The challenges and opportunities facing financial institutions have never been more varied and multifaceted. Adapting to new technologies, preparing for the departure of LIBOR, and navigating geopolitical tensions, are all frequent targets of discussion. But one issue frequently slips under the radar: the dilemma of corporate actions.
With a boom in stock splits, dividends, and M&As, not to mention rights issues and IPOs – there has been a corresponding increase in corporate actions data over the past two decades. In the 2000s alone, there was a 41% spike in the number of companies listed on stock exchanges, which entailed a significant increase in the volume of corporate actions. And with the complicated nature of certain corporate actions meaning that they are updated several times in their lifecycle, constant monitoring is often required.
These factors have now combined to put pressure on teams internally and have forced them to look for a remedy. Despite their work traditionally being considered less glamorous than that of the front-, and even middle-office, back-office staff now find themselves with a starring role in the battle to avoid seeing their bank’s reputation being tarnished. But it can sometimes be hard for the back-office to secure the financial backing needed to implement satisfactory corporate actions solutions, as banks don’t always see immediate benefits.
Unless financial institutions find a way to process corporate actions successfully and efficiently, downstream processes will be affected. With security master databases and front-office trading so reliant on the quality and consistency of data, the implications of failing to tackle this issue could be huge.
Crucially, it would be far more expensive for an institution to lose a client from failing to correctly process two or three corporate actions, than it would be for the bank to invest into reliable and timely corporate actions data. Firms must be prepared to accept a little bit of short-term pain in higher investment levels, in order to secure the long-term benefits of being able to attract and retain clients more easily.