Sapient Global Markets has published a white paper which examines collateral management trends and their effect on firms’ systems and processes.
The paper, “Bringing Efficiency to Collateral Management”, discusses how and where firms must deliver greater efficiency in order to remain competitive and protect revenues.
It reveals that while regulations continue to drive firms’ investments in new technology and infrastructure, a number of other trends are influencing firms’ desire to increase efficiency including shortfalls, cross asset netting, collateral optimisation and transformation.
“Market participants have patched together fragmented systems, manual processes, and siloed approaches to ensure compliance with various regulatory requirements,” says Thomas Schiebe, senior associate at Sapient Global Markets. “Unfortunately, such disjointed efforts have made managing and processing collateral inefficient and costly, which impacts profitability.”
As the costs of central clearing, collateral reporting and margining continue to rise, firms will need to bring efficiency to several areas of their collateral management process in order to remain competitive and protect revenues. The white paper identifies and discusses six key areas for improvement, namely: inventory management, risk management, data management, reporting and analysis, dispute management, and communication standards.
“From the current environment of batch processes and reactive collateral management decisions, firms are now looking holistically at collateral management projects,” Schiebe says. “They realise that automation is needed to manage higher collateral volumes, increased margin calls, and interaction with more counterparties. As collateral management continues to evolve, driven by regulatory reform, firms are taking positive steps to remain competitive and protect revenues.”