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Process Maturity in the Securities Lending Industry
INTERVIEW WITH DENNIS SCHETSCHOK AND SYLVIA ROSENZWEIG, IBM DEUTSCHLAND GMBH
Dennis Schetschok: Managing Consultant, Financial Services – Financial Markets IBM Deutschland.
Sylvia Rosenzweig: Consultant, Capital Markets IBM Deutschland.
In 2009, IBM conducted a market study with leading financial markets institutions and examined their securities lending processes. Please provide some information on the background of the study.
Before the financial crisis, securities lending volumes were rising at an annual rate of 10%. Even though the market has slowed down during the crisis, we are expecting the trend to continue once the markets will have recovered. Institutions will need to handle rising numbers of transactions with existing resources, which will put them under pressure to optimize and automate processes in order to remain competitive. As a result, institutions must actively manage their process results and not leave them up to chance. In our study, we determined the market’s readiness for the process-related challenges ahead.
Could you please summarize the main findings of the market study?
All participating institutions have process descriptions available and most of them have process controls via profit- or yield-related indicators in place. However, there are divergences regarding the level of detail and topicality of the documentation. Similarly, end-to-end process descriptions and documentation of process interdependencies are largely missing. Process management software is rarely used and process owners have limited responsibility. There are no process-based figures that could be used to detect inefficiencies at an early stage. Overall, process management maturity is rather low.
Concerning the individual design of securities lending processes, there is often no full integration between front- and back-office systems, which leads to interruptions in the process flow. Manual and often paper-based activities are used to bridge the gap between systems where interfaces are missing. Also, spreadsheets which are prone to error, are used to perform calculations or to monitor the process flow. In summary, there is a multitude of risks for process failures, but to the same extent also a high potential for automation. Companies just have to make use of it.
To read the whole interview please refer to page 9 of our latest EFL-Quarterly:
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