By Saleha Anwar, Lead Business Consultant, GFT
As Business Process Management (BPM) continues to develop, one of the most exciting and high profile aspects of it is that of Robotic Process Automation (RPA).
RPA is transforming organisations across all industries, leading experts to believe that it is one of the most transformational tools in current times. In this article we explore the benefits of RPA and why it is so transformational, along with an analysis of where it can be applied within the financial services sector.
You are probably thinking that RPA is not entirely a new concept and has been around for a number of years; and yes you are right, it has been around for some time now. The key question is what is so different about the latest wave of RPA? The answer lies with the maturity of both the technology being used as well as the business processes that it is being applied to. In addition, the key difference between RPA and other recent automation methods is the approach used for completing the tasks carried out by employees. RPA utilises a standard interface and deploys software without modifying the applications or systems being automated.
Another question to address is why we use RPA rather than simply implementing new systems? New may sounds great in theory, however, this is not so straightforward in reality. What happens in every business is that people and technology are combined to meet the external demands of the customer. However, the challenge is often that technology cannot be adopted at the speed which the business requires to meet its needs, and people are used to bridge the gap between technology and processes by applying business rules.
Additionally, most (if not all) banks have old legacy systems which can be very difficult to upgrade, and it is often easier and cheaper to use people to bridge the divide. Although people are able to apply judgment, empathy, interpretation and deal with exceptions, the downside is that people are often left with repetitive and mundane tasks. Repetitive and mundane tasks undertaken by people are often subject to errors, which result in operational deficiencies, less focus on the customer, higher costs and a declining sense of motivation amongst the workforce.
This is where the benefits of RPA come into play, by using a virtual workforce empowered by software robots that allow enterprise organisations to automate these mundane and repetitive tasks. For example, a virtual workforce of software robots can be used to automate processes that are governed and hosted by IT, but are configured and controlled by the business.
Below are a number of the characteristics of the best candidate processes to target for RPA automation:
- High volume processes
- Highly manual processes
- Repetitive tasks
- Rules-based tasks
- Low exception processes
- Stable processes
- Data conversion processes
- Low complexity processes
If the process is: ambiguous, unstructured, not rules-based, has high exception rates and complexity, or if there are large amounts of data, then Artificial Intelligence (AI) can be employed as this can manage greater variability. AI can improve over time, since AI robots have the ability to ‘self-learn’ whereas RPA capabilities are mainly limited to the criteria mentioned above.
However, apart from removing repetitive and mundane tasks, what other benefits does RPA provide? Despite being a new technology, crucially, RPA software is neither expensive nor complex compared with some other technologies. RPA tools are also on average, 65% less expensive than employing a full-time worker to do the same task.
Although the financial sector has already embraced RPA to some extent, it is still relatively behind the curve compared to other industries, such as vehicle manufacturing, which has heavily embraced the RPA paradigm since about 2009. In so doing vehicle manufacturing has enjoyed a 59% increase in productivity compared to a 10% decrease in productivity within Financial Services since 2009*. However, it is worth noting that a complete like-for-like comparison between RPA adoption in vehicle manufacturing (more robotic based) and Financial Services (more system based) is difficult, due to the distinct nature of each industry. In addition, Financial Services tends to be far more complex than most other industries, given the complexity / multi-layers of persistent legacy systems and the ongoing regulatory demands placed on firms over the past decade which have increased complexity dramatically.
However, the current low rate of adoption within Financial Services can be considered as an opportunity for the industry, since it gives the sector room to make large improvements, which can be achieved very cost-effectively and without the need for expensive or complex technologies.
Which processes to target first in Financial Services?
Looking at the characteristics we highlighted earlier of processes that are applicable for RPA adoption, we can begin to prioritise candidate processes that may be suitable within the firm. Some of these processes within Financial Services may include (but not be limited to):
- Client on-boarding (Know Your Customer (KYC) and Anit-Money Laundering (AML)
- Performing data enrichment
- Reviewing transaction data
- Adding new securities to systems
- Resolving books and record breaks
- Matching and reconciling securities positions
- Clearing and conveying settled trades
- Reporting current positions
- Monitor liquidity and report exceptions –
…the list really does go on and on!
