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SunGard and CEB TowerGroup Reveal Risk Management is Driving Innovation in Reconciliations

An annual reconciliations survey* conducted by TowerGroup, a Corporate Executive Board company, on behalf of SunGard, has revealed that risk management and regulatory concerns are driving innovation in reconciliations as more operational executives recognize its critical role in addressing regulation and internal compliance demands. This is a key conclusion from the research, which explores the changing face of reconciliations in the rapidly evolving global business environment.

Despite efficiency and cost savings remaining key drivers of reconciliations automation, 75% of respondents agreed that regulation is having a significant impact on these processes, which is broadening the role of reconciliations. 60% of respondents agreed that greater emphasis on liquidity is raising reconciliation focus for intra-day cash and collateral, and increasing the frequency. 63% stated that the introduction of central clearing through Dodd Frank will drive the adoption of over-the-counter derivatives reconciliation automation, further broadening the scope of these processes.

Findings revealed that in response to regulation, risk management is driving innovation across three areas:

  • Expansion of Scope: In addition to intra-day cash and derivatives reconciliations, 87% of respondents agreed there is a greater need for internal system to system and front to back reconciliations to support an increased focus on operational controls and external regulations.
  • Increased Frequency: Market initiatives, including Basel III, are demanding greater timeliness and accuracy in regulatory reporting; more than 69% of respondents agreed there has been an increase in intra-day and real time reconciliations in response to such initiatives.
  • Use of Technology: As operations executives demand continuous access to real time information, tablet adoption is set to increase over the next 18 months. Over 60% of respondents ranked real time notification and alerts as the biggest benefits of mobile usage, helping to track information ‘on the go’.

Steve Murphy, research director at CEB TowerGroup, said: “The growing importance of reconciliations is highlighted by the exciting innovations we are seeing around real time processing, tablet deployment and a broader expansion in operational processes. Our research shows a direct link between the rise of regulation and operational risk management which is driving this innovation.”

Jennifer Hanes, executive vice president, Operations for SunGard’s banking business said: “While cost and efficiency remain the key drivers for IT investment in reconciliations, the research shows that risk management is causing a major shake-up in this area. Our customers echo the findings of this report as they strive to expand the use of IntelliMatch Operational Control to cover reconciliation of all aspects of their business; from derivatives to ATMs and from end of day processes to sophisticated intra-day and real-time environments.”

*TowerGroup conducted a global survey of 48 banking institutions in July-August 2012 to help determine present and future changes to reconciliations.