Corporate actions, such as dividend payments, merger and acquisition activities, rights issues and more, can often require treasurers to play a role, usually to ensure that the cash exists at the right time and in the right place for the corporate action to occur. The efficiency of corporate actions can be hampered by manual processes, however, and according to a survey by SIX there is a great industry need for automated corporate actions solutions. The survey was carried out from April to June 2020 to analyse current corporate actions’ operational and technology challenges and opportunities.
Overcoming manual processes
With the vast majority (87%) of those surveyed currently processing part of their corporate actions manually and some 32% processing more than half of their corporate actions manually, it is clear that the time for automated solutions is now. This illustrates the extent to which day-to-day operations remain heavily contingent on human intervention. Humans 'touching' data generally results in an increase in the emergence of operational risk through errors, while significantly growing corporate actions volumes, and an inexorable increase in their complexity further exacerbates the situation.
But firms will face challenges in the form of data quality and legacy technology/infrastructure, as over half (51%) reveal that this is the biggest barrier they encounter when turning to automation. Legacy technology negatively impacts operational performance. Therefore, the provision of consumption-ready, high quality data ready to integrate, must therefore be considered a highly sought-after asset to overcome these issues.
Importance of real-time data
Almost 60% of respondents indicated that either intraday corporate actions data is critical (12.9%) or as close as possible to real-time delivery is required (45.2%), illustrating just how crucial delivery timeframes are for industry participants.
Firms are looking to automate their corporate actions processing by way of implementing new technologies, with 38.7% indicating that they already have projects underway. A further 25.8% have plans to initiate such projects over the course of the next one to three years. Significantly, more than one-third (35.5%) of respondents indicated that they do not currently have any plans to initiate a project to increase their levels of automation, although an obvious assumption based on that finding is that appreciable numbers of capital markets firms have already completed such projects.
The migration to ISO 20022 has an important role to play in the automation of corporate actions. Respondents illustrated a general keenness to embrace various means of automating their corporate actions processing, with 44.0% indicating that their firm had already embarked on such projects - with an additional 20.0% indicating that they would be doing so in the next one to three years - although surprisingly 36.0% indicated having no plans to embrace or initiate ISO 20022 projects in the coming years.
AI stands tall
The survey also provided insight on the types of technology that firms believe will improve the quality of corporate actions processing with over 40% of firms selecting artificial intelligence (AI), 20% selecting cloud-based solutions and a quarter selecting blockchain/distributed ledger technology. AI was also clearly identified (48%) as the technology that will generate the most insights from corporate actions data, with cloud-based solutions and machine learning (both 20%) trailing in second place.
"This survey shows the increasing requirement for automation to allow firms to process data as close to real time as possible, eliminating failures and strengthening a firm’s offering," said Annelotte De Nanassy, senior product manager, Financial Information at SIX. "By relieving themselves of such a manual labour-intensive task, they will be able to reduce operating costs, manage growing corporate actions volumes and, in turn, service their clients better."
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