Finance

4 First Things First: The Building Blocks for a Successful Transition While this guide discusses several specific tasks for corporates to take on as the transition deadline approaches, a transition must be premised on a sound governance framework, a detailed project plan and a full identification and analysis of the various existing exposures and dependencies tied to LIBOR and other IBORs. They form the building blocks for a successful transition, underpinning all the tasks discussed in this guide. Good Governance – A sensible governance framework for navigating the transition is essential. At a minimum, this means ensuring that senior management is engaged and that there are clear lines of responsibility and reporting. In some cases, a separate working group, steering committee or task force will be established to manage the transition; in other cases, the transition will be administered principally through individual business units with legal, accounting and other functions playing supporting roles. However, in all cases, corporates should adopt a framework that answers how the firm is going to execute, manage and monitor the transition to minimize legal and business risks. There is no one-size-fits-all framework, as many corporates have already realized by this point in the transition. Project Planning – Corporates need to have an enterprise-wide project plan that encompasses input from key constituencies within the organization. The plan should be informed by the firm's overall strategy and goals for the transition, such as avoiding value transfer and mitigating operational risk. It should also have specific timelines for transition-related milestones, including with respect to contract inventorying and analysis, negotiation and "repapering" tasks, and "switching off" IBOR-related processes and infrastructure. Updates to reflect insights from regulators, standard-setting bodies and industry "best practices" should be made as necessary. Review and Analysis – A comprehensive review should be conducted of every contract, system, model and process for references to LIBOR or other IBORs. Exposures should be identified and catalogued. Merely finding contracts can, in many cases, be one of the most difficult aspects of the transition, especially for corporates with multi-national operations or that have grown through mergers and acquisitions. Reviews may entail representative sampling and internal questionnaires before maturing to more extensive scoping exercises. They also may be aided by data extraction technologies.

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