By Annelotte De Nanassy, Senior Product Manager, SIX.
With dividends season just around the corner, how many financial institutions can truly say they have full confidence in their ability to handle a sharp increase in corporate actions efficiently? The cyclical nature of dividend payments, updated several times in their lifecycle, means constant monitoring is required around this time of year. Corporate actions like dividends can materially affect stock prices – which are currently going through extreme levels of volatility. Hence why accurate data is essential for anyone trading a listed company or trying to value their portfolio right now.
With security master databases and front-office trading so reliant on the quality and consistency of data, the implications of failing to tackle this issue could be significant. Unless financial institutions find a way to process corporate actions successfully, downstream processes will be affected. It will be far more expensive for a bank to lose a client from failing to correctly process two or three dividend payments, than it would be to pay a little bit more for reliable and timely data. Firms must be prepared to accept a little bit of short-term pain in higher investment levels, in order to secure the long-term benefits of being able to attract and retain clients more easily.
We already know that the complex nature of corporate actions demands huge amounts of human processing power to ensure accuracy and timeliness of delivery. However, this doesn’t mean that the more repetitive, simple events, such as mandatory dividends, can’t be left to automated systems. It might not sound like much, but it would free up back-office staff for more complex tasks. These include events such as IPOs and M&As, which require constant back-and-forth between the team and the client.
It is so important for firms to have a solution in place that ensures these more mundane aspects of corporate actions are automated. Particularly for firms looking to integrate information more easily and reduce operational risk. After all, efficiency and reliability are two cornerstones of any business looking to navigate themselves through the market turmoil right now. The leading players of the financial world depend on receiving detailed information about these events in an efficient and timely manner.
When it comes to corporate actions more broadly, financial institutions also need to be constantly analysing and improving how they tackle corporate actions volumes. Take data standards such as ISO that enable straight through processing. Through the deployment of these standards, there are less errors in the data and, crucially, it allows firms to deal with volumes in a much more industrial and secure way.
In addition to using standards to their advantage, firms also need to transform their data volumes to unravel new insights. This involves engaging with the wider industry on new use cases and turning towards historic corporate actions. Having a trusted source that provides both real-time corporate actions updates, as well as rich historic data is critical from front- to back-office.
Financial institutions shouldn’t see dividend payouts as something to cower in front of. Instead they should see them as a huge opportunity to streamline their structures and to distinguish themselves from the competition. Moving through this unprecedented period of market volatility, a solid understanding of how to best source and make use of available data has never been more important in the eyes of shareholders.