How do you deploy a secure, scalable, well-controlled RPA platform in your organisation?
The answer is that it has to be a true partnership between Operations (the business) and IT. IT will look at governance, control, compliance, scalability, security and the ‘rules of engagement’ of the RPA. Operations will prioritise having an operating model framework that allows for an extensible platform that can be applied to a number of different processes, with the potential to scale out across the organisation.
RPA provides a different way of thinking about how business processes are ‘solutionised’, delivered and managed in an organisation. The good news is that RPA can utilise the existing software platforms that have already been rolled out to users – platforms that have been tested, validated and integrated into the existing processes of the organisation. This approach proves to provide a more flexible and adaptable solution that is able to keep up with the demands of the business. It also ensures adherence to the compliance and governance requirements of IT.
What are the advantages of RPA?
By adopting RPA, Financial Services firms will be able to realise a number of benefits:
- Drive operational efficiencies
- Focus on the customer
- Transform customer outcomes / enhance customer experience
- Create cost savings
- Decrease business risk
- Optimise existing processes and systems
- Utilise human talent in better ways
- Increase productivity
- Create scalability
- Empower the business to improve
- Remove demotivating mundane tasks
The concept of RPA is not completely new for Financial Services or other industries. It is, however, more mature now than other technologies currently in the marketplace. This makes RPA a very strong contender when it comes to transforming processes within the Financial Services sector. Firms that adopt RPA will benefit from:
- Higher accuracy
- Right first time approach
- 24/7 availability
- Instantly scalable solution
In most firms, the gap between the technology division (IT) and the Business / Operations continues to widen, with IT teams that are unable to keep up with the ever changing demands of the business. This situation has been exacerbated by the vast number of new regulations that have been imposed on the finance sector following the banking crisis of 2008. This has added to an already complex legacy banking landscape, making it even more difficult to create efficiencies with existing systems and processes.
It is clear that like other industries have already done, the Financial Services sector can definitely reap the benefits of RPA to a greater extent than at present. This will not only be at relatively low cost, but can also be delivered with low complexity compared to other technologies. Moreover, RPA can be combined with artificial intelligence (AI) to make it an even more sophisticated and powerful technology. (For more on this see Artificial Intelligence: Why now? – by Richard Miller to find out more).
Whilst some may fear the ‘rise of the robots’, those who can step back and see the overarching benefits of RPA will see that people will be freed up to focus on tasks that are more interesting, more valuable and more customer focused. Give the right tasks, and the right processes a good robot can be good for everyone!
Leon Black step downs as Apollo CEO after review of Epstein ties
By Mike Spector and Chibuike Oguh
NEW YORK (Reuters) – Leon Black said on Monday he would step down as chief executive at Apollo Global Management Inc, following an independent review of his ties to the late financier and convicted sex offender Jeffrey Epstein.
While Black, whose net worth is pegged by Forbes at $8.2 billion, will remain Apollo’s chairman, his decision to step down illustrates how doing business with Epstein weighed on the reputation of one of Wall Street’s most prominent investment firms. Black co-founded Apollo 31 years ago.
Apollo said it plans to change its corporate governance structure, doing away with shares with special voting rights that currently give Black and other co-founders effective control of the firm.
The independent review, conducted by law firm Dechert LLP, found Black was not involved in any way with Epstein’s criminal activities. Black paid Epstein $158 million for advice on tax and estate planning and related services between 2012 and 2017, according to the review.
Black, 69, said that although the review confirmed he did not engage in any wrongdoing, he “deeply” regretted his involvement with Epstein.
“I hope that the results of the review, and related enhancements … will reaffirm to you that Apollo is dedicated to the highest levels of transparency and governance,” Black wrote in a note to Apollo fund investors. He will step down as CEO no later than July 31.
