Corporate actions inaction

The same discussions around corporate actions are occurring year in, year out, with little progress being made by the industry despite the advent of new technologies, writes Virginie O’Shea, founder of Firebrand research, who points out that inaction is no longer an option.

It’s been two years since I attended a corporate actions conference thanks to the pandemic, but it seems like no time at all. In that time a lot has changed but much more has stayed the same, especially in the asset servicing realm.

I’ve been going to corporate actions conferences for many years and year in, year out, the same topics are discussed in a never-ending meditation on stalled industry progress. We seemingly always talk about ISO 20022 and the lack of a convincing business case for adoption, especially for firms that have invested in ISO 15022. Every time, the topic of the lack of a reliable golden source of data for corporate actions event data comes up along with the resulting financial institution over-spending on cleaning up that data per firm and at an industry level. It’s like being in the Hotel California, stuck in the lift, with the same muzak refrain on repeat.

Of course, the people working in asset servicing and corporate actions are great, but you have to wonder how long they’ll keep working in the area, with so little progress being made to make their working lives better. And don’t even get me started on the unlucky individuals working in the tax space. Those poor souls had to be granted special dispensation to be allowed to work from the office during lockdowns across the globe just so that they could send and receive faxes and wet ink documentation.

These functions certainly seem to be struggling more than most to attract and retain talent. If it’s harder than normal for front offices to compete in the hiring space, what hope do operations teams have?

The stark contrast between the technologies facing these teams in their day-to-day working lives and their own personal devices makes things worse. Why does it take seven clicks and several screens on two machines to complete a relatively simple task? Why does this screen look like something someone designed 15 or 20 years ago? You can imagine the questions that rightly get asked by these new entrants as they are introduced to their responsibilities.

It’s not that corporate actions as a function hasn’t paid attention to technology. Over recent years, topics such as data utilities, distributed ledger technology (DLT), artificial intelligence (AI), cloud adoption and robotic process automation (RPA) have waxed and waned in popularity. Nearly all of them were discussed during this year’s CorpActions event in London. A veritable cavalcade of technology experiments have been conducted or are currently being trialled by the financial institutions, market infrastructures and vendors that have managed to bargain a modest budget from their C-suite executives to conduct such proof of concepts.

However, the majority of firms have not been so lucky. I chaired a couple of panels at the event and asked the room several questions to assess delegates’ internal environments. I asked how many firms had a cloud-first approach to their technology. Around five people in a room of about a 100 put their hands up, likely representatives from the vendor community. The same number of responses (and from many of the same people) were yielded when I asked whether firms were trialling AI and RPA in any areas of asset servicing. Some of my panellists luckily had positive stories to tell about using natural language processing (NLP) to help their corporate actions analysts to deal with a high and increasing volume of prospectuses. Or using RPA to reduce the requirement to re-key information from one system to another when processing elections or claims, for example. But this is most definitely not the norm.

Other panellists highlighted that their IT requests are often at the back of a very long list of internal projects and budgets are few and far between for technology experimentation. Even much-needed platform upgrades are hard to justify.

You have to wonder what the impact of the coming recession will be on these functions that are already facing a much higher volume of corporate events year-over-year, with fewer staff members and rapidly ageing technology that their new recruits don’t want to look at, let alone use. One thing’s for sure, something needs to change. Inaction isn’t an option.