How should we define the deal lifecycle states in a treasury engine to maximize

A robust deal lifecycle in a treasury engine should consist of discrete, state-changing events with immutable audit trails to ensure compliance and operational efficiency.

Why it matters

• Regulatory Compliance: Adhering to regulations such as IFRS 9 and CPMI-IOSCO principles is essential for audit readiness and operational integrity.
• Operational Efficiency: A clearly defined lifecycle enables straight-through processing (STP), reducing manual intervention and errors.
• Risk Management: Proper state management helps identify and mitigate operational risks associated with trades and settlements.
• Traceability: Immutable audit trails provide necessary documentation for internal reviews and external audits, enhancing accountability.
• Data Integrity: Versioning metadata ensures that all changes are tracked, maintaining the integrity of the deal data throughout its lifecycle.

How to apply

1. Define Lifecycle Stages:

   • Trade Captured: Initial record is created, capturing time, trader, and source.
   • Validated: Perform reference data checks, limit checks, and ensure all mandatory fields are completed.
   • Approved: Implement a four-eyes control process to ensure compliance with internal policies.
   • Confirmed: Obtain counterparty affirmation or electronic confirmation of the trade.
   • Settled: Execute cash or securities movement, marking the completion of the trade.
   • Accounted: Post journal entries according to applicable accounting standards.
   • Reconciled: Match positions and cash against statements to confirm accuracy.

2. Record Non-State Events:

   • Capture non-state events (e.g., pricing updates, margin calls) as metadata versions rather than lifecycle transitions to maintain clarity.

3. Map Artifacts:

   • Associate each lifecycle transition with relevant artifacts such as confirmations (ISDA), settlement messages (ISO 20022 pacs/camt), and accounting entries.

4. Ensure Traceability:

   • Store message IDs (e.g., ISO 20022 EndToEndId, UETR) alongside deal IDs to facilitate traceability and audits.

5. Align with Risk Controls:

   • Implement monitoring and exception handling processes in line with CPMI-IOSCO Principle 23 (disclosure) and Principle 17 (operational risk).

Metrics to track

• Time to Completion: Measure the time taken to move through each lifecycle stage to identify bottlenecks.
• Error Rate: Track the number of errors occurring at each lifecycle stage to improve processes.
• Audit Trail Completeness: Assess the completeness of audit trails for each deal to ensure compliance.
• Exception Handling Frequency: Monitor the frequency of exceptions and how quickly they are resolved.
• Operational Risk Incidents: Record incidents related to operational risk to identify trends and areas for improvement.

Pitfalls

• Inadequate Documentation: Failing to document each lifecycle stage can lead to compliance issues and operational inefficiencies.
• Lack of Version Control: Not versioning metadata can result in loss of critical information and data integrity issues.
• Ignoring Non-State Events: Treating non-state events as lifecycle transitions can complicate the audit trail and obscure important information.
• Insufficient Training: Employees not trained on the lifecycle processes may lead to errors and non-compliance.
• Overlooking Regulatory Changes: Failing to stay updated with regulatory changes can lead to compliance risks and operational failures.

Key takeaway: Model state changes explicitly, attach external evidence, and version metadata to achieve STP and audit-ready traceability.