Is Complacency the Enemy of Reconciliation Efficiency?

To misquote a well-worn proverb, the road to inefficiency is paved with good intentions. This seems to be the case, at least, for many reconciliation teams, which are failing to follow up on their well-laid plans to optimize and capitalize on opportunities within their reconciliations inventory.

Building an inventory of global reconciliation activities is probably the most important step a team can take towards understanding the expectations and performance of its service. So, as intentions go, maintaining a catalogue of this kind is a pretty decent one. What’s more, in a new report by CEB TowerGroup, ”Avoid Complacency to Optimize Enterprise Reconciliation: An Assessment of the Global Market,” 70% of banking and capital markets technology executives claim to do just that.

But is this where complacency is creeping into the reconciliation service? For it transpires that only a tiny minority are actually putting their inventory to work. The real value of creating and maintaining an inventory of reconciliation activities is to perform a real-time evaluation of tasks against it, which will enable reconciliation teams to improve service levels and deliver cost savings. In reality, just 17% carry out this type of automated performance monitoring at the enterprise level.

Despite claims of a reconciliations inventory, operations executives also appear to lack insight into many of the processes themselves, and are well-informed only about reconciliation practices across a narrow subset of mainstream core activities and asset classes. They report confidence in completing general ledger and balance sheet reconciliations, and the core reconciliation of cash, foreign exchange and securities, but beyond, there are many blind spots. The report states that 25% are unsure how their institutions perform custody and broker reconciliations, and nearly 30% “don’t know” how their firms reconcile mortgages, loans, derivatives and commodities.

If complacency is the enemy within the reconciliations team, then there is plenty to contend with across the wider organization thanks to high levels of functional, operational and technology fragmentation. More than 50% of surveyed institutions report 10 or more different systems performing reconciliation functions, and a quarter use more than 20 globally. The preferred way to manage such complexity, for 26% of respondents, is to further centralize and optimize processes by increased investment in their center of excellence model.

To win the war against complacency and inefficiency, and to optimize the performance and delivery of their service to internal customers, reconciliation centers need to keep a close, defensive watch on global reconciliation activities. By creating an enterprise-wide reconciliations inventory, and evaluating the execution of global activity against such a catalogue in real time, they will pave the way to a successful, reconciliation service.