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RPA ‘steps to success’ for the finance industry

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RPA ‘steps to success’ for the finance industry

Jonathan Ebsworth, partner of the disruptive technologies practice at Infosys Consulting

Earlier this year, Samsung Securities gave 2,000 of its employees an early bonus which must have come as a welcome surprise – especially as this unexpected present was in the form of shares to the value of $105 billion. While no-one doubts that Samsung Group’s employees work hard, an individual award of some $50m per employee seems rather excessive – not to say unfair on the other workers who received nothing.

The problem, of course, is that the employee responsible for issuing the shares had made a catastrophic mistake: in fact, each employee was due to receive a dividend of two billion won, or just under a dollar for each share they owned. But what actually happened was that the luckless administrator accidentally issued two billion of shares.

While the Samsung story is just the latest in a long line of ‘fat finger errors’, human mistakes can cost a business billions of pounds – quite literally. Such mistakes can also lead to terrible reputational damage and compliance liabilities, as happened here. In the 37 minutes it took to correct the error, sixteen Samsung Securities sold their shares for almost $10m each, in spite of having been warned not to by their managers. The lure of a payday beyond the realms of an ordinary worker’s imagination clearly outweighed the consequences of getting fired.

Eliminating risk 

We all make mistakes, but few of us have to face the same consequences as this poor Samsung Securities’ employee, who miss-type wiped 12 per cent of the company’s stock price. Businesses in the financial services industry are uniquely vulnerable to these sorts of mistakes, and not just because of the volumes of high value transactions they make every day.

The answer is to explore where robotic process automation (RPA) can be employed to eliminate human error (or, indeed, deliberate fraud). There is a lot of fear around automation ‘stealing’ humans’ jobs, but for repetitive, rules-based processes involving high-stakes transactions, it’s more likely to safeguard our jobs by preventing cataclysmic mistakes that can cost a company hundreds of millions of dollars at the stroke of a key.

Automation isn’t just about protecting against errors, important as that is. There is enormous potential to bring RPA into other areas of finance; for example, in areas such as compliance, anti-money laundering activity, and Know Your Customer (KYC) initiatives. What’s more, RPA can bring huge cost- and time-savings by automating many of the tedious, process-heavy transactions such as account opening or customer service.

  Building a vision for RPA

With so many clear benefits, one would expect financial services businesses to have embraced RPA; however, recent research by Infosys Consulting revealed that only 10 per cent of organisations currently using RPA or AI believe they are maximising their full benefits and capabilities. For example, a single RPA agent involves a one-off cost of between $5,000 and $15,000 – far cheaper than even the most junior employee. Failing to take advantage of bots represents a major missed opportunity, and the reason is more often than not a lack of clear strategic vision for RPA, and poor understanding of the requirements for effective implementation.

We should all be tremendously excited about RPA’s potential; to achieve this, however, businesses must take a pragmatic and strategic approach to bots in the enterprise. Here are our five steps to RPA success:

  • Bots are no panacea

For repetitive, transactional tasks, bots are around three times more efficient at certain processes than an equivalent human worker, but that doesn’t mean that a business should conduct a wholesale replacement of their existing employees. Bots are good at routine processes, but finance is about much more than hitting buttons at the right time – it requires workers with intelligence, intuition, and problem-solving abilities. Organisations shouldn’t calculate their RPA strategy on like-for-like replacement, but must give careful thought to how bots and humans complement each other in various roles such as compliance, invoicing or customer service – as well as considering the costs of retraining, redeployment and sometimes organisational adjustment required.

  • Planning for disaster

It’s not technology itself that tends to cause us problems, but rather our over-reliance on new tools and apps. This is especially true when a business faces a business continuity problem such as a power or network outage, or a cybersecurity breach. If the bots go offline for any reason, will your business be able to keep functioning – and will your company retain skilled employees who can take over these processes when disaster strikes? Business continuity questions like these are often overlooked, but should be at the heart of any RPA strategy.

