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Introducing ReconArt to a prospective client for the first time is always an exciting experience. No matter whether we are talking to a multi-billion dollar bank considering hundreds of users to accommodate highly complex processes, or a startup looking for a couple of users to handle a time-consuming account reconciliation, we gear up for our first-time encounter with the same enthusiasm and curiosity. This is the time when we learn about our future client: who are they and what do they do? Their customers see an innovative online e-commerce marketplace, or a disruptive peer-to-peer loan provider, or their home city government, or a fair trade jewelry retailer, or their neighborhood bank, or trusted insurance carrier. We see them from the other side, a bit like opening a machine and seeing all the gears and moving parts that make up the whole. We get the opportunity to dive right into some of their most intricate processes that occur totally behind the curtains of their business, product, or service. Yet, these reconciliation and financial close management processes are an essential part of their skeleton, potentially affecting their profits, their ability to grow, their financial control and integrity, their reputation, the productivity and happiness of their employees, the peace of mind of their leaders. So, what do they struggle with? What are their ambitions and dreams? And, of course, the key question: how can we help? This is also the time for them to learn about us – and not only what our product does and how much it costs, but – what are they really signing up for if they choose ReconArt? Regardless of whether we have the opportunity to conduct initial discussions with an accountant or an IT analyst, a CFO or a controller, a VP Finance or a procurement officer, there are some key messages we want to convey early on. And these are not checkboxes to be ticked in some scripted, artificial sales cycle or just buzzwords we throw around to stand out and be remembered. These messages reflect our core values that infuse everything we stand for and work for. The skeptics might smirk and call ‘sales pitch’, but we are serious about this. We want to be and are that trusted partner that brings real value in the long-term. Cutting edge functionality. What does this actually mean? How do we know our technology is truly the most up-to-date on the market? We know because we listen – to both prospective and existing clients. When we jump on an intro demo/discovery, we dig into every opportunity to find out about the business process at hand and really understand it. When an existing client brings up a need that reflects best practices, we embrace the opportunity to enhance the product for the benefit of all users. There is no better way to anticipate and respond to the constantly evolving market needs than to ‘forget’ everything we think we know, and listen to the people who live and breathe these processes every day. Of course, there has to be a practical side in order to transform that knowledge into product – which is why maintaining reinvestment into the product and an extremely agile development process will always remain top priorities for ReconArt. Vibrant, evolving product. The business and technology world is constantly changing. What is cutting edge today must constantly evolve to remain so or quickly become obsolete – even in a niche and finite field like reconciliation and financial close. In practical terms, we apply the above in a variety of ways. At any given time, there are a number of focused development efforts going on at ReconArt, often in partnership with an existing Client. We are not talking about customizing code, rather constantly expanding best practice functionality for all users led by real-world business scenarios. Separately, we are constantly soliciting feedback from system users directly from within the application, gathering an on-going stream of real-time suggestions. On top of all this, we are in a state of perpetual roadmap development to prepare for our two annual major releases. So when we enthusiastically respond “That’s actually coming up!” to a functionality question, we don’t mean ‘some day’ – we mean, at most, a very few months from now. Strategic fit. It is great that more and more often these days, in addition to functional needs, we hear people saying: “We want a good partner.” In some ways, demonstrating functionality is much more straight-forward. We often conduct Proof-of-Concept demonstrations and eliminate any existing question marks by showing a prospective client their processes flowing through the system. The expectations are concise and defined; the results quickly and easily delivered. You don’t really find out whether you have a good partner until later on in the game. The only testament to whether you have succeeded to deliver what you promised is the “happiness” of existing clients. We want our clients to be our happy partners, allowing us to learn from them, work with them and share with them on a level that enables collaboration, creativity, and mutual benefit. Scalability. This concept can mean very different things to different people. The accountant at the e-commerce start-up might be thinking “We are expecting massive growth. Can you handle rapidly growing volumes? Will our growth impact our pricing?” The Operations or IT department at an insurance company might wonder “What happens when Finance wants to add a new process, with their own unique data formats and business logic? Will we have to do it for them?” The compliance team at a multi-national manufacturing company might ask “We grow through acquisitions, how will you cost new users and can we onboard them easily?” To ease all these concerns, a truly scalable solution must offer enterprise-class, powerful functionality packaged in a modern, business-user driven interface. It should empower teams to own their processes end-to-end, which in turn should support the growth and future of the organization as a whole – whatever it may be. By openly discussing these concepts early on, we are opening the door to our home and inviting our future clients to really get to know us. By their reaction and feedback to these points, we get to know them. We both – as partners- find out we are motivated, excited, and inspired by the same things. Geri Davies is ReconArt’s Vice President of Client Success based in the company’s Alexandria, VA head office. By working closely with ReconArt’s sales and delivery groups, she ensures the intricate cross-team collaboration that contributes to ReconArt’s place as a leading provider of reconciliation and period close technology. Geri can be contacted at geri.davies@reconart.com....

