2. Why is this a problem?
Why does it matter that the majority of our corporate action notifications are being recorded by hand today? Is this just a question of cost and risk or is there more to this?
It's investors who end up carrying the risk
Each of us is paying for this manual processing.
As the end beneficiaries of corporate events it is no surprise that investors carry the burden of responsibility for corporate actions. It is their portfolio valuations that will rise and fall depending on their elections after all.
Yet it is less understandable that investors should feel 20% more corporate action risk than their banking providers and double the level of risk that CSDs feel.
With corporate action data quality diminishing as it progresses through the lifecycle, the end-investor is paying for being at the end of the chain: in risks and costs that each of us carries in our pensions every day.
The risks are client facing. We're not hiding them.
Even within the investment lifecycle, there is a widely held belief that our back offices are doing a good job of containing corporate action risks and protecting the wider business from their downsides.
Yet corporate action risks and errors are visible to more stakeholders than we perhaps think - not least of all our customers.
Client SLA breaches are the single biggest consequence of corporate action errors, highlighting that our manual processes are turning up at the heart of the client relationship. As banks and fund managers struggle increasingly to gain any differentiation over their peers, the emergence of corporate actions as a scorecard criteria in many relationship reviews is evidence of how corporate actions are moving from the shadows of the back office into the harsh focus of the client revenue line.
The potential damage of corporate action errors doesnt stop there. Banks, brokers and institutional investors all see significant internal audit issues as a second area of fall out - adding the scrutiny of Compliance and Risks departments alongside increasingly stringest customers.
Corporate actions are no longer just a cost to bear. They are a source of differentiation and evidence of management competence.