| Substantial
operational risk is incurred when processing corporate actions
manually. With no common external standards for the actions
themselves, but with many players in a two-way information flow,
these communication exchanges have often been considered too
specialised and complex to automate successfully.
A typical firm will receive notification details via SWIFT, fax,
and telex from its custodians, as well as from different data
vendor sources. Reconciling this redundant information and
detecting mismatches is the first and largest task facing any
corporate actions department.
Not only is it expensive when a corporate action is not
processed in time – it is also bad for the image of the institution
as a provider of portfolio management services. Corporate action
updates are crucial and have the potential to lead to substantial
loss on the customer’s portfolio. Timely processing is important
but proper interpretation of the corporate action’s content is also
crucial. Finally, as manual processes do not scale with volume, the
rising volume of corporate actions and the seasonal nature of such
events can cause major processing headaches.
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