Risk Waiting

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Will concern about reducing corporate actions exposures be enough to push the industry toward advancing the ISO 20022 messaging standard?

Risk management is the biggest reason to improve corporate actions processing, judging by responses to a Thomson Reuters poll conducted in a webcast last week, and also by Inside Reference Data's own webcast poll conducted in April.

Thomson Reuters is promoting migration to the more advanced ISO 20022 messaging standard for corporate actions, with collaboration from Brown Brothers Harriman, the Depository Trust & Clearing Corporation (DTCC), Fidelity ActionsXchange, Information Mosaic and XSP. This standards upgrade is emerging as the key to addressing those risk management concerns.

"20022 is primary to reduce risks and save on costs," says Justin Chapman, global head of process management at Northern Trust. "It's a big investment for us in 20022. It's a key project for us. There's definitely a benefit from 20022."

DTCC is itself also pushing the move to 20022, with its Corporate Actions Reengineering Project targeting a complete migration by 2015. The DTCC project makes it possible for large global custodians to automate formerly manual US domestic corporate actions, according to Malene McMahon, senior business manager, securities initiatives at Swift Americas and a co-executive sponsor of ISITC North America's Corporate Actions Working Group.

And as the US moves more quickly and aggressively to ISO 20022, so too does the Asia-Pacific region, with European markets still mostly holding off, or just trying to make their way to ISO 15022, creating a possible divide. "[Europeans] have made a lot of investment on the 15022 side. They see a lot of benefit, particularly on announcements. So they're happy with that," says Gerard Bermingham, senior vice president of business strategy at Information Mosaic.

Still, financial firms are likely to have challenges in any region when it comes to this key corporate actions processing upgrade. As Northern Trust's Chapman says, "My biggest challenge is taking any form of messaging—15022 or 20022—further up the value chain."

One thing is certain, however. With messaging dominating the conversation about corporate actions processing, improving communication has become key to better risk management that so much industry polling and feedback tells us is the greatest concern. So where there are doubts or resistance to upgrading those messaging standards, the industry's own sentiment ought to be that driving force to push them through.

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