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Stop spoiling the favourite front office child: Optimisation of post-trade operations

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Rik Turner

By Rik Turner, senior analyst, financial services technology, Ovum

Since the beginning of the global financial crisis, Ovum’s annual survey on the IT investment priorities of capital markets participants has consistently shown back-office optimisation to be among the top three items exercising IT decision-makers in the sector.Rik Turner

That said, post-trade operations – those in the middle and back office – of many capital markets participants, on both the sell and buy side, are in urgent need of optimisation.In essence this means modernisation and automation. Some of the largest sell side firms are still heavily dependent on manual systems, overnight batch processing, and Excel spreadsheets. Ovum believes that the situation that these organisations find themselves in will not to meet the demands of modern-day capital markets.

Even the biggest bulge-bracket firms, which may have already automated a lot of their post-trade processing, would have done so for a product set that is slimmer and simpler than what they will soon be required to handle. This is largely due to regulation around central clearing and exchange trading for over-the-counter (OTC) derivatives and liquidity risk management (LRM).

Furthermore, they will frequently have silos of post-trade systems with, for instance, a different reconciliations platform for each asset class. This is clearly not going to be an optimal post-trade situation, given their desire to explore multi-asset class strategies and the need to calculate and address liquidity risk across the entire enterprise in a timely fashion.

There is a clear technology gap between the front office, which, as the locus of revenue generation, has enjoyed “favourite child” status with regard to IT investment for many years, and the middle and back office. The time has come for investment in post-trade. If operations are to cope with the next wave of market and regulatory development it can no longer be ignored.

The front office has enjoyed significant investment in technological sophistication
As the place where revenue is made, the front office has always been the main focus for IT investment. This has particularly been the case during the last two decades, as deregulation has led to fragmentation of liquidity and the development of technology-basedtrading strategies to exploit this situation. The technological leap forward that the front office has taken, and continues to take,means the back office must now be far more automated and optimised if it is to support further advances in trading strategy.

With margins on cash equities in the mature markets increasingly slimming,market participants have also begun to look at new trading venues and asset classes, as wellas developing more complex strategies. These involve different asset classes in the same tradefor hedging purposes. All this puts additional stress on post-trade operations, which need to support new identifiers and the processes required to trade in new asset classes.

It is also good business practice to optimise post-trade operations at a time when the overall world economy is in the doldrums. This could be to drive down cost, improve time-to-revenue by freeing up more stock for repo operations, or simply to attract customers by highlighting the ability to handletheir business in a timely and efficient manner.

‘Repooperations’ refer to a form of short-term borrowing, originally for dealers in government securities and now used increasingly for other asset classes too. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security and agreeing to repurchase it in the future,it is a repo; for the party buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

Better post-trade operations can also lead to better customer relations. Buy-side firms have moved to more multi-broker strategies in the wake of Lehman’s sudden demise, so streamlined post-trade operations can help a sell-side firm stand out inthat crowd. Buy-side firms may also look to their brokers to perform a lot of post-trade processing on their behalf. This means there is also an additional revenue opportunity in running the most efficient post-trade operations.

By carrying out LRM on an intraday basis, institutions will not only be able to comply withthe Basel III requirements enshrined in a growing number of national laws, but also to gain a real-time view of their risk profile. This, in turn, will inform them of what stock or other instruments they have that can be lent to other market participants on a fee-paying basis, without jeopardising their own exposure levels.

In addition to the operational requirement, there is also the need to meet the increasingly stringent compliance requirements of regulators across the globe. A company’s ability to carry out appropriate risk management, and clear and settle trades in asset classes that were previously not centrally cleared, is becoming mandatory.

Choosing the appropriate optimisation strategy and measuring success
The majority of post-trade functions were automated initially by being encoded into software for deployment on the user’s premises. The companies that produced this software usually started by offering it on a server-licensing basis but they are increasingly moving into service delivery. Some can now manage the software deployed on a server ona customer’s premises, or offer an entirely cloud-based managed service with a customer simply accessing the service through a web browser. A customer’s choice will depend on a variety of factors, including its technological prowess and available resources, but also how it is evolving its business.

