A typical year can see over ten million different corporate actions which can vary wildly from dividends to acquisitions, and the amount of work that follows can be astronomical. For an asset manager, they almost always mean a headache: Going through each client’s portfolio to add another share or another dollar is a lengthy and tedious process. Yet alone failing to interpret a corporate action correctly may lead to value loss and pitiable trading decisions.
Accurate data is crucial in the financial world. A small error in a portfolio or financial statement can lead to lasting consequences. Therefore, it is fundamental to correctly post to the correct account in the correct amount. This becomes challenging with thousands of complex corporate actions. In fact, typically human error is at the root of miss postings.
The financial industry always seeks to mitigate risk. Improper handling of corporate actions can lead to operational risk and especially reputational risk. According to a study published by Oxera, “the direct risks to any individual firm involved in the corporate action processing chain can be very significant. Failure in handling a single, complex corporate action has the potential to result in a loss running into tens of millions of euros.” According to the study, the European fund management industry experiences an annual loss of €65m to €140m (globally €300m– €700m) due to corporate action processing failures. Each participant faces not only back office risk, but also front office risk. The front office acting on incorrect information may cause temporary arbitrage opportunities or sub-optimal trading decisions by brokerages and fund management firms for clients or for proprietary positions. Corporate action processing is complicated, not standardised, and to a large extent still manual, making it imperative to have a streamlined and fool proof system in place.
Undertaking a corporate action can be a long, risky, and hard process especially when managing a large number of portfolios. FA’s Corporate Actions module allows you to automate the cumbersome aspects of corporate action management. For example, you can control which portfolios to use, what kind of transactions to create, which taxes to apply, and when to exercise the corporate action. This makes the management of corporate actions a quick and easy process through the FA Platform.
FA Platform is a solid base for building your investment management business as it ensures that you have everything in a single integrated platform and adapts flexibly to your critical business processes rather than the other way around. FA’s modularized functionalities cover all aspects of investment management from front office to back office. FA Platform allows you to select functionalities based on your needs, ranging from a simple portfolio reporting tool to a comprehensive investment management system.