A detailed knowledge of reconciliation processes in banks and financial institutions (FIs) is a core competency at ReconArt, yet it never ceases to amaze us how every client’s focus is on a different process with a distinct set of challenges. We are fortunate to have worked with a wide range of great institutions: from small environments with a handful of users focused on a particularly painful reconciliation, to medium and large players with hundreds of users working across the Total Reconciliation Lifecycle in a centralized reconciliation function. This experience has taught us over the years that every new technology implementation is an opportunity to rise to the occasion of truly understanding each client’s needs and the rich business logic that governs their workflow – and to learn from it. Some of ReconArt’s most powerful functionality conceptually evolved from this exact sensitivity and the ability of the ReconArt product to grow and adapt to the vast – and evolving – reconciliation needs of the Banking and Financial Industry sectors. Here are some things we have learned along the way about the factors which often make account reconciliation in this space a challenge: Lack of Governance.  Reconciliation is often a ‘lone beast’ of sorts, not fully owned by a particular department. Instead, the process is spread across departments and one-off individuals, with fragments in Accounting, Finance, Operations, IT, Risk, Compliance, and a variety of analysts. Without a clear mandate of what is done, when, and by whom, nobody truly owns the reconciliation process. As a result reconciliations do not follow specific principles and often lack accountability. Incomplete processes. Although there is usually huge amount of time and effort put into collecting and comparing pieces of information, a true reconciliation is rarely performed across the board. The business priority is typically to ensure the fulfillment of the customer-facing product – as opposed to actually performing a thorough financial control reconciliation across the entirety of systems and operations. Instead of ensuring financial integrity, those sporadic and fractional data comparisons are often confused for reconciliations and provide only more limited control over financial activities. Layers of Complexity. One characteristic of the Banking and FI space is the typically longer transactional workflow. This often involves multiple systems and subsystems. Lack of clear process principles and low visibility into the transactional workflow means that transactions are rarely followed end to end. Core systems, GL/accounting systems, treasury systems, data warehouses, loan origination systems, ATM/teller cash systems, trading/investment systems. All of these (and more), each with their different data formats and limitations, expose the business to risk of errors, omissions, and fraud. High Transactional Volume. The banking and financial industry is notorious for having high transactional volumes. This further complicates the institutions’ ability to take control of their transaction reconciliation process through traditionally available and widely used instruments such as spreadsheets and ad-hoc and in-house developed tools. The tendency to add headcount to crunch numbers in spreadsheets, and to engage technology resources for each additional product line, gives the soothing illusion of control. However, in the long-run as volumes increase, systems suffocate and processes become even more convoluted. Regulatory Compliance. With all of the above at play, it is not a surprise that sometimes even large and established institutions slip and a scandal or even a financial crisis erupts. Regulators then react (some would argue overreact) by creating industry-wide regulations to tighten controls that could have been there in the first place. It is, therefore, no surprise that evolving regulations that govern this industry often catch institutions ill-prepared to comply. New regulations often inspire in-depth process reviews and stir ambitions for improvement, but by the time a new process is legitimately in place, a new regulatory challenge is already knocking on the door. Many institutions simply can’t keep up and never achieve the peace of mind of being fully and consistently compliant. We have learned that the true industry leaders take the proactive approach by deploying best practices and tools as they become available rather than being reactive to legislations and regulations. Where the former leads organizations ahead of the curve and provides competitive advantages, the latter is a never-ending vicious circle of which many fall pray in today’s volatile marketplace. Find out more about ReconArt for Banks and Financial Institutions here. Geri Davies is ReconArt’s Vice President of Client Success based in the company’s Alexandria, VA head office. By working closely with ReconArt’s sales and delivery groups, she ensures the intricate cross-team collaboration that contributes to ReconArt’s place as a leading provider of reconciliation and period close software for FIs and other organizations. Geri can be contacted at geri.davies@reconart.com. ...