Since the basic ethos behind implementing a reconciliations platform is to automate the process as far as possible, with only exceptions to be handled manually, a key metric for deciding how well your firm is doing on this front is the auto-match rate. This measures the degree to which trades are being matched and confirmed automatically, without the need for human intervention. If the rate drops too low, further optimisation is required.

Rik is a senior analyst on the Financial Services Technology team, focusing primarily on the financial markets area and, in particular, on capital markets infrastructure.

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How robotic technology will disrupt the manufacturing industry

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How robotic technology will disrupt the manufacturing industry 1

By Marga Hoek, author of The Trillion Dollar Shift

Robotics technology has the potential to disrupt industries across all sectors – but its impact on the manufacturing industry will be transformative. Not only can robots increase productivity, efficiency and profit margins but adopting this tech for good will be a key way for the manufacturing industry to transition to a more sustainable future.

Driving productivity & efficiency

Manufacturing processes are faster, more efficient, and more cost-effective when humans and robots work together. Studies show that idle time is reduced by 85% when people work collaboratively with a human-aware robot, rather than in an all-human team.[1] Modern robotic automation is key to reshaping production processes to become more efficient and reliable. They deliver significant benefits for companies and investment is often recouped within just 18 months.[2]

Robots in manufacturing can allow businesses to monitor the production lines from anywhere and pinpoint issues quickly, allowing for production to continue smoothly and efficiently, ensuring companies surpass consumers’ expectations of supply chain speed and reliability. Intelligent industrial service robots are an upcoming industrial tool that will amplify manufacturing capabilities and allow businesses to safely operate faster, in places humans could never go, and with cognitive and physical capabilities not yet imagined.

Transitioning to a sustainable future

Robots are a vital way to reduce pollution and emissions from manufacturing operations. For starters, they reduce our reliance on larger vehicles and machines that are harmful to the planet. Robots’ ability to be extremely accurate and minimize errors is also hugely important in sustainability efforts to reduce waste. Robots also aid businesses in their energy-saving process because they do not require as much energy to operate as humans do. Where humans need facilities with sufficient lighting and heat, robots can work under cold and dark conditions. This drastically reduces the amount of energy used in the manufacturing production process. It is estimated that for every 1C reduced in factory heat levels, there is a potential saving of up to 8%.[3] In addition, up to 20% of energy savings can be reached if the plant turns off any unnecessary lighting.

Case Study: GE

Tech giant GE is a brilliant example of how robotics technology can both boost the bottom line and sustainability.

GE is at the forefront of robotics manufacturing technology. Their value proposition is tightly tied to productivity in field service and manufacturing and offers potential cost savings within operations. While delivering industrial-grade service robotic systems that enable automation, productivity and safety for GE and its customers, the company works closely with GE business units, GE customers and strategic partners across the globe to envision, shape and build intelligent robotic technologies from idea to commercialization.

Marga Hoek

Marga Hoek

GE’s recent $125 million investment project at its Decatur refrigerator plant boosted production capacity, added new “smart” technology and increased the site’s workforce.  This includes auto guided vehicles, or AGVs, that move materials through the assembly process and more than 50 robots that perform heavy lifting operations and repetitive tasks.

The expansion project, announced in June 2018, allowed GE Appliances to increase production to meet growing demand for its freezer-refrigerators, which are top-rated in the industry for both quality and reliability. The expansion created 255 jobs, bringing total employment at the plant to 1,300. The project boosts production capacity by 25 % and ensures early compliance with 2022 refrigerant changes, making the Alabama plant a super site for GE. GE Appliances said Industry 4.0 technology additions at the Decatur facility include data visualization, 3-D scanning, rapid prototyping and other smart automation that provides the operations team with real-time data to make better and faster decisions.

Achieving the UN’s Sustainable Development Goals

Utilizing robotics technology within the manufacturing industry can help to meet the UN’s 17 Sustainable Development Goals (SDG) for a healthier planet, to be met by 2030:

SDG 3 – Good Health & Wellbeing: Collaborating with people, service robots work with shoulder-to-shoulder and over long distances, to fulfil dull, dirty and dangerous work.

SDG 8 – Decent Work & Economic Growth: Presenting new growth opportunities for businesses and creating new jobs at manufacturing plants

SDG 9 – Industry, Innovation & Infrastructure:  Manufacturing value proposition of robotics ties tightly to productivity and brings potential cost savings into those operations.

