Corporate Actions Standards: Order From Chaos
A new report from Aite Group, LLC examines the challenges and benefits of corporate actions standards, and makes a case for ISO 20022. The report sheds light on the various aspects of corporate actions – from associated costs, to available solutions, to barriers – and looks at various corporate actions messaging standards slated to be implemented in the next two to three years, including Swift’s latest standard for corporate actions communications messages, ISO 20022.
Corporate actions are a subject that many in the investment industry prefer to avoid. They are difficult, fraught with risk and, if mishandled, can present very costly financial damage to firms. A major challenge to is that it is difficult to consistently and accurately translate corporate actions into electronic information for the ‘digital world’ that financial systems operate in today. Fortunately, ISO standards, such as Swift’s ISO 20022, remove the potential for misinterpretation of corporate actions because of different messaging terminology or protocols. Another important factor driving the adoption of corporate actions messaging standards is the cost savings that can be obtained by firms implementing corporate actions processing systems that can handle the new messaging standards.
“Corporate actions will continue to gain in number and importance as financial markets undergo changes and firms make major corporate modifications,” says Phillip Silitschanu, senior analyst with Aite Group and author of this report. “The risks associated with not adopting a messaging standard are too great to mitigate, as miscommunication in corporate actions messaging can cause major financial losses. Aite Group believes that the best solution for corporate actions will be to implement ISO 20022, which is a more advanced, flexible, and widely usable messaging standard both now and long-term.”