Mitigating Risk

Managing Operational and Cost Efficiencies Across Financial Markets in Asia

By Nellie Dagdag, DTCC Managing Director – Asia Pacific | Apr 29, 2020

Managing Operational and Cost Efficiencies Across Financial Markets in Asia
Nellie Dagdag, DTCC Managing Director, Industry Relations, APAC

Amid a backdrop of trade and tariff wars, escalating costs and shrinking margins, Asia woke up in early 2020 with a major crisis – the COVID-19 coronavirus pandemic. While Asia felt the effects of the COVID-19 pandemic early and before it began its spread to other regions around the world, it is still too early to predict the full impact of the crisis on Asia and its impact on the financial world. With that said, regional firms have an opportunity to re-examine and adjust their business and operational strategies to ensure they are well prepared for future opportunities and challenges.

Reviewing and Revamping Operational Systems

Extraterritorial and regional regulatory obligations will continue to push firms in Asia to leverage technology to drive compliance and efficiency. Specifically, a review of existing institutional post-trade systems should be a part of overall preparations to comply with regulations that will be implemented to address challenges revealed by the pandemic. Firms will need to ensure that operational systems are scalable, extensible and adjustable to support new and evolving regulatory requirements across multi-jurisdictions. This is especially important for regional firms seeking to explore new and untested markets in light of slowing growth.

Streamlining Post-Trade Operations

Regional firms that are expanding their foreign footprints must also ensure that existing institutional post-trade systems are able to support the additional trade volume and operational complexities associated with cross-border transactions.

Given that the levels of automation vary across markets in Asia, regional firms that depend on manual post-trade processes that require human intervention from all parties to a trade will be exposed to greater costs and operational risk due to unnecessary delays and human errors, further complicating the post-trade and settlement environment. The issue is even more pronounced in a cross-border setting due to time zone differences and shorter settlement cycles. In the absence of automation and straight through processing (STP), operational risk is increased and the ability to scale becomes a challenge.

Automating and standardizing processes that are aligned with global standards introduces greater operational stability and transparency into the post-trade lifecycle. It also allows regional firms to enhance their ability to demonstrate process reliability and cope with evolving trading strategies – vital to enabling future growth.

Turning to Market Utilities for Help

Regional firms could leapfrog their transition to automation and STP by utilizing the services of market utilities that offer flexible interfaces and modular functionality to expedite the post-trade and settlement processes and mitigate operational and settlement risks. Aside from offering a common STP platform, regional firms can capitalize on the community of users, and take advantage of best practices employed by market utilities to streamline communications among buy side and their custodians and counterparties.

While market utilities heavily rely on technology, they are also valued for their role in fostering collaboration across the industry, resulting in massive opportunities to reduce the total cost of trade processing, sharing expertise and insights and integrating siloed systems and solutions. Essentially, market utilities are here to solve common industry needs in areas such as institutional post trade processing, trade reporting and client onboarding through industry collaboration across Asia. The result? Market participants can concentrate on delivering portfolio growth and fulfilling regulatory obligations in a secure and efficient environment.


 

 

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