SDG 12 – Responsible Production & Consumption: Providing a new and rich data source for companies to produce products responsibly

Marga Hoek is a global thought-leader on sustainable business, international speaker and the author of The Trillion Dollar Shift, a new book revealing the business opportunities provided by the UN’s Sustainable Development Goals. The Trillion Dollar Shift is published by Routledge, in hardback and e-book. For more information go to www.margahoek.com

[1] https://www.weforum.org/agenda/2020/08/here-s-how-robots-can-help-us-confront-covid/

[2] https://www.industrialtechnology.co.uk/products–transforming-your-sustainability-with-robotic-automation.html

[3] https://greencleanguide.com/how-robotics-is-revolutionizing-sustainability/

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RPA, the software robots that finance and banking professionals need to hear about.

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RPA, the software robots that finance and banking professionals need to hear about. 2

By Rory Gray, Vice President of Sales at leading software automation firm, UiPath, explains what role Robotic Process Automation (RPA) can play in improving the efficiency of finance and banking departments.

Pre-coronavirus, the finance and banking industries were already facing a myriad of challenges. Now, this myriad is quickly becoming ever more complicated. There is increasing pressure to react to declining business health, be flexible to changing customer behaviour and to adapt to evolving workforce dynamics.

Unfortunately, for these teams, improving agility is easier said than done. Many processes involve legacy systems, paper-based documents and unstructured data. These processes are time-consuming and mundane, leaving finance and banking professionals hard-pressed to fit in client-centric and strategic work.

Take processing invoices. The way it’s done hasn’t changed for years in many organisations. It often involves a member or members of the finance team receiving the invoice by mail or email, approving it manually, printing, signing and submitting it to Accounts Payable. An AP Clerk then has to pick it up, read it, verify the approvals, extract the data and input it into to the accounting package. This all takes time and costs money. What’s more, it’s dull and prone to errors. People don’t want to spend their days doing it.

Imagine if processes such as invoicing, but also loan processing, credit card disputes and many more, could be automated. Finance and banking teams would spend much less time copying, pasting and printing and could refocus on business health and transformation.

RPA is the key to finding more time in the day  

Robotic Process Automation or RPA, is software that can work just like a human. It can use AI capabilities to read and interpret data from both physical and digital documents. It can extract the necessary information and it can transfer this to multiple IT applications. It’s a software robot – or digital assistant.

For finance and banking professionals, RPA could help them break free from the time constraints caused by inefficient and complex legacy operations by passing rule-based repetitive tasks to software robots. This saves time and money – and allows people to focus on the tasks that can make a difference to the business.

RPA can help carry the burden of compliance

Rory Gray

Rory Gray

With data extracted, processed and formatted by software robots, employees will also no longer have to carry the full and heavy burden of compliance.

However accurate we aim to be, the reality is that processing data is always open to mistakes. This is exacerbated by ever shifting market regulations. Software robots, however, are programmed by finance and banking professionals to strictly follow the same steps every time and thus do not fall victim to the same blunders as all humans inevitably do.

Of course, many regulatory compliance functions will often need to involve some human validation or decision making. While the robots work around the clock without fatigue to complete tasks, professionals can still intervene if there is an inaccuracy that requires the personal touch or a loop in the workflow where a decision is needed. Therefore, time-consuming compliance tasks can be passed to software robots, but humans ultimately remain in control.

This in turn provides better risk management and compliance, higher accuracy, better cycle times and improved throughput.

RPA in practice

This may all sound very futuristic, but in practice, many firms are already using RPA to free up employee time, improve compliance and save money.

For example, a leading smart infrastructure solutions firm we work with has created a software robot affectionately named Archie, which has taken over the responsibility for processing all invoices.

Pre-Covid, the 400,000 invoices received by the firm each year were dealt with manually. With Archie this is now fully automated freeing up on average 11 minutes per invoice of time which employees can now use to focus on value-adding activities. It also means that no employee needs to come into the office to process the invoice, nor does any paper need to be passed around the team. Thus helping to keep the workforce safe.

