Based upon research projects that have been performed by The Summit Group, we believe that there are several worldwide trends that are driving the securities industry. These trends are the result of the industry-wide recommendations, as well as fundamental economic, political and social changes that are occurring worldwide.
There are six basic trends:
- Commoditization of the basic securities processing services
- Changes in customer requirements
- Increased settlement efficiency in each country
- Lower margins on the basic services
- Securitization of assets
- Shifting sources of cross-border investment
Many firms are reacting to these basic trends by reevaluating their position and role in the industry. This is causing:
- Shifting alliances in the infrastructure
- Increased competition
- Increasing disintermediation of the traditional players
Finally, as firms develop their on-going strategies, they have to consider two other trends in order to develop their implementation plans:
- Increase in the use of standards
- Availability of new technologies
- Out-sourcing vs. In-sourcing
- Off-shoring vs. On-shoring
These trends are creating new opportunities for securities processing intermediaries, and will also create numerous potential pitfalls. If intermediaries fail to adapt to the new realities of the securities business and do not solve their customers' problems, their own disintermediation will be hastened, not postponed. TSG has helped numerous firms interpret these trends in terms of their specific businesses.
Changes in the industry and in the available technology have not always been adequately transformed into improvements in each business's process flow. We believe that the constant evolution of the available technology and the industry infrastructure provide outstanding opportunities.
Through Continuous Process Reengineering, we review the current business and process flow, add our industry and technology knowledge, and reengineer the process to make fundamental and radical changes in the way that work is done or in the way that a product is delivered, or how a business relates to its environment. We go far beyond the simple automation of existing functions and seek an entirely different approach that can significantly increase revenues, improve the service levels, and reduce expenses.
Our process is based upon four major activities, each of which is supported by a set of distinctive implementation techniques. These techniques can be used by our staff, taught to the client's staff, or a combination of both.
Through the application of this practical process, we have identified numerous fundamental process changes where the use of technology has created or amplified a business's competitive advantage.
Total Process Management
TSG's Total Process Management tm approach helps our clients select the best approach for controlling costs through rightsizing, outsourcing, consolidation, and redesign, etc. And, when we implement any one approach, we consider the entire picture. For instance, we believe that rightsizing without some process redesign is dangerous, and that outsourcing without additional standards and controls could be very expensive in the long run.
Every management function needs to be considered whenever any one cost reduction technique is employed. By using Total Process Management we establish standards, methodologies, and tools to improve the process quality, controls, and MIS, while reducing our client's expenses.
Constant changes in the business climate, competition, and client needs require firms to adapt quickly to capitalize on dynamic conditions and opportunities. The Summit Group can help businesses respond effectively in this environment, identify and develop new revenue opportunities, and significantly reduce their cost structure. And, we have the experienced professionals, the tools, and the methodologies to support our clients in the very complex task of systems integration.
In recent years firms have been moving between out-sourcing and in-sourcing, as well as off-shoring and on-shoring. TSG has had experience in each of these areas and can provide assistance in developing the appropriate strategy.
Straight Through Processing
The concepts behind Straight Through Processing (STP) are the same as those that have been used by operations and technology managers to improve their processes for years; however, STP can be used as a rallying point for firms to work together to improve integration between firms.
STP requires an understanding of the business, the technology and the industry trends, and an ability to identify and implement practical solutions to complex problems. TSG has written on this topic and has actively supported many clients identify opportunities and to help them achieve their goals.
TSG believes that for the industry to effectively have Straight Through Processing, both internal and external connectivity will have to be established, from the initiation of the transaction by the customer all the way to reporting the completed transaction to the customer. We regard STP to be 'Customer to Customer Automation'.
Out-sourcing vs. In-sourcing and Off-shoring vs. On-shoring
TSG has written articles on the advantages and disadvantages of out-sourcing vs. in-sourcing and has supported clients in comparing on-shore and off-shore alternatives. Our comparison process is based upon our understanding of the industry processes and trends, as well as our combined experience in managing operations and technology activities in a variety of securities-related businesses.
TSG has supported clients in off-shoring projects and has managed many facets of these projects.
TSG has been a provider of out-sourcing services for several clients. Recent activities have included providing the full support for a large global Private Bank’s legacy applications while the client moved the fundamental processes to new technologies. This support continued for three years, and involved using staff locally and in India.
TSG also supported a comprehensive testing of a complex global custody processing and accounting application for a major bank by providing the testing resources, managing the process and coordinating the repairs with the vendor. This eighteen month process allowed the business to focus on converting clients and maintaining client satisfaction during the transition period.
TSG has supported numerous clients in the selection of applications to support new businesses or to replace existing applications.
In both situations, TSG’s process involves the documentation of the key requirements for the new application in terms of technology, functionality and volumes. Based upon our industry experience and input from the client, we develop a short list of vendors who are asked to respond to a detailed questionnaire that we prepare. The results are evaluated in a rank score analysis and two or three vendors are invited to provide a complete demonstration of their capabilities. TSG experts participate in all phases of the selection process and are available to support the implementation and testing of the new application.