  • Updating your security strategy 

Cybersecurity threats are more prevalent than ever. As we pass increasing responsibility onto non-human actors such as RPA software, we need to consider how we update our security strategy to accommodate this changing dynamic. For example, bots aren’t well-suited to authentication methods such as biometric or two-factor authentication. Failing to integrate bots fully into your organisational security plans risks creating new vulnerabilities that could ultimately be just as costly as any ‘fat finger error’.

  • Staying agile 

A tactical or poorly-planned RPA deployment can significantly reduce the agility an organisation has, tightly coupling automated processes to the underlying platforms. Automated processes can be quite fragile and particularly sensitive to even minor updates to the core systems they drive. Bots and AI solutions at scale should be governed within the overall architecture framework that underpins the business and not as a stand-alone solution sitting outside of the enterprise architecture. 

  • It’s a steep learning curve for everyone 

Automation is still a very new technology, and there are many lessons that we need to learn before we can deploy it uniformly across a business and iron out potential risks and errors. That doesn’t mean that we can’t wring enormous value from RPA today. However, we should at least be alive to the potential risks and consequences of introducing these new capabilities. The secret to success is knowing how to complement human activity with RPA, rather than have them compete. That’s why it’s so important to develop a strong business case for every RPA implementation, based on an awareness of where human error can and should be eliminated – but also considering where humans, in spite of their fat fingers, can continue to add value to the organisation.

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Oil prices steady as lockdowns curb U.S. stimulus optimism

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Oil prices steady as lockdowns curb U.S. stimulus optimism 1

By Noah Browning

LONDON (Reuters) – Oil prices were steady on Monday as support from U.S. stimulus plans and jitters about supplies competed with worries about demand due to renewed lockdowns to prevent the coronavirus from spreading.

Brent crude futures for March rose 7 cents, or 0.1%, to $55.48 a barrel by 1210 GMT. U.S. West Texas Intermediate crude for March was up 5 cents, or 0.1%, at $52.32.

“Sentiment was buoyed by expectations for a blockbuster coronavirus relief package … (but) the tug of war between stimulus optimism and virus woes is set to continue,” said Stephen Brennock of broker PVM.

U.S. lawmakers are set to lock horns over the size of a $1.9 trillion pandemic relief package proposed by new President Joe Biden, financial stimulus that would support the economy and fuel demand.

European nations, major consumers, have imposed tough restrictions to halt the spread of the virus, while China reported a rise in new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.

Barclays raised its 2021 oil price forecasts, but said rising cases in China could contribute to near-term pullbacks.

“Even though the pandemic is not yet slowing down, oil prices have good reasons to start the week with gains,” said Bjornar Tonhaugen from Rystad Energy.

Supply concerns have offered some support. Indonesia said its coast guard seized an Iranian-flagged tanker over suspected illegal fuel transfers, raising the prospect of more tensions in the oil-exporting Gulf.

“A development that always benefits prices is the market turbulence that conflicts create,” Tonhaugen added.

Libyan oil guards halted exports from several main ports in a pay dispute on Monday.

Output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.

(Editing by David Goodman and Edmund Blair)

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Dollar steadies; euro hurt by vaccine delays and German business morale slump

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Dollar steadies; euro hurt by vaccine delays and German business morale slump 2

By Elizabeth Howcroft

LONDON (Reuters) – The dollar steadied, the euro slipped and riskier currencies remained strong on Monday, as currency markets were torn between optimism about U.S. stimulus plans, and the reality of slow vaccine rollout and the economic impact of lockdowns in Europe.

Market sentiment had turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the virus hurt business activity, dragging stocks lower.

The safe-haven dollar declined gradually overnight, and riskier currencies strengthened. It then recovered some losses after European markets opened, and was at 90.224 against a basket of currencies at 1152 GMT, flat on the day.