With all this extra time, finance and banking departments can focus on adapting to and thriving in the current crisis. Moving away from data processing and towards advisory roles where they can best use their strategic skills.

Consequently, businesses will benefit during the pandemic and beyond and employees could see their roles shifting away from the mundane and towards tasks that keep them on their toes. A rare win-win in a difficult time.

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WeWALK joins Microsoft’s AI for Accessibility Programme Using artificial intelligence to change the lives of the visually impaired 

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WeWALK joins Microsoft’s AI for Accessibility Programme Using artificial intelligence to change the lives of the visually impaired  3

WeWALK, the smart cane designed for people who are blind or with low vision which is now in use across 37 markets, has joined Microsoft’s AI for Accessibility programme to accelerate WeWALK’s capability by developing and validating a human behaviour model for visually impaired users and creating a Voice Assistant designed for the visually impaired, providing the right mobility information when needed and allowing for even greater control of the WeWALK mobility experience.

Microsoft’s AI for Accessibility $25 million 5-year programme is aimed at harnessing the power of AI to amplify human capability for the more than one billion people around the world with disabilities. Through grants, technology, and AI expertise, the program aims to accelerate the development of accessible and intelligent AI solutions and build on recent advancements in Microsoft Cognitive Services to help developers create intelligent apps that can see, hear, speak, understand and interpret people’s needs.

WeWALK’s new Voice Assistant will be released later in 2020 and will have immediate usability benefits, improving the user’s confidence as they mobilise. The assistant will be built on clearly derived requirements and natural usage patterns and the challenge that WeWALK is seeking to overcome is to make the assistant truly ‘smart’ and dynamic, where it will effectively categorize and deliver on the user’s commands in a host of different environments.

WeWALK’s human behaviour model is due for release in 2021 and is of significant importance as currently there are no accurate models for how a person who is blind moves and how their mobility holistically evolves, especially after receiving orientation and mobility training. As a result, healthcare, government, and mobility trainers cannot effectively track how a person who is blind mobilizes and whether or not intervention has had benefit. By using WeWALK’s built-in IMU (inertial measurement unit) sensors, including the gyroscope, accelerometer, and compass, as well as data collected from a connected smartphone, the model can be implemented and expanded organically through daily usage. The first stage will be rigorous data collection and user testing, followed by data manipulation and classification to ensure that optimum reliability and system usability can be achieved.

Commenting upon WeWALK’s entry into the program Jean Marc Feghali, R&D Lead at WeWALK. “By working on these two objectives, WeWALK can set the standard for visually impaired mobility for both the individual user and the organisations that support them. We are now rigorously collecting mobility data with novel experimentation, validating our work by continuously engaging our users to ensure an exceptional product powered by Microsoft’s best. Being a part of the Microsoft family truly excites us, bringing us closer to mobility trainers, researchers, and the global visually impaired community.”

Mary Bellard, principal innovation architect lead at Microsoft adds “At Microsoft, we believe AI solutions built thoughtfully by and with the disability community have incredible potential to offer meaningful independence in people’s daily lives.  That’s why we’re thrilled to support WeWALK on this important assistive tool that stands to empower the millions of people around the world who use a white cane.”

With the power of Microsoft AI, WeWALK’s impact will be wide-reaching explains Kürşat Ceylan, WeWALK’s co-founder & CPO  “As a blind person from birth, I know that it is very important to get the right habits of using a cane from a young age. It is amazing to see how WeWALK can enhance this aspect of our lives with high tech, making training and orientation more effective. I believe that the smart cane will be a symbol for the fully independent journey people who are blind or with low vision.”

Selected as one of the best inventions of 2019 by TIME Magazine, WeWALK is a member of YGA Ventures, which is an ecosystem of impact entrepreneurs.  The team envisions WeWALK as a platform for continuous and collaborative development, putting it at the forefront of cutting-edge assistive technologies. This is exemplified through WeWALK’s collaboration with Microsoft, where WeWALK participated in Microsoft’s 2019 AI for Good in the UK.

The WeWALK smart cane is currently available on the market and can be purchased on the company website www.wewalk.io. The free WeWALK mobile app which provides various features such as VIP friendly navigation and public transport tracking capabilities is also available for immediate download on both iOS and Android devices.

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