Case Study 38.2: Priya's Business Case That Wasn't — When the Numbers Don't Work
Overview
Not every RegTech ROI analysis concludes with an investment approval. Some of the most professionally important business cases Priya Nair has built over her seven years as a Big 4 RegTech Senior Manager have been the ones that concluded: this investment, as specified, is not economically justifiable.
Those engagements — the ones where the honest answer is "no" — are in some ways the most valuable, because they are the ones that test whether the ROI discipline is genuine or performative. It is easy to build a methodology that always recommends the investment the client wants. The harder skill is building a methodology rigorous enough to surface genuine negative cases and communicating those findings in a way that is useful rather than simply deflating.
This is the story of one such engagement.
The Engagement
The client was a large UK-headquartered asset manager — call it Thornfield Capital — with approximately £45 billion in AUM across UK, EU, and Asian markets. Thornfield's compliance function had been managing regulatory reporting across three jurisdictions using a patchwork of systems: an aging on-premise regulatory reporting platform for UK filings, a third-party service bureau for EU submissions (AIFMD, EMIR, MiFIR), and a largely manual process for Asian regulatory requirements.
The proposed solution was a single cross-jurisdictional regulatory reporting platform: a cloud-based system that would consolidate all regulatory reporting across the three jurisdiction clusters into one data model, one workflow, and one technology vendor relationship.
The platform vendor's initial proposal was ambitious: a full implementation covering all regulatory filing types, with multi-jurisdiction data mapping, automated reconciliation, and a regulatory change management module that would track regulatory updates and flag required schema changes. The all-in price was substantial.
Priya was brought in, on a fixed-fee engagement, to build the independent business case.
The Numbers, Honestly
Priya spent four weeks on the analysis. She interviewed the compliance reporting team (five analysts, one senior manager, part-time contribution from the Head of Compliance), the IT function (who would manage the technical implementation), the existing third-party service bureau relationship manager, and the vendor's implementation lead.
She built the cost model and the benefit model separately, then compared them.
Cost model — three-year total:
| Cost Item | Year 0 | Year 1 | Year 2 | Year 3 | Total |
|---|---|---|---|---|---|
| Platform license | £0 | £420,000 | £430,000 | £441,000 | £1,291,000 |
| Implementation | £680,000 | £0 | £0 | £0 | £680,000 |
| Data mapping & migration | £210,000 | £0 | £0 | £0 | £210,000 |
| Integration (IT internal cost) | £145,000 | £0 | £0 | £0 | £145,000 |
| Training | £35,000 | £12,000 | £12,000 | £12,000 | £71,000 |
| Ongoing configuration/maintenance | £0 | £85,000 | £90,000 | £95,000 | £270,000 |
| Total | £1,070,000 | £517,000 | £532,000 | £548,000 | £2,667,000 |
Note: the three-year total of £2,667,000 was significantly above the initial vendor estimate of £2.1M, because the implementation engagement had expanded in scope during the discovery phase and the IT integration work had been underestimated in the initial proposal.
Benefit model — three-year total:
Priya built each benefit category with documented assumptions:
Cost efficiency: - FTE savings from automating UK regulatory reporting: 1.2 FTE at £75,000 fully-loaded = £90,000 per year - FTE savings from eliminating service bureau (replacing it with in-house platform): the service bureau cost £320,000 per year. The platform replaced this cost but required one additional internal analyst (£85,000) for ongoing management. Net saving: £235,000 per year - Reduction in manual error and resubmission cost: £25,000 per year (estimated from historical resubmission frequency)
Risk reduction: - The existing manual Asian regulatory processes were genuinely inadequate and represented a real regulatory risk. Expected value of risk reduction: Priya estimated a 6% annual probability of material enforcement action in one of the Asian jurisdictions, with an expected outcome of £400,000. Risk reduction benefit: 50% reduction in probability × £400,000 = £12,000 per year expected value. (This number was small because Thornfield's Asian reporting volume was modest and the jurisdictions in question had relatively lower fine severity than UK/EU.)
Revenue enablement: - Faster reporting enabling faster product launches: not quantifiable at this stage — Thornfield's product development team could not identify specific launch delays attributable to compliance reporting limitations.
Regulatory relationship: - Consolidating to a single platform would improve data quality and consistency across jurisdictions, which had audit and supervisory value. Estimated at £20,000 per year in reduced audit and examination time.
Three-year benefit total (undiscounted):
| Benefit | Y1 | Y2 | Y3 | Total |
|---|---|---|---|---|
| Service bureau elimination (net) | £235,000 | £235,000 | £235,000 | £705,000 |
| UK FTE savings | £90,000 | £90,000 | £90,000 | £270,000 |
| Error/resubmission reduction | £25,000 | £25,000 | £25,000 | £75,000 |
| Risk reduction (expected value) | £12,000 | £12,000 | £12,000 | £36,000 |
| Regulatory relationship | £20,000 | £20,000 | £20,000 | £60,000 |
| Total | £382,000 | £382,000 | £382,000 | £1,146,000 |
Three-year NPV at 8% discount rate: - Year 0: −£1,070,000 - Year 1: (£382,000 − £517,000) / 1.08 = −£125,000 - Year 2: (£382,000 − £532,000) / 1.1664 = −£128,601 - Year 3: (£382,000 − £548,000) / 1.2597 = −£131,775
Three-year NPV: −£1,455,376
Not a negative NPV that might be acceptable on a longer horizon. A deeply negative NPV that would not turn positive until well beyond year seven, if ever.
The Conversation
Priya requested a meeting with Thornfield's Head of Compliance, Isabelle Marchetti, and CFO, Ronan Devereux. She brought a three-page summary of her findings.