The United Kingdom’s Financial Conduct Authority (FCA) regulation PS14/9 related to custody assets and client money has a backstop for implementation of 1 June 2015. Compliance with the rules in the client assets sourcebook (CASS) has never been more important. There is now considerable ‘noise’ from the FCA given the short timescale for implementation, which is placing a considerable onus on firms carrying out investment business to understand and comply with the new rules. Pressure is now clearly being applied The FCA has identified a common set of faults made by organisations for which the PS 14/9 rules have profound implications. These faults include, amongst others: Client money and assets reconciliations are incorrectly performed, delayed or completely overlooked. Permitting the inter-mingling of client and own monies and for this reason, paying business expenses out of client money and creating a funds shortfall. A failure to submit accurate Client Money Account reports, required by their auditors. ReconArt has implemented technology-led solutions to enable firms in this space to comply with their PS14/9 requirements regarding custody assets and client money responsibilities. Currently, businesses are attempting to manage these complex processes manually or semi-manually. Inevitably, these practices are prone to significant levels of human error; are labour, time and cost intensive and insufficiently robust to ensure CASS rule compliance. The FCA has made it clear that its expectations are high and has used enforcement action regularly in this area; it is likely to continue to do so. These have included everything from publicly delivered written and verbal admonishment to heavy fines. Barclays provides a case in point. It was found by the FCA to be negligent in taking reasonable care to establish adequate and effective organisational, control and risk management systems and of keeping adequate records and performing regular reconciliations. While there had been no actual loss of client assets, its governance failures in respect of its responsibility for £16billion of client assets resulted in it being fined £37million. This huge figure even included a 30% early settlement discount! For some tardy organisations, all this appears to matter little, and either ignorance or intransigence has them very firmly gripped. Their inertia is both unrealistic and possibly very costly. However, this is as nothing compared with the huge issue of reputational and personal damage that could be potentially fatal for the unwary CEO and CFO and their businesses. Ensuring you avoid the plausible emergencies that readiness for 1 June 2015, when the final stages of the PS14/9 rules come into force, is still a possibility. If you act now! Contact ReconArt to find out more about our account reconciliation software and other reconciliation tools to help your organisation meet the June deadline. ...

You know there are problems with your current manual reconciliation process. It’s not efficient – there are way too many people ‘ticking and tying’ when they could be doing so much more. It’s open to risk and difficult to report on – unstandardized. Jack notes an exception in one way, Jill in another. Sometimes things get missed. It takes too much time – month end seems to eat up half of the following month, and you’re always in catch up mode. It’s stressful – hopefully there is no audit anytime soon. You are considering automation – there has to be a better way! But you have doubts, and perhaps feel nervous about bringing the idea up for consideration. See if you can relate to these four myths and let us help you debunk them! MYTH 1: It’s prohibitively expensive. We should just hire another couple of people to help out. False. Of course, there will be an associated cost to introducing new technology – but try to think long-term (or even medium term). You will know upfront what the cost of a reconciliation solution would be, and also the cost of new headcount if you need more. Can you really say the same about the cost of not putting something in place? Risk equals cost, and there are many risks associated with manual reconciliation processes. Some of that risk is related to human error – the wrong number entered; the wrong formula used. Some of it could be delays between various information sources. There is also the risk of being overly dependent on individuals with good understanding of the process – but what happens when they leave the job, along with their expertise on spreadsheets, or the internal tool they designed from scratch? And then, there is the on-going cost of bloating up your reconciliation team with people who are ‘ticking and tying’ when they could be involved with more meaningful, higher-value tasks. When you consider all these things, the upfront cost of automation is much more palpable, often cost-saving in a matter of months. MYTH 2: Our process isn't straightforward, so there probably isn't a good fit for us out there. False. Because you are deeply vested in your organization’s current reconciliation process, it is natural to feel overwhelmed