Industry-wide complacency and unsystematic monitoring are hampering efforts to achieve smarter operational efficiency for optimising enterprise reconciliation, a global survey of banking and capital markets technology executives by CEB TowerGroup analysts and SunGard suggests.
The research study, which questioned 117 senior operations and IT executives in primarily Tier 1 and Tier 2 institutions, found high levels of confidence in enterprise reconciliation capabilities, with 70% of respondents claiming to maintain and monitor an inventory of all their global reconciliation activities.
However, the findings revealed that 37% are only doing so on an ad hoc, unscheduled basis, with large gaps in enterprise coverage of mainstream cash, payments and securities workflows.
Overall, the survey found that managing the quality and effectiveness of enterprise-level reconciliation is an ongoing challenge for firms, citing a lack of operational maturity and fragmented automation as obstacles to an optimised, scalable and operationally efficient enterprise reconciliation environment.
SunGard is recommending that in order to help mitigate the potential for poor customer service and system inefficiency, firms should actively maintain an inventory of reconciliation tasks and automate the monitoring and optimisation of all processes within it. This is based off the following findings:
Fragmented enterprise reconciliation:
Firms recognise the complex challenge that reconciliations best practice represents, especially given high levels of functional, operational and technology fragmentation. Fifty-one per cent of survey institutions report 10 or more different systems performing reconciliation functions; a quarter use more than 20 systems across their global enterprise.
Confidence in core capabilities but many blind spots:
Executives are only well-informed and confident about their reconciliation practices across a narrow subset of mainstream core activities and asset classes. They report the highest amount of confidence in completing general ledger and balance sheet reconciliations, and the core reconciliation of cash, foreign exchange and securities. But 25% lack insight into how their institutions perform custody and broker reconciliations, and nearly 30% “don’t know” how they reconcile mortgages, loans, derivatives and commodities.
Contradictory evidence of optimisation efforts:
A reconciliations inventory is probably the most important tool for improving reconciliation performance, and a surprisingly high number of firms (70%) claim to have one. Far fewer, however, are getting true benefits and maximum value from their inventory by monitoring the actual execution of tasks against it in real time. Only 17% of respondents carry out automated performance monitoring at an enterprise level, with 14% still relying on spreadsheets and other manual processes.
For another 40%, there is no centralised management of maintenance tasks – casting doubt on just how much rigour and discipline is really applied, and showing that firms overestimate the maturity level of their enterprise optimisation capabilities.
Investment strategies ‘of excellence’:
Institutions understand that improving performance across more reconciliation types and asset classes is an extremely useful and realistic goal. Adopting a center of excellence model is the preferred investment strategy for improving the reconciliations function for 26% of respondents. Alternative delivery models such as software-as-a-service (SaaS) and business process outsourcing (BPO) are a significant and growing trend, with more than a fifth of respondents expressing a preference for not-on-premises strategies.
“True enterprise reconciliations may not have arrived quite yet, but the tools and opportunities for optimisation are already at the industry’s disposal,” said Gert Raeves, research director, CEB TowerGroup. “To reduce blind spots on their reconciliation map and optimise reconciliation processes right across their business, firms need to implement an enterprise-wide reconciliations inventory along with organisational changes and technology improvements.”
Richard Chapman, director, product management for SunGard’s IntelliMatch business, added: “Within financial institutions, reconciliation centres of excellence are service providers and they are responsible for delivering multiple and complex sets of processes on a daily basis and a global scale.
“To optimise the performance and cost-effectiveness of this activity, we believe they should tackle the three main challenges of fragmentation and delivery quality to help ultimately meet their goal of achieving smarter operational efficiency.”
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