She had considered how to open this conversation carefully. Her options were: lead with the number (blunt but clear), lead with methodology (analytical but potentially defensive), or lead with what the analysis revealed about the underlying situation. She chose the third.
"I've spent four weeks on this," she said. "The conclusion is that the project as specified doesn't close the business case. But I think what we've actually found is that the project was overspecified for what Thornfield actually needs. Let me show you what I mean."
She walked through the cost model first. The largest single driver of cost was not the platform license — it was the implementation. The full-scope implementation, covering all jurisdiction clusters and all filing types simultaneously, was quoted at £680,000. This was driven primarily by the complexity of mapping Thornfield's data structures to the platform's model across three jurisdictions at once.
"The question worth asking," Priya said, "is whether you need to do all three jurisdictions at once. Or whether a phased approach — starting with UK and EU, where the benefit is largest, and adding Asia in Year 2 or 3 when the platform is mature and the mapping work is largely done — might produce a very different cost profile."
She put the alternative model on the table.
The Phased Alternative
Priya had built the phased approach case as an alternative alongside her primary analysis.
Phase 1 only (UK + EU, Years 0–3):
| Cost Item | Year 0 | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|
| Platform license | £0 | £260,000 | £267,000 | £274,000 |
| Implementation (UK + EU only) | £310,000 | £0 | £0 | £0 |
| Data mapping & migration | £95,000 | £0 | £0 | £0 |
| IT integration | £65,000 | £0 | £0 | £0 |
| Training | £20,000 | £8,000 | £8,000 | £8,000 |
| Ongoing configuration | £0 | £52,000 | £55,000 | £58,000 |
| Total | £490,000 | £320,000 | £330,000 | £340,000 |
Three-year total cost: £1,480,000 (versus £2,667,000 for the full scope).
Benefits in Phase 1 (UK + EU only):
The service bureau eliminated (EU filings only — partial elimination): £180,000 per year net saving UK FTE savings: £90,000 per year Error reduction (UK + EU): £22,000 per year Regulatory relationship: £18,000 per year Risk reduction: £8,000 per year (Asian risk not addressed in Phase 1)
Three-year benefit total: £318,000 × 3 = £954,000
Phase 1 NPV at 8%: - Year 0: −£490,000 - Year 1: (£318,000 − £320,000) / 1.08 = −£1,852 - Year 2: (£318,000 − £330,000) / 1.1664 = −£10,288 - Year 3: (£318,000 − £340,000) / 1.2597 = −£17,464
Phase 1 three-year NPV: −£519,604
Still negative, but in a materially different range. The Year 3 annual cash flow is nearly breakeven (-£22,000/year), meaning the investment would likely turn NPV-positive by Year 4 or 5.
More importantly: what the phased approach revealed was that the full-scope project's business case was being dragged down primarily by the Asian jurisdiction implementation cost, which contributed £390,000 of Year 0 cost against a risk reduction benefit of only £12,000 per year. The Asian piece was not economically justifiable in the near term. In three years, if Thornfield's Asian AUM grew materially, the calculation would change.
The Outcome
Isabelle Marchetti's first response was quiet. Then she said: "We've been planning this for eight months. The board signed off on the concept at the last strategy day."
Priya nodded. "I know. And the concept is right — a consolidated platform is strategically correct. The question is the scope and the sequencing."
Ronan Devereux, who had been reading the phased case, looked up. "If we do Phase 1 and break even by Year 4, what does Phase 2 look like?"
Priya had modelled this. Phase 2 (adding Asia in Year 3 or 4, on a platform that already has the data model built and the team trained) would cost approximately £220,000 in incremental implementation costs — far less than the £390,000 of including it in the initial scope — and at that point the Asian regulatory risk benefit would be worth including. Phase 2 incremental NPV was marginally positive over two years.
The combined Phase 1 + Phase 2 business case, staged over five years, was approximately NPV-neutral: not a compelling investment thesis, but defensible as a risk-management and operational resilience investment rather than a pure ROI play.
Thornfield proceeded with Phase 1. They deferred Phase 2 pending a review of their Asian business growth trajectory.
Lessons from the Case
Lesson 1: The ROI framework must be capable of generating "no" conclusions, or it has no credibility. A business case methodology that always recommends proceeding is not a business case methodology — it is a rationalisation tool. Priya's willingness to tell a client that their planned project was not economically justifiable is what makes her advice valuable. A consultant who always recommends the client's preferred course of action has a short career.
Lesson 2: A negative finding on the proposed project is not the same as a negative finding on the underlying need. Thornfield genuinely needed a better regulatory reporting infrastructure. The full-scope project as specified was not the right way to meet that need at that cost. The phased alternative addressed the real need more efficiently. The ROI analysis revealed this; it did not block the investment.
Lesson 3: Scope is a cost variable. The single largest driver of the unfavorable NPV was not the recurring license cost — it was the upfront implementation scope. Full-scope, multi-jurisdiction, simultaneous implementations are far more expensive than phased implementations. When a business case comes back negative, the first diagnostic question should be: which cost items are discretionary? What can be phased, descoped, or delayed without defeating the underlying business purpose?
Lesson 4: Communicate negative findings early and directly. Priya did not send an email. She requested a meeting with the decision-makers and presented in person. Negative findings delivered asynchronously are processed in isolation; negative findings delivered in person allow the conversation to move immediately to alternatives. The meeting where Priya presented the negative analysis was also the meeting where the phased alternative began to take shape.
See also: Chapter 38, Section 38.4 (Business Case Framework) and Section 38.7 (Communicating to the CFO).