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A spark to ignite Corporate Finance

Over the last two years I have been researching the technology requirements to support primary market transaction and other activities in the Corporate Finance department. As an ex City professional I often worked closely with Corporate Finance to organise settlement in the primary market and had the privilege of working on some of the most innovative transactions during the late eighties and nineties whilst at my post in Robert Fleming. Then as now there was a distinct shortage of technology support for Corporate Finance transactions bar the spreadsheet, word processing and calculator. This lack of technical support has always troubled me as deals in Corporate Finance are normally the largest and most prestigious, carrying the greatest reputational risk, let alone the settlement risk!

There has been huge investment in technology by financial services firms over the last twenty years, with billions spent across the front and back offices in the hope it will achieve high automation, increase throughput and a healthy return on investment. As we know the ROI is not always obvious but that has not stopped IT budgets from burgeoning and an ongoing march towards developing new systems with new technology. It is therefore a mystery why so little technology developments have been focussed on the Corporate Finance department.

Systems developed especially for Corporate Finance could raise the bar and bring a higher degree of efficiency if not exactly STP. Of course new systems would offer the mandatory benefits of cost reduction in both department overheads and in time to create and settle the transaction. Reputational risks would be reduced and a more efficient primary market would over spill into the secondary market.  These compelling benefits make the technology gap in Corporate Finance hard to understand.

The research for Corporate Finance technology started with the five top corporate actions software suppliers. The idea being that they appeared to be in a technological prime position to  expand into Corporate Finance rather than existing back and front office systems vendors who are laden with legacy technology. The result of my ongoing research to date is quite staggering. I found only one software vendor that had specifically developed a system for corporate finance; TCS Financial Solutions.

They have developed the TCS BANCS system to support Corporate Finance transactions but surprisingly this fact has taken quite a bit of finding. TCS may have undervalued their Corporate Finance system within an industry that looks bereft of such a system? However the reasons why other vendors have missed the opportunity probably indicate why there is this systems hole in the primary markets. So why has Corporate Finance been so elusive in attracting technology?

There are probably many reasons but my research has shown that these are the main ones:

Lack of technology knowledge within Corporate Finance teams

  1. Unwillingness of Corporate Finance to change practices that necessitates some risk
  2. Lack of detailed specifications to build the technology
  3. No technology budget given to Corporate Finance
  4. Apart from TCS a lack of vendors investing in developing Corporate Finance Technology
  5. No Cost benefit analysis to produce a business plan for the development of technology support
  6. No regulatory drive to create greater efficiency and drive out risk in Corporate Finance
  7. The killer of all development! Wrong attitude "if it's not wrong don't fix it"

The research report on the markets position of technology in Corporate Finance and the existing Corporate Actions vendor's strengths and weaknesses is freely available to Asset Managers, Banks, Brokers,and Custodians. It's hoped that this lights a spark in a fire towards bringing Corporate Finance departments into the 21st Century.   

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