Operational Resilience by Mihir Joglekar Business Analyst, AutoRek

Globally, organisations’ operational resilience is currently being tested as key members of staff are working remotely. The need to access data in real time has increased and reporting accurately has become more critical than ever.

Operational readiness can be defined as an organisation’s ability to anticipate, prepare, respond and adapt to uncertainties and disruptions to successfully deliver services to its client base. It requires both tactical and strategic thinking.

The Financial Conduct Authority (FCA) suggests organisations follow these three steps to support operational resilience (CP19/32):

1. Focus on continuity of its most important business services.
2. Conduct an extensive impact vs threshold exercise of all business services, and the levels of disruption that could be tolerated. This exercise should be conducted and reported at the highest level of seniority of organisational management i.e. board level.
3. Consider disruption as a certainty and ensure adequate plans have been agreed to mitigate its impact to services.

The FCA reinforces the need for firms to develop and improve capabilities so that any systemic impact event is contained. Focus should be on time taken to respond, effective internal and external communication, particularly with customers. The FCA have also linked operational resilience as part of its objectives involving Consumer Protection, Market Integrity, and Effective Competition by ensuring resilient firms can support ongoing availability of services, thereby reducing harm to the consumer.

While operational resilience is not a new concept to the business community, what is missing is a complete approach to address resilience. Organisations may already have components like crisis management plans, disaster recovery plans and secondary sites etc., but unfortunately over the last two decades there have been a number of stress factors that have contributed to this subject being relegated as more pressing issues have taken priority mainly due to:

• 2000-02: Dot-com bubble and the impact due to its crash i.e. only 48% tech companies survived post event
• 2007-2010: Financial crisis trigged by subprime loans and reduced oversight of the industry at that point
• 2010-15: European sovereign debt crisis due to EU Member States taking on unsustainable levels of debt
• 2014-17: Chinese financial crisis with the popping of the stock market bubble
• 2019-21: Corona virus (COVID 19) related lockdown and economic downturn

The current “Great Lockdown” due do COVID 19 has simply functioned as a catalyst for serious action, triggering management and leadership team to renew efforts.

One way of differentiating operational risk from operational resilience is to consider the internal vs external force perspective. Operational risk is largely internal to an organisation due to a blend of systemic and non-systemic risks associated at micro level of business processes, while resilience is an organisation macro level initiative where all business units contribute towards establishing a resilient business and is inclined more towards external circumstances. Both risk and resilience are intrinsically connected and an organisation’s ability to effectively address operational risks across business functions will contribute to its overall resilience. The table below outlines these differences.

Following the publication of the discussion paper, Achieving Operational Resilience and the conclusion of the consultation process, the FCA has communicated its intention to review and where applicable, consider all feedback received as part of its final policy statement.

The FCA proposal include that firms:

• Identify and Categories their important business services.
• Set Impact Tolerance for each of these services.
• Test their ability to support these services across a range or scenarios
• Conduct active lessons learnt exercises
• Develop internal and external Communication plans
• Establish self-assessment and reporting documentations

Within the context of the current crisis our economic engines must start to fire up again and business must ramp up at the earliest safest opportunity. This is where AutoRek sees its innovative software making a significant contribution towards business, who still need to deliver service excellence to their clients in an unified manner, utilising new and innovative workflow and people management practices more than ever are reliant on distributed and remote team work.

In conclusion, organisations are now actively progressing their operational resilience programmes that will continue to evolve around new set-ups as leaders and managers gradually commence the return to a new and adaptive business as usual.

www.autorek.com

More on Autorek

An interview with AutoRek’s MD, Gordon McHarg

For those who don’t know AutoRek, could you tell us what you do and what makes you different?

AutoRek is a financial controls and data management platform which automates and streamlines data collection, validation and reconciliation of financial data. We were founded 25 years ago as a Glasgow based consultancy firm specialising in data management and bespoke applications development on the Microsoft platform. The majority of our customers are financial services companies with high transaction volumes and often complex data management requirements.

Our software is a configurable rules driven platform which can be applied to diverse business scenarios including Mortgage payments, Insurance premiums, ATM cash management, internal financial controls and various regulatory reporting requirements such as MIFIDII and CASS (client asset protection).

Over the course of 25 years, we have worked with our clients continually evolving our product to meet the needs of the financial services market adapting to new operational challenges and the ever changing local and global regulations. Our technology has also evolved transitioning from a client server windows application to being web enabled and is now available as a fully featured SaaS solution. Our upcoming Version 6 of AutoRek, scheduled for release August 2020 will be the first release of AutoRek with embedded AI & ML capability.

Making effective use of technology to solve business problems requires a team capable of understanding and delivering solutions. Our primary differentiator in the market is the capability of our people and the commitment of our team to deliver the best possible outcome for our clients.

You’ve signed some very impressive clients in the past few months including Nationwide and the Bank of England. What are the reasons of your success?

We have a number of the UK’s leading financial services organisations as clients which we are very proud to have on board and serve. The Bank of England and Nationwide, were of course, great names to add to our list. In both cases, we were competing with large global reconciliation platforms.  Our understanding of the specific requirements of their business and the capability and flexibility of our software to deal not only with the huge volume but the complexity of data led to AutoRek being selected by both organisations.

