Corporate Actions Managed Services Use Case Series: Use Case #2

Introduction: The Intersection of Corporate Actions and Managed Services

The evolution of managed services has been a dynamic journey marked by continued expansion and innovation. Initially, financial service providers used traditional technologies and break-fix services to cater to customers' needs. However, as businesses became more reliant on technology, the need for proactive support grew, giving birth to managed services.

Recent years, particularly shaped by the pandemic, have witnessed a rapid transformation, with a heightened focus on continuous innovation, remote work, and agility. In response, the adoption of managed services has intensified within the financial sector as firms continue to look for strategies to safeguard their operations and define a growth-oriented approach in the ever-changing economy.

Corporate actions operations teams, working with highly manual processes lacking automation, are taking steps to alleviate this pressure and control infrastructure costs, all while striving to reduce the risk and disruptions caused by staff attrition resulting in a shortage of expertise.

This four-part blog series focuses on our experience working with our corporate actions clients and supporting them as they move from on-premises to managed services. Utilizing our full end-to-end workflow solutions can relieve their operations teams from day-to-day management to focus on the core business.

Use Case 2: Business as a Service (BPaaS) Outsourcing - Mitigating Risks in Corporate Actions Processing for Financial Institutions

Financial institutions face growing financial and reputational risks when handling corporate actions announcements that impact both clients and the broader market. As the number of assets under management (AUM) and portfolio volumes reach unprecedented levels, the asset servicing sector is grappling with escalating cost pressures. In addition, the surge in announcement volumes, combined with the ever-growing complexities surrounding corporate actions processing, is prompting firms to rethink their operational strategies. The imperative is to reduce risk by ensuring the seamless continuity of corporate actions data.

The current landscape underscores the necessity for companies to transform their corporate actions processes, investing in the resources and expertise required to future-proof operations and successfully transition to a sustainable operating model. In response to these challenges, an emerging trend is the outsourcing of these critical processes to specialized data service providers offering Business Process as a Service (BPaaS) solutions tailored for corporate actions. This strategic shift not only addresses the pressing need for risk reduction but also positions firms to navigate the evolving landscape of corporate actions with agility and efficiency.

Traditionally, reliance on custodians for processing corporate actions messages often overlooked the quality and nuances of the announcement. For example, 30% of corporate actions events processed required corrections via S&P Market Intelligence's Agent Validation Service (AVS) to create the final Golden Record, highlighting the substantial risks involved.

Globally, the introduction of new standards and regulations (e.g., SMPG and SCoRE, SRD II) is occurring rapidly. However, disorganized execution, limited expertise, and inadequate monitoring of these changes have led to inconsistencies in upstream messages between custodians and depositories.

Recent industry transformations have prompted financial institutions to reconsider the reliability of custodian messages. While custodian messages are integral, regulatory requirements and inconsistencies necessitate a robust data validation process. With a surge in short-fused corporate actions announcements (~38k short-fused events announced in 2023 as compared to ~31k events announced in 2022 - based on the Managed Corporate Actions AVS database), requiring firms to react and make election decisions quickly, it has never been more critical to ensure data validity for timely and effective processing.

About the Agent Validation Service

The S&P Global Market Intelligence Managed Corporate Actions (MCA) Agent Validation Service team addresses these challenges by comparing custodian and depository messages with a reliable data source (MCA), establishing a final Golden Record for seamless processing. Developing such a process in-house requires significant resources and expertise, highlighting the importance of outsourcing to a fully managed corporate actions service provider.

The Agent Validation Service provides a customizable solution, managing messages received from custodians, depositories, prime brokers, and vendors throughout the corporate action announcement lifecycle. Clients benefit from a comprehensive managed service that validates agent messages, optimizing efficiency and straight-through-processing rates, and reducing risk and total cost of ownership. Clients also receive unlimited access to a global team of experts, dedicated support, and a self-service user-interface portal for a full audit trail.

For more details on the key features and benefits of the Agent Validation Service, download our brochure or visit our website.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.