Initially, understanding the current landscape and anticipating future industry trends are critical to developing a successful transformation strategy.

Establishing clear ownership, coordination, and accountability across the three lines of defense is fundamental to achieving a unified target state design, but many organizations struggle with this foundational principle.

Furthermore, integrating new technology into this design poses its own obstacles, especially when considering legacy infrastructure and data.

Even after a coherent target state design is achieved, securing the necessary resources, skillsets, and capacity to operationalize the enhanced framework remains challenging.

For these reasons, one of the most critical steps is creating the appropriate governance structure to manage and orchestrate the transformation from end to end. This structure provides the ability to measure progress and maximize value retention, with supporting capabilities to provide adequate training and promote the desired organizational culture shifts—all of which are essential for managing change effectively and sustainably scaling the target state framework.

Transformation management office (TMO)

The establishment of a centralized TMO is critical in orchestrating transformation initiatives. This office serves as the centralized hub for the broader effort, inclusive of maintaining alignment with the organization’s strategic objectives, driving program routines, facilitating communication across teams, providing transparent reporting for various stakeholder groups, and actively managing risks & issues.

Model management assessment framework

Prior to effectuating change, there must be a robust framework to evaluate existing modeling practices against market trends, industry leading practices, and regulatory standards. To minimize “time to impact”, AI tools & agents may be deployed to accelerate documentation reviews, perform regulatory mapping, and support identification of actionable insights. By identifying areas for improvement and aligning them against broader strategic objectives, organizations can develop an action plan to kickstart their transformation efforts.

Modeling subject matter expertise

As a critical step in achieving the desired target state, organizations must secure the appropriate modeling subject matter expertise, as these skillsets are foundational to building and/or enhancing strong model management frameworks, maintaining alignment with leading industry practices & organizational objectives, as well as providing the capacity to effectively navigate complexities on the transformation pathway. It’s critical that these resources not only build and/or enhance existing modeling frameworks but also support broader adoption from the modeling community.

Organizational design

Critically assessing organizational design is crucial for establishing clear roles & responsibilities across the three lines of defense, driving accountability, and understanding capacity needs within the target state framework. A strategic approach to organizational design ensures that each role is well-defined and aligned with broader objectives, fostering collaboration and ownership. This not only facilitates effective risk management but also supports operational efficiency, enhancing the ability to adapt to changing conditions or capacity needs.

Change management and training

Adopting a people-centric approach to change management and training is vital for ensuring organizational readiness and enabling adherence. By developing persona-based journey maps, organizations can identify key inflection points where targeted change and training support is essential, with mechanisms such as feedback loops to facilitate continuous improvement. This approach not only helps in addressing specific employee needs and challenges but also fosters

a culture of empowerment and adaptability, enhancing the overall engagement and resilience of the workforce. Additionally, incorporating real-time performance metrics can provide invaluable insights into the effectiveness of the change initiatives, allowing organizations to refine strategies dynamically and maximize the impact of their transformation efforts.

Culture

Cultivating an organizational culture that is receptive to change is paramount to realizing transformation goals. By promoting desired behaviors and setting the “Tone from the Top,” organizations can foster an environment where new practices are readily embraced and sustained for the long term. This involves engaging leadership at every level to embody and support change initiatives, helping to ensure the entire organization aligns with strategic objectives. Moreover, integrating recognition programs and incentives can motivate employees to actively participate in the cultural shift, reinforcing positive behaviors and enhancing team cohesion.

Technology and data

Technology enhancements are often siloed from the broader transformation efforts, yet their integration is critical for maximizing return on investment. When effectively utilized, advanced technology solutions facilitate efficient model operations and robust data governance, enabling actionable insights and informed decision-making. By integrating technology with overarching transformation goals, organizations can enhance model accuracy, agility, and strategic impact.