Business leaders need easy access to timely, reliable, and complete information across post-trade processes. Aside from the usual requirements of senior managers to optimise for risk, revenues, and costs, they increasingly need to demonstrate to their own management and to regulators that they have the tools to run their business safely and effectively.
Alex Knight, Head of EMEA at Baton Systems, explains how Baton’s Core-Payments™ tracks data in real-time and provides leaders with the tools to supervise and manage risk for their business more effectively.
Now more than ever, business leaders have an obligation to manage and supervise their business performance and risks effectively. This obligation doesn’t stop at the point of execution, but covers the whole lifecycle of a transaction, only concluding with the confirmed payment or receipt of assets.
Whilst enormous strides have been made in both technology and processes around price discovery, distribution, and the management of market risk, the processes related to the arrangement, processing, and final reconciliation of payments and receipts remain, to a large degree, in the Dark Ages. Many business leaders have almost no access to information in this increasingly fractured and impenetrable area.
Why is this? First, it’s often the case that the information in question is difficult for anybody within the organisation to obtain, due to the proliferation of manual processes and legacy, siloed technology. Additionally, a request or instruction to obtain data might need to go through several different people. By the time this long chain of communication has been completed, the data retrieved may have prompted further questions or may even no longer be relevant.
When a manager knows what they need to know…
Let’s say a counterparty is going through stress in the very public domain. In this case, it’s important for a business manager to have a clear, up to date and accurate understanding of their organisation’s settlement risk with that counterparty; i.e. what obligations the counterparty has to pay today (and perhaps in the future) and its performance against those particular obligations. The manager also needs to understand, and perhaps instruct, how their own firm manages their obligations to that customer, based on real-time information.
To take another example, if a currency is going through a period of significant volatility, a manager needs to understand their organisation’s obligations and balances in that currency. Is it waiting on large inbound payments or needing to pay out large outbound obligations? What is the forecast end-of-day balance? Is the firm sufficiently funded, or, indeed, is there a risk that it’s overfunded and likely to breach limits and be subjected to fines? In some cases, it will be helpful to track the status of large inbound settlements. If the manager has confidence that they will be advised when this has actually settled, or be alerted if there’s a risk that it will fail (or indeed that it has failed) then they are going to be able to manage their business safely and effectively.
“The manager also needs to understand, and perhaps instruct, how their own firm manages their obligations to that customer, based on real-time information”
… and when they don’t
The examples outlined above describe the situation when a senior manager already has a level of awareness of a potential risk. However, in many cases, the risks aren’t necessarily obvious. Core-Payments allows users to set up highly configurable alerts that will provide early warning to events such as large settlement fails, balances that are outside of tolerances, changes in counterparty settlement behaviour, or blockages in the post-trade processes that impact the firm’s ability to meet their obligations.
Ultimately, senior managers need direct access to reliable and up-to-date information across functional and product silos, configured in a way that meets their requirements and shortens the lines of communication whilst enhancing supervision, client service, and risk management.
“Core-Payments allows users to set up highly configurable alerts that will provide early warning to events such as large settlement fails, balances that are outside of tolerances, changes in counterparty settlement behaviour, or blockages in the post-trade processes that impact the firm’s ability to meet their obligations”
How can Baton help?
Baton Core-Payments™ is a single platform that operates across multiple lines of business and is capable of tracking all cash flows across multiple entities and business lines from the point of matching through to final settlement. Core-Payments tracks the data in real time and reconciles both inbound and outbound settlements in real time. This information can then be deployed against rules that automatically orchestrate the release of settlements based around either or both counterparty performance and funding/liquidity constraints.
Additionally, Core-Payments enables the creation of an extremely valuable data pool. This data can then be presented not only to operations teams but also to business leaders. Core-Payments allows users to configure the data to suit their needs and can also trigger alerts when certain conditions are met. So the platform not only provides data at a business summary level but also allows managers quickly to validate a situation by drilling down – if necessary, all the way to the underlying SWIFT message relating to an inbound payment. Of course, the opportunities to use this data for analytical insights are also enormous and we will cover these in a future article on our website.
“Baton Core-Payments™ is a single platform that operates across multiple lines of business and is capable of tracking all cash flows across multiple entities and business lines from the point of matching through to final settlement”
Smart data means smart leadership
Put simply, Core-Payments allows business leaders to supervise and manage risk for their business more effectively than before by harnessing real-time information on payments and receipts across business lines, counterparties, legal entities, and currencies. By eliminating the need to link multiple, disjointed post-trade systems, Core-Payments allows managers to observe trends in counterparty behaviour, deploy resources more efficiently, and get ahead of issues around funding or counterparty exposure. These issues can then be resolved before they become major concerns, inspiring confidence in both stakeholders and regulators that a business is being well run.
I hope that you have found this article useful in explaining how access to real-time data on payments and receipts can help managers supervise their business more effectively. To learn more about Core-Payments, please don’t hesitate to contact me at [email protected].