On one hand, market sentiment is supported by hopes for President Joe Biden’s $1.9 trillion fiscal stimulus plans, as well as the expectation that central banks will continue to provide liquidity.

But, in Europe, the extent of the risk appetite was limited by a lack of progress in rolling out the COVID-19 vaccine as well the economic impact of lockdown measures.

German business morale slumped to a six-month low in January, surprising market participants who had expected the survey to show a rise.

“It’s very much a case of hopes for the future against the reality of the first quarter of this year which is going to still prove to be fairly troubled,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

“For now at least, the optimism that we’re hoping for has been somewhat delayed and that has taken a little bit of steam out of the euro and just put a little bit of support back in the dollar but ultimately I think it is still a case of those high-beta commodity currencies, reflation currencies, will continue to perform well,” he said.

Analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in ten years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.

The U.S. Federal Reserve meets on Wednesday and Fed Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.

“The process of tapering QE is likely to be a gradual process which could last throughout 2022, and then potentially be followed by the first rate hikes later in 2023,” wrote MUFG currency analyst Lee Hardman.

“In these circumstances, we continue to believe that it is premature to expect the US dollar to rebound now in anticipation of policy tightening ahead, and still see scope for further weakness this year,” he said.

The euro was down around 0.1% against the dollar, at $1.2153 at 1207 GMT. At the European Central Bank meeting last week, President Christine Lagarde said the bank was closely watching the euro. The euro surged 9% last year versus the dollar and reached new two and a half year highs earlier in January.

But despite this verbal intervention, traders remain bullish on the euro, expecting the bar for a rate cut to be high.

Elsewhere, the Australian dollar, which is seen as a liquid proxy for risk, was up 0.2% at 0.7726 versus the U.S. dollar at 1208 GMT.

The New Zealand dollar was up 0.5%, while the commodity-driven Norwegian crown was up 0.2% the euro.

The safe-haven Japanese yen was flat on the day at 103.815 versus the U.S. dollar.

Graphic: USD, https://fingfx.thomsonreuters.com/gfx/mkt/qmypmyjdxpr/USD.png

(Reporting by Elizabeth Howcroft, editing by Ed Osmond and Chizu Nomiyama)

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Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn

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Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 3

(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash burn may rise if Hong Kong installs new measures that require flight crew to quarantine for two weeks.

Hong Kong’s flagship carrier said the expected move will increase cash burn by about HK$300 million ($38.70 million) to HK$400 million per month, on top of current HK$1 billion to HK$1.5 billion levels.

Hong Kong is set to require flight crew entering the Asian financial hub for more than two hours to quarantine in a hotel for two weeks, the South China Morning Post reported last week, citing sources.

“The new measure will have a significant impact on our ability to service our passenger and cargo markets,” Cathay said in a statement, adding that expected curbs will also reduce its cargo capacity by 25%.

The airline, in an internal memo seen by Reuters, requested for volunteers among its crew who could fly for three weeks, followed by two weeks of quarantine and 14 days free of duty, adding it will be a temporary measure and not all its flight will require such an operation.

“We continue to engage with key stakeholders in the Hong Kong Government,” the memo said.

In an emailed response to Reuters, a Hong Kong government spokesperson said: “In the light of the evolving pandemic situation locally and internationally, the Government will keep reviewing and refining the arrangements applicable to different categories of exempted persons, including air crew, with reference to all relevant considerations.”

Separately, a company spokeswoman said the airline could not detail the impact on vaccine transport specifically in terms of cargo shipments.

The aviation industry has been hit hard by the COVID-19 pandemic as many countries imposed travel restrictions to contain its spread.

In December, Cathay’s passenger numbers fell by 98.7% compared to a year earlier, though cargo carriage was down by a smaller 32.3%.

(Reporting by Shriya Ramakrishnan in Bengaluru; Additional reporting by Jamie Freed in Sydney and Twinnie Siu in Hong Kong; Editing by Bernard Orr, Arun Koyyur and Mark Potter)

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