Corporate Actions

Processing corporate actions
manually is slow, expensive and risky.

The value of information and data is only truly realised when it is put in the right context and treated appropriately to create knowledge!

Corporate actions still have a huge potential for automation optimization. For example, being able to process a single, isolated corporate action is good, but combining corporate action information from different sources increases the quality of the information, and combining them with other transactions, such as settlement instructions, brings additional real added value.

The Problem

Substantial operational risk is incurred when processing corporate actions manually. With no common external standards for the actions themselves, but with many players in a two-way information flow, these communication exchanges have often been considered too specialised and complex to automate successfully.

A typical firm will receive notification details via SWIFT, fax, and telex from its custodians, as well as from different data vendor sources. Reconciling this redundant information and detecting mismatches is the first and largest task facing any corporate actions department.

Not only is it expensive when a corporate action is not processed in time - it is also bad for the image of the institution as a provider of portfolio management services.

Corporate action updates are crucial and have the potential to lead to substantial loss on the customer's portfolio. Timely processing is important but proper interpretation of the corporate action's content is also crucial.

Finally, as manual processes do not scale with volume, the rising volume of corporate actions and the seasonal nature of such events can cause major processing headaches.

The Solution

The INCENTAGE for Corporate Actions solution is complementary to the INCENTAGE MACUG Server which deals with entitlements, validation and routing.

The INCENTAGE for Corporate Actions solution allows the combination of various sources which are internally normalised into a common standard based on ISO15022.

The golden message is generated as a fully validated and quality assured message with possible restrictions based on matching results.
It is possible to combine settlement messages with pending corporate actions and either reject the settlement or raise a settlement specific alert.

Should a corporate action have passed a type specific deadline, the system can raise an alert and flag the message as urgent.

The GUI allows searching for specific corporate actions and browsing of all relevant messages received. It is possible to manually override system decisions.

Background

Instead of trying to match multiple corporate action messages at once, the system is electing a golden message in multiple steps. The first corporate action concerning a certain event will automatically receive the status of the golden message. Any new message concerning the same event will be compared with the existing information. Based on configuration, the system gives preference to messages of certain sources for specific regions, instrument types or contractual agreements.

The following picture illustrates a possible information flow deploying the possibilities of SWIFTNet MACUG. Please consult the INCENTAGE MACUG Server fact sheet for SWIFTNet MACUG specific features and benefits.

Some mismatches result in overwriting the golden message, filtering out part of the golden message, raising an alert, distributing updates or routing the information into a GUI requiring a manual decision. In any case, an audit log traces the complete information process of each event.

The GUI can be used to selectively override any automatic decision. The messages are all available for browsing and categorised according to their events.

For more information please contact us.

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