Risk Reduction Becomes Investment Driver for Corporate Actions Projects
SmartStream Technologies, a transaction lifecycle management (TLM) specialist, has launched new research, entitled ‘The Never-ending Story? Progress in the Automation of Corporate Actions’.
Based on in-depth interviews with senior executives in the UK and US conducted by A-Team Group, the report reveals where progress has been made to date and what is left to do in order to create more efficient event management. According to the report, lowering operational costs has been superseded by risk reduction as the critical driver for automation projects and this has accelerated since the financial crisis.
Existing problems with manual steps in the corporate actions process have been exacerbated in the last two years due to volume growth and increased complexity. This has placed increased pressure on back offices already struggling with event processing and the rising costs associated with having to hire staff to cope with volume demand.
Although progress has been made in the automation of the simpler and more standardised event processes such as data capture and reconciliation, the report also revealed where significant challenges remain. Custodians, prime brokers, asset managers and banks in both the US and the UK highlighted issuer announcements, election responses and proxy voting as the areas causing processing issues. The research also suggests that automation projects at these firms will now start to focus on areas including entitlement confirmations, instructions processing and client communications.
Paul Phillips, senior business development consultant at SmartStream, said: “In the current climate where firms are examining every operational aspect to understand where their biggest risks lie, it’s no surprise that the manually intensive world of corporate actions processing is now gaining attention at the board level of these institutions. The inherent problems in corporate actions processing are well documented but it’s clear from this research that the pace of change is causing major issues at firms of all sizes globally. Greater automation cannot be achieved in isolation, it depends heavily on developments in infrastructure, standards and technology, and our survey participants were vociferous in their demands that the industry and vendors work together to progress this.
“A great example of this is the recent draft ISO 20022 announcement messages by the DTCC and SWIFT for the US, extending the use of standardised messaging to that market where take up has traditionally been slower than Europe or Asia. However, as the report shows outside of the US the highly fragmented market infrastructure creates significant operational challenges to firms that are unlikely to be overcome in the short term.”