Corporate Actions Processing: Is Now the Time to Automate?

January 17, 2013

iStock_000002575226XSmall[1] The discussion of corporate actions processing as a “pain point” for financial services (FS) back-office operations has been an on-going conversation. We even blogged about it a few years back (see blog here) where we noted a Security Technology Monitor article titled “5 Top Data Nightmares of 2011” named “Correctly Notifying Investors of Corporate Actions” as #3. The issues seem to heat up and have a lot of buzz but then die down and gets put on the back burner, until now, maybe…

In a recent Bobsguide blog (Evolving Corporate Actions: The Drivers of Transformation), it is suggested that a confluence of events may be the push FS firms need to address the increasing risk around corporate actions. The blog points to three drivers of the change; increased event complexity, enhanced scrutiny of risk and the change in the consumption of information.

As the industry engages in more complex and global investment options, the complexity of the corporate actions grows with it. FS organizations are responsible for gathering the information, properly processing it and disseminating it to their shareholders and throughout their organization in an efficient manner. Keeping on top of the events and understanding the intricacy of how to process and apply the actions is a nearly impossible task. Couple that with the fact that in many organizations much of this is still done manually and you have a recipe for a processing nightmare.

In addition, a stricter regulatory environment and an increased push for transparency are putting added pressure on every FS firm. Investors, compliance officers and regulators alike are reviewing and monitoring the risk associated with all types of transactions. Corporate actions are being particularly scrutinized due to the effect they can have on liquidity and trading decisions. It is imperative that the event information is both timely and accurate to avoid large risk exposure and costly mistakes.

The last driver, changing consumption patterns of the data is, in my opinion, what will prompt change more than anything else. As the blog suggests, the front-office is becoming more attuned to and scrutinizing the implications of events and the affect they have on their portfolios. Their customers are expecting accuracy and reassurance that their portfolios are being monitored and actively managed. Customers today, still feeling the sting of the 2008 financial crisis, are pushing more to understand risks associated with their investments. This is driving the need for more transparency and making any mistakes in processing more apparent and costly to firms (in both a monetary sense as well as in reputation and image). The demand from the end-client and the front-office will drive the transformation in the middle- and back-office.

While the customer push will be the primary driver, all of the factors noted are forcing companies to rethink their corporate action processes and put proper controls in place to get the needed information disseminated throughout the organization. At PORTIA we consistently monitor the changing nature of corporate action events and processes and continually incorporate the changes into our software solutions. We have made a significant investment in our Corporate Actions functionality to ensure our clients can reduce the time and risk associated with the manual entry and processing of corporate actions events. Our solutions offer a centralized corporate actions workflow, flexible processing solutions and automated feeds to the providers our clients work with, to drive efficiency in the processes. Automating the back-office and creating accurate data allows our clients to feed reliable information to their front-office and to the end-client in a timely manner providing the insight needed to make informed investment decisions.

– Claudine Martin, Product Marketing

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