Apollo co-founder Marc Rowan, 58, will take over as CEO.
Rowan has often kept a low-key profile compared with Apollo’s other co-founder, Joshua Harris, 56, and spearheaded many initiatives that turned Apollo into a credit investment giant, including the permanent capital base the firm enjoys through its ties to reinsurer Athene Holding Ltd.
The revelations of Black’s ties to Epstein took a toll on Apollo, which Black turned into one of the world’s largest private equity groups. Apollo executives had warned in October that some investors had paused their commitments to the buyout firm’s funds as they awaited the review’s findings.
Apollo shares are down 1% since the New York Times reported on Oct. 12 that Black paid at least $50 million to Epstein for advice and services, when most of his clients had deserted him.
Over the same period, shares of peers Blackstone Group Inc, KKR & Co Inc and Carlyle Group Inc are up 19%, 10% and 23%, respectively.
“We think a large number of (Apollo fund investors) took a ‘pause’, and we believe the outcome (of the review) and changes today will cause most of them to return to allocating to future Apollo funds,” Credit Suisse analysts wrote in a research note.
Apollo shares jumped 4% to $47.65 in after-hours trading on Monday.
“We continue to follow these events closely and will evaluate how Apollo addresses its issues,” the California State Teachers’ Retirement System, one of the largest U.S. public pension funds and an Apollo investor, said in a statement.
Epstein was found dead at age 66 in August 2019 in a Manhattan jail, while awaiting trial on sex trafficking charges for allegedly abusing dozens of underage girls in Manhattan and Florida from 2002 to 2005. New York City’s chief medical examiner ruled that the cause of death was suicide by hanging.
Black previously said he had paid millions of dollars to Epstein, but the exact size of his payments was revealed for the first time on Monday. Beyond the $158 million in payments, Black made two loans to Epstein totaling $30.5 million in early 2017.
Dechert said in its report that Black’s social ties with Epstein, who built his fortune by endearing himself to powerful figures in high society, went back to the mid-1990s.
Epstein won Black’s trust by resolving an estate tax issue for him in 2012 potentially worth at least $500 million, the report said. He ended up advising Black on various aspects of his personal financial affairs, from his family office and airplane to his yacht and artwork.
Black believed that Epstein provided advice over the years that conferred between $1 billion and $2 billion in value to him, according to the Dechert report. Black said in his note to investors that he had paid Epstein a fee equivalent to 5% of the value he generated on an after-tax basis, and not tied to hourly rates.
Black and Epstein’s relationship deteriorated after Epstein failed to repay $20 million of the loans and Black refused to pay tens of millions of dollars in fees that Epstein demanded, according to the Dechert report.
They severed ties in October 2018, according to the report. Black knew Epstein had been convicted in Florida a decade earlier for soliciting prostitution from a minor, the Dechert report said, but there was no evidence suggesting Black had knowledge of the other alleged crimes before they were publicly reported in late 2018, culminating in Epstein’s July 2019 arrest.
On Monday, Black pledged $200 million toward “initiatives that seek to achieve gender equality and protect and empower women,” as well as helping survivors of domestic violence, sexual assault and human trafficking.
Apollo said it would pursue a “one share, one vote” corporate governance structure that would do away with shares with special voting rights. It said the move could qualify it for listing on the S&P Global indices.
Apollo also said it would seek to give its board more authority to oversee its business, eroding the power of its executive committee led by Black.
The board will be expanded to include four new independent directors, including Avid Partners founder Pamela Joyner and physician and scientist Siddhartha Mukherjee, Apollo said. Apollo co-Presidents Scott Kleinman and James Zelter will join the board and take on increased responsibility running day-to-day operations.
Apollo had about $433 billion in assets under management as of the end of September.
