Corporate Actions Processing's Slow Boil


In poll questions asked during Inside Reference Data's webcast last week concerning corporate actions issues, respondents indicated that reducing operational risk was an important priority driving greater automation. When asked to indicate which of several parts of the corporate actions lifecycle their firms had automated, 55% cited event management, while other parts of the cycle, such as position management (39%), election management (26%), and entitlement calculation and posting (24%) each had less than half or close to a quarter of respondents automating them.

These two sets of results are certainly consistent—if reducing operational risk is seen as the most important reason to automate corporate actions processing then it should follow that most firms will have event management systems in place before anything else. Managing positions, shareholder votes and dividend calculations are not as relevant to operational risk for companies.

But a question comes to mind. If our poll is truly representative of what's happening in the industry, is having event management systems in place at 55% of firms really enough to avoid serious operational risk issues arising when corporate actions are processed and the resulting data produced?

Maybe not. But it might be the best the industry can currently do, because so many asset managers still are using faxes for corporate actions, as Invesco's Joel Brown pointed out during the webcast. "Just because you're able to automate doesn't mean others in the chain are able to," he said.

Another reason why it may be hard to automate corporate actions events is because the events need to be managed, as Alan Jones of SmartStream noted in the webcast. The latter pieces of the process, after the action event, are less conducive to automation.

It is the exceptions that keep corporate actions professionals up at night, as Brown said. Perhaps certain aspects of preparing the event can be automated, which is why 55% say they have event management systems in place. But does corporate actions differ so much from other aspects of data management that it's the one place where automation is counterproductive?

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