Lack of corporate actions automation remains a serious concern, ValueExchange report finds
30 November 2022 Canada
Image: conceptualmotion
Corporate action businesses are overloaded by increased securities volumes, according to a recent paper by the ValueExchange.
The paper, ‘Reimagining the Corporate Actions Operating Model’, finds that difficulties to scale can be seen across the industry, with the key pressure points differing between groups. Brokers are dealing with talent acquisition and turnover issues, while custodians are facing product complexity and investors are up against significant volume growth.
The result of this is increased manual processing costs of corporate actions, demonstrating the overreliance on people and the lack of automation around scaling, the report says. “We have run out of scale in our corporate actions processes,” it states, with those who have held off on automation now seeing negative returns on scale.
Beyond scaling cost, corporate actions data errors are on the rise. This results not only in expensive error payouts, but also has an impact on regulation, project delays, audit risks and failing trades. This is therefore an issue that affects far more than the back office.
A lack of standardisation between data sources in the corporate actions lifecycle means that the human component of the process is considerable. Sources must be verified and corrected and event data enriched, all by hand. The constant duplication of data is costly and inefficient, with the need for manual intervention limiting the possibility of scale.
The ValueExchange reports that this situation is “most acute in the areas identified as having the highest levels of portfolio growth in 2022,” compounding the problem. Research also finds that voluntary events is the area most impacted by manual data sourcing and verification difficulties.
Looking at solutions for the problem, the ValueExchange states that the front-end of the event processing is where market players will be focusing when building scale. The report finds that there is an emphasis on transformational rather than incremental change across the industry.
In regard to upcoming technology, ISO 20022’s introduction is expected to drive automation, which may aid scaling efforts. The report also finds that outsourcing remains an essential growth enabler, lowering costs and mitigating error incidents.
The paper, ‘Reimagining the Corporate Actions Operating Model’, finds that difficulties to scale can be seen across the industry, with the key pressure points differing between groups. Brokers are dealing with talent acquisition and turnover issues, while custodians are facing product complexity and investors are up against significant volume growth.
The result of this is increased manual processing costs of corporate actions, demonstrating the overreliance on people and the lack of automation around scaling, the report says. “We have run out of scale in our corporate actions processes,” it states, with those who have held off on automation now seeing negative returns on scale.
Beyond scaling cost, corporate actions data errors are on the rise. This results not only in expensive error payouts, but also has an impact on regulation, project delays, audit risks and failing trades. This is therefore an issue that affects far more than the back office.
A lack of standardisation between data sources in the corporate actions lifecycle means that the human component of the process is considerable. Sources must be verified and corrected and event data enriched, all by hand. The constant duplication of data is costly and inefficient, with the need for manual intervention limiting the possibility of scale.
The ValueExchange reports that this situation is “most acute in the areas identified as having the highest levels of portfolio growth in 2022,” compounding the problem. Research also finds that voluntary events is the area most impacted by manual data sourcing and verification difficulties.
Looking at solutions for the problem, the ValueExchange states that the front-end of the event processing is where market players will be focusing when building scale. The report finds that there is an emphasis on transformational rather than incremental change across the industry.
In regard to upcoming technology, ISO 20022’s introduction is expected to drive automation, which may aid scaling efforts. The report also finds that outsourcing remains an essential growth enabler, lowering costs and mitigating error incidents.
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