How to Structure Middle Office Organization
Finance companies have front, middle and back offices. The middle office is the office associated with risk management, debt analysis and other areas that keep the firm from taking on bad investments and/or losing money. It also involves the IT staff.
This is in contrast to the front office, who work in sales, and the back office who perform administrative tasks like accounting and data entry.
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Instructions
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Appoint a financial controller. This person will run the middle office and report directly to the chief financial officer (CFO), so he or she should be competent in risk management and have management skills and experience. The CFO is not part of the middle office but rather is part of the executive team, which is a separate part of the organization. This means that the financial controller is the liaison between the executives and the middle office.
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Appoint people to work under the financial controller. These people will run teams of risk managers or analysts and their structure is largely dependent on the personal preference of the financial controller, the organization of the individual office and the size of that office. For example, if you have a small office with only three risk managers, there's really no need for one of them to be in charge of the other two. However, if you have 20 risk managers, a team leader should be identified to make communication more effective.
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Establish which employees will be middle office and which will be back office. It is fairly clear who should be in the front office but there is room for interpretation when it comes to the middle and back offices. For example, compliance officers who ensure that your company is following laws and regulations can go in either the middle or back office. Where you put them is dependent on your company's individual needs and culture.
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Ensure that there is a clear division between offices. This is particularly true with regards to the front and middle office distinction; it is not wise to have unclear boundaries between who is making sales and who is managing risk.
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Ensure that your middle office has authority over the front office. Since the middle office is concerned with risk management, they need to be able to tell the front office not to make a sale and have the support of the upper-level management staff.
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Establish record-keeping procedures. This is important for risk management because you need to be able to show shareholders that you are taking every reasonable and necessary step to keep them from losing their money on bad investments.
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References
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