when trying to imagine an automated version of it. How will it work? Over the years, you have probably also come up with some creative workarounds to get your work done to the best of your ability, and now those oddities may seem like integral parts of the reconciliation process that you can't imagine done in any other way. Consider though, that reconciliation in itself – the comparison of two sets of data, is a finite field. Every process certainly has its specifics, but as long as you answer ‘Yes' to these three questions, chances are accommodating your process in an automated, modern, feature-rich reconciliation solution is likely: Do you compare 2 or more sets of data? Does that data come in a standard format? Do you have a set of criteria that you match that data on? MYTH 3: It will take forever to migrate our current process and train everyone – it’s not worth it. False. Not so fast! It depends on the product and the implementation. Depending upon which automated solution and vendor you consider, gone are the days when you have to spend weeks on a technical installation alone, spend months defining your business requirements for customization, then go into testing mode before you can even start benefitting from the solution (all hand-in-hand with never-ending professional services fees). Today you can choose a product that is in tune with the latest and greatest technology: thin-client, web-based, quick and easy to deploy. If you can commit time and people to the project, going live in a short 40-60 working hours is often the norm. The same is valid for training – it’s all about the product and the implementation approach. If the solution you choose is intuitive and easy to use by the average business user, then you can designate a power user within your organization who can train the rest of your users, saving you both time and money. MYTH 4: I will probably need to get used to multiple platforms for every part of the process. False. Again, not so fast! Today’s reconciliation market offers products such as the ReconArt™ Total Reconciliation Lifecycle™ solution that can accommodate your entire reconciliation lifecycle in one product with the same interface. The result is that your power admin user, daily reconciler, period-end approvers and reviewers, senior level executives looking for reports, and the auditors and compliance officer are all interacting with the same comprehensive system. Their access rights determine exactly what they can see and do on a super granular level. Geri Davies is ReconArt’s Vice President of Client Success located in the company’s Alexandria, VA US head office location. Geri can be contacted at geri.davies@reconart.com or +1 202-413-2053....

Far reaching new rules introduced by the United Kingdom’s Financial Conduct Authority (FCA) with respect to customers’ monies and assets have been encompassed under policy statement 14/9 (http://www.fca.org.uk/static/documents/policy-statements/ps14-09.pdf). These rules represent an extensive overhaul in the way investment firms handle client monies and custody assets. Companies directly affected by the new rules number about 1,500, among them managing client monies of greater than £100 billion and £10 trillion of custody assets. The changes and new rules contained in PS 14/9 (http://www.fca.org.uk/news/firms/ps14-09-review-of-the-client-assets-regime-for-investment-business) will be implemented in stages: on 1st July and 1 December, 2014 and then 1st June 2015 (with some transitional provisions for the first phase and some for the second phase). A transparent distinction is required to be drawn by organisations between those monies owned individually by clients and those owned by the firms. These rules and revisions incorporated in the Client Assets Sourcebook (CASS) impact how investment companies manage the many plausible risks to their clients’ monies. This incorporates, but is not limited to, the frequency of reconciliations. As part of a broader compliance scope, it is abundantly clear that the FCA’s CASS regulations, more specifically those regarding CASS 7 & CASS 11 require firms to: Leverage technology as a critical component to providing robust compliance Implement automated reconciliation tools rather than relying on spreadsheets to manage primary records Supply audit trail capabilities i.e. tagging transactions to audit trails; tagging transactions to facilitate reconciliation. In essence, just as the United States’ Sarbanes-Oxley Act did on a much broader industry scale, the FCA’s CASS rules require implementation of automated reconciliation technology. As a result of implementing such reconciliation systems to ensure compliance, affected firms will have the ability to: Execute daily client money reconciliations and exception resolutions to save time and effort and mitigate risk aligned to the requirement of the new CASS rules. Provide a single view of customer money accounts. Automatically allocate and post client money receipts in the context of ever more challenging allocation deadlines. Monitor, calculate and post adjustments to a client money top-up on a daily basis with fully transparent audit trail. The FCA has encouraged these companies to perform an impact analysis in light of the changes. CASS is towards the top of the FCA’s agenda and reaching beyond CASS awareness has become critical. Having a fully attuned CASS mindset, especially in financial control functions, has now become crucial. If firms are to avoid another ‘Lehman style’ fiasco, albeit for many on a reduced scale, all changes, some of which come sooner, will need to be in place for June 2015.  