 100% Total Drivers 110.7 100%

Americas Activity Drivers Europe Activity Drivers

- 51 -

Appendix B: Middle Office Derivatives Product Control Activity Summary

Derivatives PC Activities (204 FTEs)

1 / 0%

4 / 2%

6.1 / 3%

11 / 5%

18 / 9%

22 / 11%

Client Services



Marketing & Sales

Shared Services

FinancialAnalysis


Projects

Trade Processing

7 / 3%

35 / 17%Validation 59%41%

37%

49%

48%71%

29%

47%

Reporting

82%18% 68 / 33%

2 / 1%

0 / 0%

63%

16 / 8%

Management& Support

33%67%

51%

52%

53%

53%

47%

37%

63%

21%

79%

100%

Fixed: 33%

Variable: 67%

Data Integrity

37% 63%

15 / 7%

1.3 FTEs are driven by Front Office reporting requests

24.5 FTEs are conducting structured trade review activities

21.3 FTEs are currently performing FOBO reconciliations and investigating breaks




1 # Books 19.7 67% # Trades 34.7 32%

2 # Projects 3.4 11% # Books 18.9 18%

3 # Trades 2.1 7% # Reconciliation Breaks 16.1 15%

4 # Positions 2.0 7% # Portfolio Positions 6.5 6%

5 # New Business Initiatives 0.9 3% # Projects 5.8 5%







- 52 -

Appendix B: Middle Office Operations Activity Summary

Operations Activities (411 FTEs)

4 / 1%

15 / 4%

17 / 4%

19 / 5%

39 / 9%

Client Services

Validation


Shared Services


Projects

Trade Processing

16 / 4%

115 / 28%

PositionValidation

71%29%

62%

44%

39%55%

45%

26%

Reporting

83%17% 130 / 32%

2 / 1%

38%

19 / 5%

Management& Support

52%48%

56%

61%

74%

95%

5%

46%

54%

Fixed: 33%

Variable: 67%

Data Integrity

44% 56%

17 / 4%

1.1 FTEs are driven by Front Office OTC trade documentation queries




1 # Trades 40.8 33% # Trades 68.3 45%

2 # Structured Transactions 32.1 26% # Unagreed Cash Flows 10.4 7%

3 # Reconciliation Breaks 7.7 6% # Open Market Issues 10.2 7%

4 # Adhoc Queries 5.6 5% # Projects 7.5 5%

5 # Clients 4.8 4% # Adhoc Queries 6.9 5%







IX. Attachment 1: Supplier Assessment Questionnaire

IX. Attachment 2: CSFB Standard Agreement

We are pleased to present our bid package for consideration. With regard to the contract terms and conditions proposed in the RFP, we are currently in the process of negotiating a Master Services Agreement ("MSA") with CSFB which terms and conditions will govern all of our services provided to CSFB. Our experience has indicated that almost without exception we have been able to reach agreement with each of our clients that has awarded us an engagement. In the vast majority of these cases, we have had some concerns over the proposed terms and conditions included in the request for proposal, however, in this case if we are awarded this engagement, we intend to negotiate in good faith with CSFB to reach an agreement on the MSA as expeditiously as possible. In this regard, we believe that the MSA as finally drafted and agreed will be appropriate for this engagement.