Guest Contributor: Chris Kotsifas, Founder of STP Consulting Solutions, LLC
In the aftermath of the recent financial crisis, there’s a renewed emphasis in operational transparency and risk reduction. This has led many to look into their organizations and revisit problematic areas namely corporate actions processing and reference data which have typically been pushed aside for more easily attainable business process automation such as trade lifecycle and reconciliation. In most securities firms, corporate actions processing is an area overdue for automation enhancements and standards usage. Most firms are also being asked by the front office or their clients to improve and enhance their corporate actions services from quicker more accurate notifications to mobile apps for reporting and instructing.
We also have this occurring at the same time as the new ISO 20022 messaging standard has been released. The DTCC’s commitment to migrating to this standard for all corporate actions messaging with their direct participants and clients by 2015 will also serve as a domino effect in increasing standards usage and requiring firms to re-engineer their dated processes and architecture.
What are senior managers in both operations and IT to do? Corporate Actions operations and IT need to step back and assess where they are today and what they want out of their future state. In moving to automate and utilize ISO 20022, firms should use this as an opportunity to re-engineer their process. For many, migrating to ISO 20022 should not be viewed as a technology and data mapping exercise. This is a chance to move your process and infrastructure into a future state to support growth, provide operational transparency, integrate to downstream systems, reduce risk, enhance workflow, and allow for operational staff to allocate more of their time to analyze complex actions and not on the typical faxes and spreadsheets.
It’s often difficult to start a corporate actions initiative and truly move it forward. So what should you consider?
- Conduct an honest assessment of your current state. We often conduct workshops to ground all stakeholders at the beginning of an assessment.
- Understand the functional features required to support the corporate action lifecycle and its integration with other internal systems and external parties.
- Consider all cross functional implications upon conducting a corporate actions initiative.
- Where’s the data coming from to support an automated process (market data, security master, account data, bank/broker data, client data, trades, positions, securities lending, tax, etc)
- Who owns and supports this data? What are their SLAs to us?
- What dependencies are on the business and IT areas to support our initiative?
- Dig deep during a vendor evaluation. Determine appropriate scenarios for vendors to demonstrate and particularly use ones that create exceptions. It is imperative for users to understand exception root cause and remediation and for vendors to depict how this is surfaced for easy and intuitive navigation.
- Conduct a high level gap analysis on your preferred vendor prior to signing a contract.
- Don’t be shy to meet with the front office on their needs and requirements as you’ll usually find them a willing ally to justify the investment.
- Determine a pragmatic road map and comprehensive program plan. Set realistic goals and milestones to set the right expectations with senior management, operational staff, IT, front office, and external parties.
These are some of the areas to focus on at the start of a complex initiative like automating corporate actions. We’ll discuss implementation of corporate actions solutions in a follow up blog. For additional questions, you can reach me at firstname.lastname@example.org.
To view Part II of this blog, “Corporate Actions: The Way Forward Part II,” click here.