CM18: Nearly 60 percent of audience have not outsourced their collateral process
12 October 2018 Amsterdam
Image: Shutterstock
Some 59 percent of delegates asked at this years’ Fleming Annual Collateral Management Conference, stated that they had not outsourced any part of their collateral process within their firm.
The question was put to audience members during a panel discussing in-house versus outsourcing and was answered via the interactive platform Slido, to which 50 delegates answered.
To this result, one panellist stated: “It would be interesting to see if are those people who said no to that question are still doing business completely manually.”
Another panellist said: “When it comes to outsourcing, it’s usually all or nothing.”
The moderator then asked: “There seems to be this natural inclination to keep in-house wherever possible, but can firms gain extra value from outsourcing offers?”
In answer to this, one panellist said: “I’d agree, not one size fits all, it depends on buy-side firm size and the scale of a sell-side firm in terms of their transaction numbers on a day to day, week to week, and month to month basis.”
He added: Regulation is passed on the buy-side far more because they have the end investor to answer to.”
“You have to ask; where is the firm on its evolution? After the 2008 Financial Crisis, there was a loss of contraction. It also depends on the lifecycle of the firm considered, the current state of the industry can determine the appetite for outsourcing.”
A Slido question put to the panel from the audience was “what’s the benefit of talking to an outsourcer rather than just buying technology?”
One panellist answered: “Cash collateral is vanilla. It’s when you have securities involved there’s transformation issues, as soon as you start posting securities, you‘ve also got costing issues.”
The conversation then led on to data, to which one panellist said: “Some of the best controlled processes I’ve known have been manual, and that’s because [those who work there] have their eye on them every minute of the day.”
He added: “In my opinion, we are suffocating with data in organisations, almost replaced ‘straight through processing’ with ‘straight to problem’, with automation you could be dealing with a mass of controls that you didn’t know you had to deal with.”
In conclusion, the moderator asked if it could indeed be all or nothing when firms consider outsourcing.
When 63 percent of the audience said they would most likely outsource standard initial margin model communication, (compared to other options such as reconciliations and eligibility), the panellist were divided on the opinion of choosing outsourcing.
One panellist affirmed: “Some things are difficult to carve out because they are so well integrated. Optimisation can be carved out, as well as reconciliation, and the transformation process could be.”
Another panellist stated: “Ultimately, accountability remains with the company, they should be in control. A company has to make sure the external party is doing the right thing by them.”
The other confirmed: “There should be a general rule if you’re outsourcing, you’re not washing hands of your responsibilities, you need to have a clear oversight—valuing collateral properly should be practised every day.”
The question was put to audience members during a panel discussing in-house versus outsourcing and was answered via the interactive platform Slido, to which 50 delegates answered.
To this result, one panellist stated: “It would be interesting to see if are those people who said no to that question are still doing business completely manually.”
Another panellist said: “When it comes to outsourcing, it’s usually all or nothing.”
The moderator then asked: “There seems to be this natural inclination to keep in-house wherever possible, but can firms gain extra value from outsourcing offers?”
In answer to this, one panellist said: “I’d agree, not one size fits all, it depends on buy-side firm size and the scale of a sell-side firm in terms of their transaction numbers on a day to day, week to week, and month to month basis.”
He added: Regulation is passed on the buy-side far more because they have the end investor to answer to.”
“You have to ask; where is the firm on its evolution? After the 2008 Financial Crisis, there was a loss of contraction. It also depends on the lifecycle of the firm considered, the current state of the industry can determine the appetite for outsourcing.”
A Slido question put to the panel from the audience was “what’s the benefit of talking to an outsourcer rather than just buying technology?”
One panellist answered: “Cash collateral is vanilla. It’s when you have securities involved there’s transformation issues, as soon as you start posting securities, you‘ve also got costing issues.”
The conversation then led on to data, to which one panellist said: “Some of the best controlled processes I’ve known have been manual, and that’s because [those who work there] have their eye on them every minute of the day.”
He added: “In my opinion, we are suffocating with data in organisations, almost replaced ‘straight through processing’ with ‘straight to problem’, with automation you could be dealing with a mass of controls that you didn’t know you had to deal with.”
In conclusion, the moderator asked if it could indeed be all or nothing when firms consider outsourcing.
When 63 percent of the audience said they would most likely outsource standard initial margin model communication, (compared to other options such as reconciliations and eligibility), the panellist were divided on the opinion of choosing outsourcing.
One panellist affirmed: “Some things are difficult to carve out because they are so well integrated. Optimisation can be carved out, as well as reconciliation, and the transformation process could be.”
Another panellist stated: “Ultimately, accountability remains with the company, they should be in control. A company has to make sure the external party is doing the right thing by them.”
The other confirmed: “There should be a general rule if you’re outsourcing, you’re not washing hands of your responsibilities, you need to have a clear oversight—valuing collateral properly should be practised every day.”
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