(Reporting by Mike Spector and Chibuike Oguh; Additional reporting by Lawrence Delevigne and Jessica DiNapoli in New York; Editing by Sonya Hepinstall, Leslie Adler and Kim Coghill)
EU sees no cliff-edge ending for COVID fiscal stimulus
BRUSSELS (Reuters) – European governments will not need to abruptly end fiscal support for their economies after the pandemic, top officials said on Monday, noting that any withdrawal of stimulus would be carried out gradually and only once the economy has recovered.
Euro zone public debt rose sharply during 2020 and is likely to exceed 100% of GDP this year as governments borrow to help individuals and businesses survive lockdowns.
The higher debt raises concern about how to deal with it down the road and when to start cutting it again, since the EU last year suspended its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP).
EU finance ministers are to discuss when to reintroduce any borrowing limits in the second quarter of this year.
“I believe it important that finance ministers debate and reach a common understanding on the appropriate fiscal stance by the summer. This can then serve as guidance for the preparation of their draft budgetary plans for 2022,” the chairman of the euro zone’s group of finance ministers, Paschal Donohoe, said on Monday.
“To avoid any misunderstanding, let me stress that this is not about an imminent withdrawal of fiscal stimulus,” he told the economic committee of the European Parliament.
“We all agree that our immediate priority is to shield our citizens, in particular younger cohorts and those most exposed to the crisis. There must be no cliff-edges,” he said.
Joao Leao, the finance minister of Portugal which holds the rotating presidency of the EU and therefore sets the agenda for EU finance ministers’ work until June, was equally cautious.
“We should not withdraw stimulus too early. We need to make sure the suspension clause for the SGP remains in force at least until we return to pre-crisis economic figures,” he told the committee. “We need to make sure jobs are maintained as well as the production capacity of companies.”
He said first cash from the EU’s 750 billion euro post-COVID economic recovery programme should reach the economy in the first half of the year.
“Real funding should be getting to the economy before the summer or in early part of the summer,” he said.
(Reporting by Jan Strupczewski; Editing by Giles Elgood)
IMF to intensify focus on climate change’s economic impact, Georgieva
By Andrea Shalal
WASHINGTON (Reuters) – The International Monetary Fund views climate change as a fundamental risk to economic and financial stability, its chief said on Monday, mapping out the IMF’s plans to help focus investments in green technologies that will boost global growth.
IMF Managing Director Kristalina Georgieva told the Climate Adaptation Summit that global economic output could expand by an average 0.7% annually over the next 15 years and millions of jobs could be created if carbon prices rose steadily and investments expanded in green infrastructure.
“We see climate as a fundamental risk for economic and financial stability, and we see climate action as an opportunity to reinvigorate growth, especially after the pandemic, and to generate new green jobs,” Georgieva said.
She said the IMF was taking action in four areas to accelerate the transition to a new low-carbon and climate-resilient economy.
Georgieva said the Fund would launch a new “Climate Change Dashboard” this year to track the economic impact of climate risks and the measures taken to mitigate them, a key step to ensuring the needed shift.
“Climate resilience is a critical priority,” she said. “This is why we place it at the heart of what do, this year and (in) the years to come.”
The Fund is also integrating climate factors into its annual economic country assessments, also known as Article IV consultations, focusing on adaptation in highly vulnerable countries, and carbon pricing in its assessment of large emitters, Georgieva said.
In addition, she said the IMF is adopting enhanced stress tests and standardizing disclosure of climate-related financial stability risks in its financial-sector surveys, and expanding its training and support to help central banks and finance ministries take climate considerations into account.
The World Bank, the largest multilateral funder of climate finance, boosted funding for adaptation projects to 50% of its total climate finance over the past four years, and plans to maintain that percentage for the next five years, World Bank President David Malpass told the same event on Monday.
In addition to funding projects addressing coastal erosion, increasing crop yields and building cyclone-resistant infrastructure, the Bank was also investing in early warning and evacuation systems, better social protection, and weather observation, he said.
(Reporting by Andrea Shalal; Editing by Paul Simao)
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