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Perspectives

A Strong Reconciliation Model Needs These Pieces

November 2020

-By Disha Parikh

Reconciliation.

The idea of comparing and finding differences between two sets of data is not new. Whether you tick and tie, or run a sophisticated and automated process, every back office does a form of periodic reconciliation. If the process is well-run, it serves to provide reliable data for trading, performance, and reporting purposes.

So what is a well-run reconciliation process and just as important, why do some firms struggle with this?

Automated and Exception-Based

  • Yes, a manual process works. However, it is not scalable and is prone to errors. Also, a manual reconciliation is time-consuming. Spending hours on reconciliations that can be done in a fraction of the time is not the best use of a company’s resources. In addition, setting up controls and tracking trends on a manual reconciliation process is difficult.

Clean Data

  • Any reconciliation process is only as good as the quality of the data that is being used. Perhaps no cliché is as apt as “Garbage in, garbage out.” For example, if data does not capture back-dated information, is stale or incomplete, the data cannot be reconciled fully.

Timely

  • Based on a company’s needs, reconciliation must be completed daily, weekly, or monthly. This is based on dependencies of the data being reconciled. For example, data used for daily trading must be reconciled each day. Similarly, data being used for performance and reporting purposes may be reconciled monthly. A solid reconciliation process should be able to meet the needs of the firm and produce reconciled data as needed.

Automated data-feeds and customized matching

  • We work with clients to establish a recon process that best fits the client’s needs. In addition to more than 100 banks data feeds we receive each day, we perform daily, weekly, and monthly reconciliations depending on client’s needs. We also have the flexibility to match on specific criteria and can establish custom rules for data-matching.

Transparency

  • STP’s clients have access to OpsPortal which features a reconciliation dashboard that is an almost-real time window into the progress of reconciliation tasks by our team throughout the day. Data belongs to our clients – and we believe that clients must be privy to their information – the outages, the research on the breaks, age breaks, etc. We collaborate with our clients to resolve breaks and this transparency allows for daily, effortless collaboration.

Versatility

  • Another worthy cliche: “There is no one-size fits all.” The needs of our clients are as diverse and unique as our client base. We reconcile data on a trade date or settle-date basis, and we also do 3-way reconciliations comparing custodians and admins. In addition, we also perform ad-hoc monthly reconciliations, such as market-value and cost. Last, we can reconcile a broad array of asset classes, from equities and fixed income to international securities and derivatives.

STP’s reconciliation shared service has evolved over the years. As an industry leader, we not only meet the above challenges but we’re also the standard-bearer of transparency and versatility.

While end clients may not get reports on reconciliations, they do receive performance reports and other reports. Leaky reconciliation processes will undermine report quality of any back office. Investment firms see significant improvements in efficiency and accuracy, and reduced risk by committing to a robust and tightly controlled reconciliation structure.

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