Getting costs under control through automation

Challenging performance conditions and ongoing regulatory pressures may be causing costs to spiral at certain financial firms, but so too is the industry’s dependency on manual processing and legacy technology stacks.   

In the first of a new three-part series of insights on the subject of operational automation in post-trade, we look at how automation and the adoption of intelligent collaboration and workflow solutions can help financial institutions obtain meaningful savings in their day-to-day operations.    

The creeping costs of running a financial institution 

Financial firms today are facing unprecedented costs.  

Recent market volatility aside, banks, brokers, asset managers and asset owners have been grappling with the introduction of complex regulations ever since the 2008 Global Financial Crisis (GFC), and more recently Covid.  

Mandatory clearing of OTC instruments (plus US Treasury cash and repo transactions from 2026/7), detailed regulatory reporting requirements, new minimum standards around operational resilience, and the global rollout of T+1, are just some of the regulations and market changes impacting the industry today, all of which have taken their toll on margins.   

Furthermore, clients, both retail and institutional, are demanding highly bespoke reporting, together with other hyper-personalised services and products, which is forcing firms to invest heavily into their operations and infrastructure. 

Historic dependencies on manual processing are also a drain on limited resources.   

“The industry’s reliance on manual processing during the transaction lifecycle, in particular, is a major cost driver,” said Adair.

“One of the challenges is that financial services firms have outsourced manual, often broken processes, to lower cost third-party locations and vendors. As these processes have not been automated at the point when they are migrated to third parties, firms are effectively moving manual processes around, meaning these activities are getting more manual and more broken. This ultimately leads to a further protracted broken workflow and can be a driver leading to a spike in errors and costs,” she added. 

So, what exactly is happening? 

During a transaction, different teams or providers, each operating off their own unique versions of the truth, will be involved in the various stages of the trade’s lifecycle. This creates inefficiencies, which will only deteriorate as organisations scale.  

Trade confirmations are a good example here.  “Confirmations drafting will happen in London or New York or in the primary location if we are talking about exotics. Post-trade activities, such as affirmations, indexing and chasing, might happen across a different set of vendors, so the same client could find themselves being serviced by three different sets of people,” commented Adair. 

Equally problematic is the persistent use by financial institutions of legacy technology systems to support critical operational activities.   

“Even some of the large tier one banks are still using monolithic infrastructure, such as mainframe architectures. Excel spreadsheets still dominate too, including in areas such as regulatory reporting, where documents are often downloaded and reconciled offline in Spreadsheets,” noted Adair.  

Legacy systems are problematic for several reasons.  

Firstly, they are expensive to maintain as they require frequent security patches and upgrades, while older systems may struggle to interoperate with some of the more modern or innovative technology platforms.    

Another lingering issue is key person risk, with the smooth running of legacy technology systems often wholly reliant on a very limited number (or even individual) of IT professionals.  

This creates not just inefficiencies, but also operational risk for organisations.  

Over-reliance on manual processing and antiquated technology makes it harder for people to have full visibility into their trade operations. With markets behaving as they are, this could lead to firms facing higher operating costs, or worse, significant financial losses.  

Getting operations in order 

There are plenty of options available to firms to help them migrate away from manual processing and ageing technology systems, all while achieving cost synergies. 

“To begin with, firms need to automate as many of their core processes as possible, or even move some of them off premises into the cloud. Automation allows firms to deploy their operations people more efficiently, and focus on critical business activities, such as revenue generation and client relationship management,” said Adair.  

As asset managers and banks look to rationalise their operations even further, many are starting to transition away from email towards collaboration platforms and workflow functionality tools, such as those offered by Taskize.   

“Through the adoption of collaboration platforms and workflow functionality solutions, firms can eliminate the need for email and other manual interventions. This allows them to consolidate multiple workstreams within their organisation, giving them aggregated views and better insights and end-to-end audit trails into their operations,” said Adair.  

The proof is in the pudding, with firms leveraging Taskize’s solutions reaping major efficiency benefits. For example, when using Taskize, Euroclear’s Client Services Team was able to resolve 70% of one leading bank’s settlement queries in less than two hours over a 13-month period, compared to 24% when communications were carried out over email.  

The number of queries being solved for a separate client also increased by 40%, again, a direct result of Euroclear’s adoption of Taskize.  

As the industry’s costs continue to mount, automation and the eschewal of legacy technology, in favour of collaboration and workflow functionality tools, are essential to drive operational efficiencies, enabling firms to efficiently scale with a strong focus on cost.