12.31.2013
By Terry Flanagan

Streamlining Corporate Actions

One billion dollars. That’s the amount that industry insiders estimate is lost through missed or mismanaged corporate actions events every single year, according to Brendan Farrell, executive vice president of SunGard XSP, SunGard.

“And it is money that is no longer available to pay out to shareholders — or to invest in organizational improvements that enhance customer responsiveness and drive competitive advantage,” Farrell says in a whitepaper. “Losses like these result from current industry conditions and longstanding practices that impede optimal processing performance. Doing nothing to address them prolongs problems and ultimately incubates risk.”

The higher volume of messages and complexity of corporate actions is driving risk, Farrell says.

According to SWIFT, the total volume of corporate actions message traffic across the network in 2012 was 104.2 million, with a projected 2013 volume of 115 million messages.2 In addition to the growth in message traffic, corporate actions events are becoming more complex in nature. For example, event types have grown to over 100 possible individual actions.

Inefficient manual process and workflow add to the burden. Organizations already under pressure to meet pending deadlines are tasked to address and establish new workflow processes. Their risk profiles can rapidly change for the worse if they take no action or don’t know how to properly adapt their current environment and equip IT to securely and efficiently handle an increase in event types and processing workloads, says Farrell.

Outdated or ill-equipped home-grown systems create an underlying liability. Many organizations employ an internal patchwork of systems to tie together email, spreadsheets and other applications to help manage corporate actions. “IT must manage, maintain and secure multiple systems as a result—with even greater effort required to accommodate emerging business and compliance requirements, as well as integrate new capabilities,” says Farrell.

Systems that are not designed to work together or specifically handle corporate actions can require excessive time, effort and expense to manage. Meanwhile, firms must be sure that all these systems are secure, or you run the risk of regulatory non-compliance. In addition, if these in-house systems cannot scale to meet the growing volumes of corporate action events, delays in processing may result in liability issues and penalties due to missed deadlines.

By streamlining and centrally managing the processing of corporate events through automation, organizations can work more productively, efficiently, consistently and securely to process events within required time frames.

“Time savings and improved interaction are common outcomes of automating corporate actions processing,” Farrell says. “As a result, you’ll experience higher straight-through processing (STP) and be better prepared to handle fluctuating workflow volumes and meet service-level agreements.”

Application of an automated corporate actions process means that corporate actions information is automatically compiled from many disparate sources to create a single event using configurable logic.

“Your staff no longer needs to manually send out requests to and follow up with custodians, brokers and other parties to receive the data,” Farrell says. “When new information becomes available, it is automatically captured and applied to the event upon receipt. Your staff can be confident that all relevant information has been collected and that individual records are complete.”

Since corresponding files on related back-office systems have been automatically updated, as well, data integrity and compliance concerns are minimized, he said. “Meanwhile, your staff retains the ability to manually update events in exception-handling workflows.”

Related articles

  1. Upstart exchange has seen market share increase to near 4%.

  2. OCC reported trading revenue of $8.1bn in the second quarter of 2021.

  3. Goldman Sachs Asset Management’s fundamental equity business manages over $20bn in thematic equities.

  4. Electronification of the municipal bond market also presents a large opportunity.

  5. Parsing 'Best Ex' for Options Trades

    Clients want short-dated options to hedge or trade with more flexibility around market-moving events.