By Daniel Carpenter, Head of Regulation at Meritsoft, a Cognizant company.
With the first round of the dividends season upon us, it is not only the front office that is preoccupied right now. Dividends are one of many forms of claims that also require attention in the back office. The typically busy period in April, when vast numbers of companies issue their dividends to a huge number of investors, poses an inescapable challenge from a claims perspective.
Much can change between the allocation and apportioning of dividends to investors between the announcement and payment of the final dividend. Before the right funds can be sent, or recovered, to or from the correct shareholder’s account, a monetary claim is generated internally for validation and processing by the corporate actions team, notably on cross border activities.
Pulling together the many different pieces of data required to validate and process the dividend payment can be complex, particularly if you are relying on manual processes and disparate data sources across a range of different dividends and across borders and regions. It is easy to see why this tangled web of claims can tie up huge resources working long hours.
For dividends, as for other claims, the goal is to digitise and centralise the data into a single source in order to provide the levels of transparency that banks need to facilitate end-to-end automation of the claims process.
The issue is that too many financial institutions currently run slow receivable and payable cycles. Relying on manual approaches built up over numerous years, many are unable to efficiently process dividend claims, auto chase counterparties, make auto payments and settle balances. There is also a lack of real-time analytics covering the situation and funds involved.
With dividends season underway, many banks will be feeling the effects and costs of outdated systems and processes. Only by re-engineering the claims process can they lighten the load in dividend season and achieve improved straight-through-processing (STP) rates with fewer exceptions, and faster, more accurate delivery of requests for payment, greatly improving both balance sheet and client service.