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Neil Vernon, CTO at Gresham Computing discusses the renewed interest in the middle office following well publicised fraud events and whether we are seeing the death knell for spreadsheets.
There’s a misconception that reconciliations was figured out long ago. In the 1990s, banks embarked on projects to automate back office reconciliations. By 2007, these were highly commoditised and seen as a done deal. But recent frauds and increased regulatory
scrutiny has thrown the spotlight on reconciliation in the middle office. The result? Reconciliations are enjoying a renaissance.
Spreadsheets and manual processes abound in the middle office. While it’s quick and easy to update a spreadsheet, these processes are also way too easy to manipulate. Fraudsters are wise to these inadequacies and have used them to commit some of the largest
and most high profile frauds of the 21st century. Even without fraud, the systems banks have had in place have not been equipped to handle the challenges of a dealing with vast transaction volumes, trade amends and fat-finger errors in a real-time environment.
This, coupled with the gargantuan losses some have experienced have acted as a wakeup call for banks. Many of them are now shunning the use of spreadsheets in favour of enterprise-level controls that can flag up unusual or fraudulent activity immediately.
There’s pressure from regulators too. The likes of the SEC and FCA are cracking down on organisations with substandard controls so firms are ditching their spreadsheets. Industry bodies are calling for individuals to be held accountable for operational processes.
Manual tools are no longer enough.
The death knell for spreadsheets has sounded loud and clear. Part of the attraction of using spreadsheets has always been ease of use – but innovations in technology is helping make reconciliations engines just as easy, if not easier for banks to use – as
well as giving them the robustness they need to show regulators they’re in control.