One has to ask the question why, beyond the need to process tax reclaims, would a custodian engage in a potentially complex solution. The answer is that it fitted their global strategy to automate corporate actions; it was the only model that was capable of delivering automation in the circumstances and, as a paradigm, it clearly offered additional benefits for potential automation of other corporate actions processes.
There were six stages to implementation:
1. Contractual - customer signs a service level agreement under which it obtains an ADBIC and assigns it to GlobeTax;
2. ADBIC Acquisition which is coordinated between the three parties;
3. Set-up in which the customer implements an exchange of electronic ‘keys' to authenticate the routing of data. This makes sure that only the correct data arrives at the ADBIC;
4. Testing which is facilitated by SWIFT issuing a test ADBIC as well as a live ADBIC to the custodian;
5. Parallel production in which data is checked and validated for layout, format, receipt confirmation and so on and compared to a manual data set from the beneficial owner to make sure all the data is being picked up; and
6. Live production in which data is received and acted on by GlobeTax. The model was tested using six branches of the custodian each located in a different European country.
Twenty client accounts were used representing three types of beneficial owners resident in four countries. In addition to new paradigm for processing corporate actions, this process also broke some new ground in managing the technology It may look like a fairly normal phased introduction, but the difference lies not in the phases themselves but how long they took to implement. Because the parties worked closely together to understand the reasons for the steps, the allocation of the ADBICs took only a couple of weeks. The set-up and exchange of keys took only 96 hours. Parallel production was left at two months as a safety net, but once into live production, results were being delivered within four weeks. If you asked most technologists how long it would take to invent, set up, test and implement an entirely new processing paradigm in a backwater of corporate actions processing that is at least 60% manual, no-one would be surprised at development times of around two years.
This solution was in place and delivering results within three months. Like any technology management issue, it has to deliver results. As we've already identified however, there can be results measured in the short term, medium term and long term. Some of these results can be quantified and some can only be qualified in terms of their potential. The custodian concerned cited the results as:
1. Impressive - it works;
2. Has clear and identifiable benefits including:
a. control and presence in the process,
b. delivery in good time with minimal cost,
c. ability to provide a platinum level of service to customers, and
d. the possibility of rolling out the service to their wider branch network
Of course the custodian was not the only beneficiary of the technology deployment. The account holders also benefited. GlobeTax used its much larger processing volumes and internal proprietary processes to add value. At the end of the day, the custodian's customer had only one interest, getting their tax recovered in the fastest possible time. So, not only did this paradigm provide a long-term methodology to automate corporate actions generally, it also provided a way for the custodian to mitigate risk and provide a better service to its customers. In the test cases, within three months of live production, over US$104 million has been put back into the beneficial owners' accounts at the custodian. Of this figure, over US$44 million was recovered by GlobeTax in under four weeks from two markets against a market average expectation of 12 to 18 months. The beneficial owners estimated that the time value of having that money 11 months earlier than expected and available for reinvestment, was over US$2.5 million.
Of course, it is not often that one can cite a technology management issue whose result directly puts money into someone's bank account. In such circumstances, the benefits and thus the driving force behind the project become very clear and easy to understand. However, this remains, in my opinion, one of the guiding light projects this century to use a combination of communications, standards and messaging to manage a technology deployment efficiently.
I do have one afterthought. While this paradigm creates V-STP for the custodian, it doesn't remove the manual processing, it just shifts it somewhere else. As we approach the second decade of the twenty-first century, its not inconceivable that the ISO20022 modelling process plus changes in attitude by the actors in this process, may open the way for a complete front to back automation of the process.
Our website is not responsible for the information contained by this article. Articleinput.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
Note: This article was sent to us by: Ruth F. Graham at 01082010
1. How to use technology in business
All articles are property of their respective authors. Please read our Privacy Policy!
© 2009 ArticleInput.com.