Industry-wide complacency and unsystematic monitoring are hampering efforts to achieve smarter operational efficiency for optimizing enterprise reconciliation, according to a global survey of banking and capital markets technology executives by CEB TowerGroup analysts and SunGard.
The survey, which questioned 117 senior operations and IT executives in primarily Tier 1 and Tier 2 institutions, found high levels of confidence in enterprise reconciliation capabilities, with 70% of respondents claiming to maintain and monitor an inventory of all their global reconciliation activities.
But in reality, well over a third of these (37%) are only doing so on an ad hoc, unscheduled basis, with large gaps in enterprise coverage of mainstream cash, payments and securities workflows.
“Within financial institutions, reconciliation centers of excellence are service providers, and they are responsible for delivering multiple and complex sets of processes on a daily basis and a global scale,” said Richard Chapman, director, product management for SunGard’s IntelliMatch business. “To optimize the performance and cost-effectiveness of this activity, we believe they should tackle the three main challenges of fragmentation and delivery quality to help ultimately meet their goal of achieving smarter operational efficiency.”
Overall, the survey found that managing the quality and effectiveness of enterprise-level reconciliation is an ongoing challenge for firms, citing a lack of operational maturity and fragmented automation as obstacles to an optimized, scalable and operationally efficient enterprise reconciliation environment.
Separately, Gresham Computing announced it has completed the implementation of Clareti Transaction Control (CTC) for a large asset manager based in London with a global client base. The asset manager will use CTC to reconcile its net asset value (NAV) calculations against the records held by custodians and prime brokers on a daily basis – providing an accurate and timely view of all investments for its London-based business.
CTC will immediately highlight any differences detected in the NAV positions between the firm’s internal systems and the records provided by custodians.
“Reconciliation is critical to ensuring accurate positions and correct net asset values,” said Bill Blythe, global business development director, Gresham Computing. “This will allow operational staff to focus their attention on investigating discrepancies and resolving exceptions, dramatically reducing operational risk. It will also help them to comply with current and future regulatory reporting requirements including EMIR and Dodd Frank.”
SunGard recommends that in order to help mitigate the potential for poor customer service and system inefficiency, firms need to actively maintain an inventory of reconciliation tasks and automate the monitoring and optimization of all processes within it.
Firms recognize the complex challenge that reconciliations best practice represents, especially given high levels of functional, operational and technology fragmentation. 51% of survey institutions report 10 or more different systems performing reconciliation functions; a quarter use more than 20 systems across their global enterprise.
Executives are only well-informed and confident about their reconciliation practices across a narrow subset of mainstream core activities and asset classes. They report the highest amount of confidence in completing general ledger and balance sheet reconciliations, and the core reconciliation of cash, foreign exchange and securities. But 25% lack insight into how their institutions perform custody and broker reconciliations, and nearly 30% “don’t know” how they reconcile mortgages, loans, derivatives and commodities.