State Street Will Save $550M Through Automation – Does Our Conversation Begin and End Here?

Posted by John Bartlett on Feb 11, 2016 5:30:00 AM

OK, true confession: I am an Ignites junkie. Did you see this article last week? It made my stomach turn a bit – the hard and cold realities of business.

Here are some important points from the article:

  • save-money-through-investment-document-automation.jpg With turmoil in the markets and persistently low interest rates eating away at revenue, State Street executives say expense management is their biggest hope to preserve profits this year.
  • Boston-based State Street is betting that the cost-cutting and digital automation effort announced in October, now dubbed State Street Beacon, will reduce expenses by $550 million by 2020.
  • The company is hopeful that the pace of growth of certain expenses, such as regulatory compliance costs, will slow as the firm implements what it calls the second phase of a long-standing effort to use technology to cut operating costs.
  • State Street Beacon relies on cloud-based infrastructure and operational changes the bank made through an IT transformation program that ended in 2014. It will digitize how certain tasks get processed and link information and data held across the now-disparate programs that run various back-office functions.
  • Besides reducing the risk of manual error, the intraday prices, and automated processes provide fund front offices the data and analytics they need for better trade and risk management.

Let me summarize from my lens:

  • Bottom line profits depend on two things: revenue and expenses. If you cannot control revenue, then you must look at expenses.
  • Cost-cutting and digital automation can have a significant impact on expenses but are phased over time.
  • Regulatory compliance costs will continue to increase, so the use of technology is the only way to control costs – through data mapping and process automation.
  • Another benefit is the reduced risk of manual error.

Cost reduction is a difficult part of the conversation, and we hate even going there when it affects internal people. When it affects external efficiencies like typesetting and filing, we love going there. Every firm has a culture and philosophy around this. We totally get that automation is about process efficiency, converting manual to an automated process, and changing they way things are done. Business cases need to be built.

If you want to have a cost conversation, then OK, let’s have it, but there is so much more to consider.

A huge factor that was mentioned in the Ignites article was the reduction of manual error and compliance risk management. HUGE, HUGE, HUGE!!!

Think about your current processes (fact sheets, KIIDS, prospectus, reports) and how many times data are keyed, rekeyed, converted, exported and reimported. I don’t care what your QA process is, every time a human touches the data there is a chance of error. The QA process just eats up time and cost and attempts to reduce the potential for error. The operative word here is attempts, as the risk remains. You can quantify the process cost including the QA, but how do you quantify the risk of an error getting through and filing/publishing incorrectly?

The list goes on:

  • Scalability
  • Speed to market
  • Brand consistency
  • Multi-channel publishing for digital strategy

You see the conversation for automation can start with cost savings, but we believe it goes far beyond that.

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Topics: Fund Document Automation