Set out below is a breakdown of our 2021/22 budget for core service delivery. By clicking on any section, you will be presented with a year on year comparison of the costs, an explanation of the change and how we will ensure efficiency in what we spend.
2021/22 core service budget costs = £9,390k
Our 2020/21 budget:
The increase in costs from 2020/21 reflects inflationary pressure, targeted additional hires and the higher exit run rate from 2020/21 (66 employees at the end of 2020/21 compared to the average of 61 for the year). People related costs include all payroll related costs, recruitment, training and engagement. This excludes the cost of people recharged to the Bilateral Transactions Programme. These costs are accounted for within the dedicated improvement programme budget.
In our 2020/21 Business Plan we committed to recruiting staff into enduring roles, increasing the size of the MOSL team to 64 permanent employees. This supported our commitment to build capability and better resource ourselves to deliver for the market.
We are currently forecast to end the year with 66 employees having hired a further two above plan. These additional employees were hired through the move to insource core legal activity – with an in-house legal team being more efficient and cost effective than using third parties. Our plan for 2021/22 includes a further three new hires. This includes one full time employee (FTE) to increase our cybersecurity capability and two FTEs to support the trading party audit element of our market audit function (bringing this activity in-house and reducing costs).
How we are driving efficiency:
Since 2019/20 we have moved away from our reliance on day-rate contractors (from 10 contractors/interims at peak to zero by the end of 2020/21). We will continue to have zero contractors in 2021/22. This delivers a more cost efficient and stable resourcing model in line with our strategic priority of Organisational Capability.
We have built our in-house legal capability during 2020/21 by hiring a legal counsel and paralegal. This has generated savings of circa £66k in 2020/21 with expected savings increasing to £130k in 2021/22.
During 2021/22 we will hire two new internal auditors and move the majority of trading party market audit activity to an in-house delivery model. This is more cost effective and enables us to leverage the expertise and insight of the wider MOSL team. This also reflects feedback from members that they would prefer this work to be delivered by an independent MOSL team to drive better value and retain the knowledge within the business.
Our 2021/22 plan also assumes that a proportion of our Bilateral Transactions Programme will continue to be delivered by MOSL employees seconded into the programme. By delivering our core services more efficiently we have been able to free up capacity for our team to deliver more of this programme, reducing reliance and cost spent with third parties and keeping knowledge within MOSL.
Our 2021/22 budget:
This cost reflects the cost of maintaining the CMOS system, provided by CGI. The year-on-year change reflects an inflationary increase in line with contractual terms. No changes in key volumes are expected.
How we are driving efficiency:
The contract with CGI was renewed in April 2020 following a fundamental review of scope, rates and how services are delivered. This renegotiation delivered savings of circa £180k over the new contract period as well as reduced rates for system change through a revised delivery model. The renegotiation of this key contract provides comfort over the efficiency of this significant component of our core services budget.
Our 2021/22 budget:
This area relates to the implementation of approved code changes with costs covering the adjustments required in CMOS as well as legal review of code changes. The volume of changes in 2020/21 has been lower than expected, reducing costs by circa £70k. Our 2021/22 budget assumes a return to average levels of code change activity – but still delivers an overall cost saving of circa £92k. This is driven by efficiency from the insourcing of legal review activity.
How we are driving efficiency:
The cost of implementing code changes has been made more efficient through the insourcing of legal review activity, following the recruitment of a legal counsel and paralegal during 2020/21. Through our improvement programmes of Market Code Simplification and Market Governance, we may identify further opportunities to reduce the implementation cost of code changes. As part of our Modernisation of Market Facing Systems programme, we will also seek to ‘componentise’ CMOS, enabling changes to be made more quickly and therefore at lower cost and overall risk.
Our 2021/22 budget:
The increase in costs relates to two changes. The first relates to increased scope (circa £85k) with the budget for 2021/22 including new market design activity such as new Panel workstreams on strategic initiatives and reinstatement of quarterly independent Panel member meetings. The second relates to the impact of COVID-19 (circa £80k) – although our plan assumes that 80 per cent of meetings remain online rather than in person, there will still be more in-person meetings than in 2020/21, increasing travel expenses and meeting room costs.
How we are driving efficiency:
Retaining 80 per cent of meetings as online with remote working will allow us to retain circa £100k of savings in 2021/22 versus pre-COVID levels. The ongoing Market Governance Review, Market Code Simplification work and Market Assurance reviews are expected to provide recommendations on how we can adjust the way the Panel and its committees operate to drive value for the market. Improvements from these reviews will be rolled out across the next three years.
More detailed information on Panel delivery and costs can be found in the specific deep dive.
Our 2021/22 budget:
Cost in this area includes software licences, IT tool support services, internet and mobile costs. The increase in costs from 2020/21 reflects inflationary pressures, as well as the cost of software tools that enable our planned longer-term, sustainable increase in online meetings.
How we are driving efficiency:
Costs in these areas are regularly challenged to ensure commercial value for money. The spend on additional capability to enable online meetings drives substantial efficiencies elsewhere in our plan - reducing overall travel and related time costs from MOSL employees and Board, the Panel and committee members. It also enables us to reduce external venue hire costs. This reflects in our plan as we will retain the majority of Panel and committee meetings virtually, with only around 20 per cent being ‘in person’. This considers learnings from COVID-19 and the benefits of holding more meetings or events online.
Our 2021/22 budget:
Cost in this area includes the statutory financial and business continuity audits, insurance costs, subscriptions and external communications support. The increase in costs is driven by increased scope in 2021/22 (circa £40k) including additional insurance cover in higher risk areas and consultancy support for the new unified disputes process. These additional costs are partly offset by reductions elsewhere, including a full year of savings from the insourcing of legal services and broader challenges applied on what can be delivered in-house or is not required at all.
How we are driving efficiency:
We continue to assess all spend on professional services to ensure that it remains a relevant priority and delivers value for members. The insourcing of legal services represents an example of where in-house provision has been considered more efficient, given the critical mass of regular annual activity. We have also reduced the risk profile in certain areas, as such as tax compliance, enabling us to reduce spend on professional services in this area over the last two years.
Our 2021/22 budget:
Cost in this area increases as a result of expected inflationary rises alongside increased cleaning costs as we resume office occupancy.
How we are driving efficiency:
As the impact of COVID-19 diminishes we will continue to assess our longer-term office space requirements and how we balance the need and benefits of a collaborative workspace with potential efficiencies from increased remote working. While changes could generate potential cost efficiencies from 2022/23, we believe it is currently too early to assess and make decisions for the longer-term in this area.
Our 2021/22 budget:
Market audit relates to the targeted audit of trading parties, which MOSL carries out on behalf of the Panel, as well as the independent external audit of MOSL’s own compliance with its obligations under the codes (including specific testing of the settlement process). Spend with third parties will reduce, with most trading party audit activity moving in-house in 2021/22. The total volume of audit activity is expected to remain the same – the reduction in third party cost is offset by an increase in MOSL’s people cost budget.
How we are driving efficiency:
Costs in this area have reduced substantially from the 2019/20 level which was circa £410k. The level of trading party audit activity has been challenged to ensure that this is targeted to key priority areas that can drive value for money for the market overall. The level of activity for 2021/22 is expected to remain the same as 2020/21, albeit delivered in part by insourced resource. Whilst this is cost neutral for 2021/22, in the longer-term an insourced model should enable an increased volume of trading party audit activity and will leverage insight from across MOSL to increase the value from this work.
