Front office the way forward
28 May 2014 Boston
Image: Shutterstock
Evolution towards the front office has been identified as one of the main trends for efficient collateral management across global market participants in a survey by Sapient Global Markets.
The research, conducted throughout March to ascertain how firms are managing and processing collateral, also named the efficiency gains required to deliver increased automation and the support systems needed as being important.
While 66 percent of the firms polled still view collateral management as a cost centre, 39 percent plan to make collateral a profit centre and use it to generate additional revenue.
According to the survey, the increasing focus on collateral as an additional revenue stream is prompting a migration of optimisation functions to the front office.
This will require significant changes to established processes and systems to enable firms to manage margin and risk calculations within compressed timeframes across all available collateral inventory pools.
The survey also states that cost efficiency is one of the main drivers of change in collateral management, requiring more effective client communication, responses to margin calls, dispute management and settlement of non-cash collateral.
However, most survey participants did not consider their dispute management processes to be efficient enough and regard their counterparties’ processes as an area for improvement.
Collateral booking, for example, is performed manually in more than 60 percent of firms due to the lack of standardisation and automation in client communication.
Sapient recommends that increasing automation would lead to cost reduction in these functions and allow knowledgeable staff to be re-deployed.
The research, conducted throughout March to ascertain how firms are managing and processing collateral, also named the efficiency gains required to deliver increased automation and the support systems needed as being important.
While 66 percent of the firms polled still view collateral management as a cost centre, 39 percent plan to make collateral a profit centre and use it to generate additional revenue.
According to the survey, the increasing focus on collateral as an additional revenue stream is prompting a migration of optimisation functions to the front office.
This will require significant changes to established processes and systems to enable firms to manage margin and risk calculations within compressed timeframes across all available collateral inventory pools.
The survey also states that cost efficiency is one of the main drivers of change in collateral management, requiring more effective client communication, responses to margin calls, dispute management and settlement of non-cash collateral.
However, most survey participants did not consider their dispute management processes to be efficient enough and regard their counterparties’ processes as an area for improvement.
Collateral booking, for example, is performed manually in more than 60 percent of firms due to the lack of standardisation and automation in client communication.
Sapient recommends that increasing automation would lead to cost reduction in these functions and allow knowledgeable staff to be re-deployed.
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