Citisoft Blog

Developing Blueprints for Global Processing

Written by Mike Walker | Apr 20, 2023

Many global asset managers have developed regional processing in global markets either through expansion or acquisition. Often this leads to different accounting systems or regional processing centers with disparate processes and data standards. Tackling the challenge of unifying such processes and systems to gain global standardization and economies of scale requires significant cost and time but also yields great benefits in increasing the agility and ability to focus on new business opportunities.

It is important when undertaking such initiatives to make sure the globalization of operations and accounting will provide the desired outcome of unifying operations and consolidating data without detracting from the competitive advantages the global offices were acquired or opened for. In developing the blueprints for globalizing operations and accounting there are some key principles that are important to follow:

  1. Changes should be driven by business models and overall company strategy
  2. The target model should be designed carefully to meet the business needs and yield the key benefits of standardizing processes
  3. Globalization should be done in logical stages, not attempted in one large jump

Driven by business model

There is often a temptation in globalizing processes to push technology and accounting consolidation first, assuming this will bring the desired outcomes. However, the best results will be realized by driving the design from the business model.

Proper global implementation would flow from business process review:

  • Identify the business requirements
  • Confirm business and operations structures
    • Regional Client facing: each region has managers who oversee all operations for their area.
    • Operational focused: global leaders have responsibility for all teams by operational functions
    • Hybrid: some functions such as investment management or trading are overseen by regional managers while others, like accounting or technology, are led by global managers
  • Assess the overall target logical business service model
    • What does global IBOR mean to your global locations?
    • What is important to you? (Success criteria)
    • Who do you envision doing what work and where?
    • Where do current challenges arise from having silos in global operations?

From this foundation of a confirmed business model the plans can be developed for globalization to optimize and prioritize the real business benefits.

Designed to business needs

With the business model and strategy confirmed the design should explore the business needs in greater detail to determine how to best align with the business model. 

There are many considerations to explore in moving through the design such as the following table of potential requirements.

POTENTIAL REQUIREMENTS

Systems needed to meet specific country requirements Regulatory or language requirements
Business and technology support needed by region Target regional consolidation of support teams 
Key subscriber requirements (internal and third party) Timing for downstream use of operations and accounting data
Determination of account location, e.g., management and trading, operations, issuer of investments held, etc. Corporate action, cash, and income processing timing priorities, e.g., security region or account location
Pricing and FX source and timing requirements by region Number of pricing and valuation options required by account
Trade order management regional timing and trade flow windows Portfolio manager requirements for cash updates through their day
Consolidation or regionalization of performance calculation processing Custodian alignment with account structures and reconciliation requirements

 

Confirm target global organization structure

Based on business needs, target operational workflows, and organization structure, select the structure best suited to your business. In general, it is recommended to consolidate operations and accounting systems to the extent possible. The chosen design must also recognize that specialized systems or processes may be required to manage specific regional or asset class requirements such as private markets investments or insurance assets. Generally, bringing global processes into unified systems and procedures to the extent possible yields the benefits of streamlining workflows, unifying data, and increasing agility. Target core accounting systems need to be identified and the consolidation strategy determined to best meet your business model needs. Consolidation of operations and accounting typically would be one of the following models:

Accounting Region Based Processing

 
Key structure
  • Each account is processed according to the timing of the global region in which the account managers reside—this can be broad with three global regions such as Asia Pacific, EMEA, and North America or as specific to countries and time zones as suggested by the target business model.
  • Trading schedules, corporate actions, end of day, start of day processing aligned by account’s global region assignment
  • Operational workflow and data feeds in and out of operations and accounting aligned with account’s global region assignment and dependencies
Benefits
  • Provides follow-the-clock processing adjusted for the account’s region—separate start of day processes and extracts to align with operational workflow
  • All processing for a given account is kept in sync with the account’s primary region
  • Different accounts for a client can be in different regions but still be rolled up for reporting
Costs/Risks
  • Requires operations and support team availability to manage global workflow
  • Corporate actions for a given security held in multiple regions will be posted at different times—posting cash may vary from time of actual availability and custodial relationships

Security Region Processing

 
Key structure
  • This would follow account regional processing except with respect to corporate action and cash processing which is separated from the different start of day process groups
  • Each security has a region code populated
  • Corporate actions and cash processing are set to run based on the security region code
Benefits
  • All processing for a given security is kept in sync with its security region code
  • Timing of cash impact of corporate actions more closely aligns with actual availability
Costs/Risks
  • Requires operation and support team availability to manage global workflow.
  • The start of day positions and cash for a given entity may change through the day as corporate actions for different regions post

Unified Global Processing

Key structure

  • All accounts and securities run on a unified schedule
  • Corporate actions, cash processing, start of day are all set to run on the timing best suited to the central offices for the organization

Benefits

  • The processing of key functions is combined simplifying support and automated processing consolidation
  • Simplifies consolidation of performance, compliance, reporting and any other downstream processes

Costs/Risks

  • Is not likely to provide data in a timely manner for all global offices
  • May conflict with trading schedules for global offices distant from central offices

 

Running multiple instances of the accounting systems is also an option some consider but this is often the model companies are working to move away from. Although it allows customization for each region it duplicates operations, data management, and much of the technology and support as well as impeding the consolidation of performance, compliance, and any other downstream reporting requirements. This option is not recommended.

Staging globalization deployment

Although general principles can be employed in making an environment better prepared for global processing, it can only be fully transitioned to meet a precise global operational workflow as designed by the requirements and informed by the overall business model and strategy.

Efforts to globalize operations and accounting are major undertakings as there is typically years of organic development around each of the regional offices that will need to be unwound and aligned with the global design.

It is worth emphasizing that a global transition and workflow will involve all key areas and teams—not just operational and accounting. Working towards global processing takes commitment and support from the top down of the organization and engages all teams to one level or another.

Given the scope of such transformation it is not feasible to move towards the target state in one step. The exact steps will be confirmed by the design on the business-driven plans and target state but generally follow this sequence:

  1. Unify accounting platforms, first across offices that will share the same processing and then between global regional processing centers
  2. Incorporate standardized connections from specific systems retained for regional or particular asset classes into centralized accounting platforms
  3. Unify performance processing, client reporting, and similar corporate level uses of accounting data
  4. Consolidate trade flows and where feasible trade order management systems
  5. Other operations or process consolidation as noted in design

Working towards globalization of core operations and accounting can yield great benefits once completed but are of such scope and magnitude that it is essential that the plans align with a company’s overall business model and strategy. Globalization is not an ends of itself but a means for a company to align their processes with their mission and core objectives. Carefully laid blueprints and execution of this vision are key to maximize this success.

 
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