Prompt adoption of automated reconciliation technology such as the ReconArt™ Total Reconciliation Lifecycle™ solution can put firms firmly on the road to compliance and afford their directors a better night’s sleep. Tom Burke is ReconArt’s latest recruited Senior Sales Executive within ReconArt’s UK operation.  With over 25 years’ experience of enterprise-class software solution sales, he brings extensive knowledge to the table of how automation using proven software can being significant benefits to any organization. Tom can be contacted at tom.burke@reconart.com or +44 (0) 7475 400 240....

Risk Mitigation Techniques such as Portfolio Reconciliation for uncleared trades must be applied by firms as described in article 13 of the EMIR regulation. Depending your exact business this can be an easy exercise or a real burden. When you are a non-financial counterparty with 100 or less contracts you have to perform the portfolio reconciliation once a year, which sounds doable, but when you are e.g. a financial counterparty you have to do it on a daily basis. The why and what is described on dozens of sites but how can you set this up if you have not done it yet? Ok, let’s start at the beginning. What is meant by reconciliation in this case? Portfolio reconciliation means a comparison of the portfolio details from your counterparties with the details in your own books. Next question: what details? ESMA has published e.g. in their Q&A (OTC Question 14) some details about this but also ISDA published their “EMIR Portfolio Reconciliation Operational Guidance Note” and included in there is list with items seen as a standardised best practice template for trade identification and matching purposes. There are different ways to do the actual recon. If you are not equipped for it and your volumes are high you could go for a third party to do it for you. In that case you are a sender but still responsible and your counterparty details have to get there as well. This might be an issue when that is a smaller firm and/or using another Trade Repository. If your portfolio is not that big and the frequency of reconciliations is low you might like to do the recon yourself. The first step is in both cases to collect the data from potentially different sources. Typically the client or counterparty details are not always in the same systems as your pricing or position information is. This means you have to set up the processes and systems to do so. Again depending on number of contracts this has to be automatic or can be (semi) manually done. Instead of building your own (spreadsheet) applications there are also reconciliation tools available that can well collect, combine and enrich data and subsequently export the data in a csv file that you can use for uploading. Another advantage of using a reconciliation tool is that everything will be auditable. Compare this with using a spreadsheet. When you have prepared your data you can either send it to your processor or use it as import in your own reconciliation. If you prefer to set up your own recon the next step is how to get your counterparties portfolio details in. There is no standard format or way of communicating the portfolio details. When you are using a third party to do the recon for you they will tell you what format to use and the possible transport mechanism. When you are a receiving party you will receive spreadsheets, csv files, Swift messages, mails and what other sort of messages you can think off. You have to agree with them how and when you will receive it. This “when” is also something to well schedule as it could well be that your counterparties most likely have different moments to send you the details. Another advantage of using a reconciliation tool is that the imports can be scheduled. In case a file is not there you can configure the tool to send you an email to warn you to take action. After receiving the information you have to compare it with you own details. Again this can be done in a spreadsheet program when it is not to complex. Sign off and archive it but please do not forget that you have to report any inconstancies with your counterparties within five days and unsolved disputes with your regulator. Needless to say that you should think of a more automated way. The advantages of this is that there is a complete audit trail, workflow for inconstancies and reports can be achieved and emailed automatically. This material has been prepared and published for informational purposes only and should not be construed as legal, accounting, tax or other professional advice....