The reliance on staff to deal with manual reconciliations and multiple systems is about to reach its tipping point. With headcount reduction and cost cutting, firms are under increasing pressure to automate their reconciliation processes. This combined with key-person risk where recs processes are known to an individual or a small contingent leads to a significant source of operational risk.  In the second part of the series from the Aite Group benchmark survey, these challenges are put under the spotlight.

An over-reliance on manual processes is particularly high within many lower-tier firms which still rely on staff to reconcile data, trade work flow items and cash accounts. Even in larger firms, manual effort dominates faster-moving and newer business lines because legacy single or multiple reconciliation platforms are often unable to support new asset classes and new clients. Multiple in-house and vendor systems are run to cover different reconciliation required across business lines.

This approach is rife with dangers. Manual processing not only increases bottom line operating costs but also raises operational risk. Pressure to reduce headcount exacerbates this already fraught situation. However, a push to decrease operational exposure and mitigate fraud is spurring an industry-wide focus on improving systems and controls. Business and regulatory pressures coupled with processing complex instruments and a shift to real-time, T0 are making manual reconciliations look distinctly untenable.

Throwing bodies at reconciliation challenges or running multiple systems to get the job done, increases risk and drives up the cost of keeping the lights on. Shouldn’t all of that valuable individual IP go into making changes that reduce operating costs in the long run? 

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