You also appeared in the Regtech 100 list recently. This is a great achievement. 

We were delighted to appear in the RegTech 100 list, one we have been associated with the last 2 years. It is always great to be recognised as a company for our efforts in the industry. It is hard to say if that has helped with recent wins, but it definitely didn’t put us on the back foot. These awards and recognitions are always great to appear in. It shows that our clients are satisfied with how we operate and that what we provide for them as a service helps them in their day to day jobs. They will certainly help AutoRek to be recognised as a leading software in future years.

Can you tell us more about your partnership with Cforia?

In 2019 AutoRek established a partnership with Cforia Software Inc,

a US-based global enterprise solutions provider delivering end-to-end global order-to-cash automation. CForia have embedded the AutoRek product into their Order to cash platform supporting automation of payment allocation and cash reconciliations. Our partnership is still at an early stage however having added 3 new global clients in the last 6 months it is looking very promising.

How has AutoRek been impacted by the COVID19 crisis?

In the early days of the pandemic the health and wellbeing of everyone at AutoRek was clearly our first priority. We moved the whole company to remote working one week prior to the government lockdown announcement. This wasn’t a particularly difficult decision as we were confident that most of our day to day operations could be executed remotely and that has proved to be largely the case.  Some initial logistical challenges have been overcome and the initial novelty of video calling has worn off and become the typical day to day for most us.

As far as business is concerned our existing customers combined with a strong order book has kept everyone busy. Clearly there has been a significant impact on the market and going forward new business development will no doubt be challenging. That said, technology businesses are well positioned to help customers adapt to new operating environments, be that the support of effective home working or improving business efficiency through automation. Difficult market environments change business priorities and create opportunities for innovation, and it is important to be ready to adapt to meet client needs. A good example of this is the client money protection regulations introduced following the 2007/2008 Global Financial Crisis. This created an opportunity for AutoRek and now more than 30% of our clients use our software to help them comply with the regulation.

Operationally the company has continued to perform very well and deliver for our clients however undoubtedly many of our team, including myself, are missing the day to day interaction of the workplace. Our team culture is central to who we are as a company, while remote working has become the new “norm” and is undoubtedly here to stay we are all looking forward to the opportunity to get back together as a team.

What do you think the future of automated reconciliation is?

The availability, quality and integrity of data within a financial services company is critical to its success. Whether it is understanding the business performance of a new product line, delivering quality services to clients or complying with regulation a key requirement is almost always about getting data right.

Data volumes are growing at almost exponential rates and regulatory demands continue to create significant strain on the industry. At the same time market disruption from new Fintech start-ups and large multinational tech platforms like Apple and Google leave the more established financial services organisations needing to accelerate innovation while at the same time reduce the cost of operations.

Empowering key decision makers, finance functions, compliance or customer management teams requires tools which are easy to use and support non-technical users in collating, reconciling, aggregating and analysing increasingly large and complex data. Recent developments in robotics, artificial intelligence and machine learning technologies present significant opportunity to reduce the complexity, automate manual processes and accelerate decision making for our customers.

What are the main challenges for regulatory reporting?

Over the past decade, in the aftermath of the global financial crisis, the finance sector has been swamped by regulatory change. Large established organisations as well as new entrants are required to comply with these regulations while at the same time evolve their customer service offering to keep pace with the increasing expectations of the digital consumer.

• Being clear and transparent – Regulators continue to test firms with a focus on restoring confidence in markets and improving transparency and fairness. Automating and integrating regulatory reporting, increasing operational efficiencies and mitigating risks are key to relieving some of the pressures compliance brings.

• Managing Data – Both regulators and auditors expect organisations to be in full control of their data. This means understanding the completeness and accuracy of the data used to complete regulatory returns. AutoRek works in conjunction with existing systems to complete and perfect financial and operational control processes. Our solutions help firms overcome spreadsheet intensive data management and reporting processes, ensuring ongoing control and regulatory compliance.

How would you describe Scotland as a place to launch, develop and grow a tech company?

Scotland has a reputation globally of producing talented graduates with an excellent attitude to work. Our universities produce thousands of graduates in tech, maths and sciences allowing us to attract some of the world’s leading financial organisations. While this has an impact for home grown companies, e.g. when competing for staff, it has also been key to creating the thriving digital economy and growing Fintech sector that we have today.

Ultimately for most companies the key to success is having a great team. Of course, there are some overnight successes but the majority of businesses develop and mature over time. The fantastic quality of life with low commuting times and excellent cultural scene make Scotland a great place to start and grow a business.

What does the future look like for AutoRek?

Although we have a number of global clients, for the last 25 years, AutoRek has predominantly been working within the UK market focussed on Asset Management and Banking sectors. In 2020 and beyond (this year being slightly delayed), we are looking to grow our business in the US and further develop our presence in the Insurance sector. With having an established partnership with Cforia Software Inc, a working capital and accounts receivable (A/R) automation software, we are well on our way to achieving our goals.