Network managers look to future-proof against technological advancements and cyber threats

Digitalisation, new technologies and cyber threats are atop the list of challenges and opportunities for network managers who are facing a major turning point in the their roles.

By Jonathan Watkins

Network managers are facing up to one of the most transformative periods in the history of their role as they juggle the challenges posed by new threats from the pandemic and cyber risks with the opportunities of new technologies and digital assets. 

Speaking on Global Custodian’s Network Management: Adapting to Unprecedented Change digital feature, some of the most notable figures in the space had no shortage of factors influencing their positions in 2021. 

“We’re actually at an inflection point at an industry level with the beginning of a period of significant change,” said Andy Osborne, global head of network management, Northern Trust.

“We’re anticipating future growth of interest and implementation of digital solutions, so we’re at the point in network management where we need to continue to understand, manage, and engage to the fullest extent with the heritage environment and infrastructures, and at the same time we need to start to plan for the coming acceleration of digitalisation.”

As a group, network managers were arguably one of the most impacted occupations within the securities services industry during the pandemic, with the very nature of their role focusing on in-person meetings and onsite visits in different countries around the world.

Meanwhile, the escalation of cyber-threats which occurred during periods of global lockdowns also gave them more considerations in their relationships with sub-custodians. In addition to remote meetings with sub-custodians and market infrastructure providers, contractual processes and regulations around wet signatures had to be adapted to worldwide, as different regulators implemented different policies. 

“There is positive momentum as financial market infrastructures use new ways to operate, such as a virtual AGMs, and this movement will continue in 2022,” said Bogart Mihaeye, head of sub-custody network management, BNP Paribas Securities Services. “[But] for account opening, the turnaround time for account opening needs to be reduced by using scanned copies of documents.

The main focuses will be on cyber risk because, as you know, many organisations’ staff are still working from home. With the COVID-19 outbreak, we had suspended all on-site visits in 2020, however…for next year [2022], with increasing vaccinations to protect against COVID-19 and its variants across the globe, we are confident we will resume onsite visits.” 

The tone of the commentary from network managers was predominantly positive during the interviews – despite growing challenges – as they acknowledged the potential that new technologies, digital assets and data can bring to their products and clients.

“The pandemic has turned some of these concepts on their head, and it’s made me think about what we as network managers are there to do, how the technology is evolving and changing, and what our clients want,” said Dan Hickey, global head of network management, RBC Investor and Treasury Services (RBC I&TS). 

With some of the advancements in distributed ledger technology (DLT), digital assets and crypto, we need to be forward-looking. A network manager has to broaden their mind and be constantly re-educating themselves on what’s out there, but also realigning themselves to product and client experience teams.”

Osborne concurred with Hickey’s sentiment that network managers need to keep on top of these developing trends. 

“On the theme of digitalisation, there are a number of areas here such as tokenised securities, stable and settlement coins, central banks settlement currencies (CBDCs), digitally native securities and cryptocurrencies,” he added. “Now all of these are going to have their own environments supporting these developing markets and network managers would increasingly need to develop skills and tools to understand and manage these changing environments.” 

The numerous developments brought on by the emergence of digital assets and their underlying technology will significantly impact network managers in the future – whether it’s cryptocurrencies as an asset class, blockchain technology, or CBDCs – and as securities services expert, Julia McKenny, pointed out, the roles in which custodians will play in this new environment may change.

“My first thought is we’re going to see a lot of digitalisation…particularly in the context of some of the assets that are coming to the fore. So as an example, CBDC’s is absolutely out there right now.  

“You have 50 central banks considering or actioning CBDCs and I think for network management it’ll be a consideration of what role will intermediaries will play, in that there are going to be problems that we haven’t really foreseen yet.” 

The themes within the digital feature very much focused on market infrastructure, regulation, technology and due diligence. While many of the conversation areas overlapped, the one theme linking them all was the remote working environment and the removal of in-person activities.

One positive from the lockdown situation and travel bans could be new processes which have proven themselves during the difficult period, or measures to counter any disruption, should this happen again in the future. 

“Traditional tasks of the network manager can be better served by data – for example, why do we do static due diligence once a year when we can use data to get those data points more frequently,” added Hickey.  

“With COVID, the whole onsite aspect has gone away – and let me be clear, client asset protection is of the upmost importance for RBC I&TS – but I think there are clever ways we can do that through data integration on an ongoing basis.  

“For example, can I use DLT to improve the onboarding process? Can I improve account opening? Can I build APIs out to my agents? If I want to add tax documentarian to an account and I have it in place for another one, is there something clever I can do there? How can I take the pain out of things like account opening and KYC for my clients using this technology? Don’t just restrict it for investment [processes] or for real-time data on settlement activity or asset servicing, let’s think about what we can do about KYC, onboarding and due diligence.”

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