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The Corporate Tsunami is coming

Anthony Hilton made a statement in his Evening Standard column that the world's corporates will be looking to refinance massively as the global economic crisis begins to subside. We are both on the same wave length, as I made the same Tsunami analogy at a recent Corporate Actions conference in New York. The point being is that if the securities industry retains only its current capability to settle corporate actions it is about to be drowned in a deluge of corporate refinancing and restructuring.

The banks will not be in a great place financially to handle the enormous demand for corporate restructuring and it's likely that corporate deals will be spread around more banks in the tier two and three sector than in the past. This in itself is going to create many more problems for the industry as corporate actions are going to come in from all directions.

There is also going to be an influx of corporate events with even more complexity and with global impacts. The securities industry on both the buy and sell side will have their work cut out for them, for sure.

Unfortunately the DTCC/XBRL initiative will not be in soon enough to help the market absorb the volume.

So what can financial services firms do to prepare for this Corporate Tsunami?

The installation of a good corporate action system would be a proactive response to the impending volume.

There are only five real quality corporate actions vendors in the space so it's hardly a difficult exercise to select the most suitable one for the firm concerned. All the vendors systems are modular and can be implemented in a phased approach. For example the corporate actions notification module is an obvious place to start and this alone would bring definite rewards for the user. From there further modules could be added, may be claims, tax or entitlement management might be seen as providing immediate returns.

The XBRL solution is coming and any investment in corporate actions modules should be a precursor to reaping the benefits from XBRL.

So time is short to prepare and there is no excuse for being swamped by the Tsunami. Doing nothing about building or installing a corporate actions solution is really not an option and should be seen by the industry as gross negligence, for those that get drowned. 

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