The capital market has a sensitivity for errors, but it is often noticed that most of the businesses are still counting on manual reconciliation. Financial experts have forecasted that with improved AI reconciliation software, finding incompatibilities in data and resolving the problem will be sorted in no time.

This article explores how automatic reconciliation helps in overcoming the challenges of the financial market. To know more about the challenges & trends of securities, click here.

Trading Operations

Front office

While talking capital market, the subject of automated reconciliation often comes to the forefront because it correlates with securities. The scope of automatic reconciliation expands in the process of trade validation. The structure of the agreed trade is thoroughly checked against the corresponding booking into the front office system. Other than this, crucial front office operations’ challenges also become an issue if not opted for the AI-supported version of automated reconciliation.

Through automation, overcoming the complexity of trade order management, deal structuring, pre-trade compliance, portfolio analysis, data reception, and distribution has reached a new level altogether. Discrepancy sorting during the front and back data matching also becomes much easier due to manual labour elimination.

Middle Office

In the middle office, these two segregations require automated reconciliation for effective operation.

Fund Reconciliation

Fund reconciliation is a bit complicated to handle, though, with automated reconciliation, things got much easier in recent years. Implemented automated reconciliation uses its AI algorithm for comparing actual receivables and payables other than generating daily cash balance reports for tracking regular activities. The comparing activity, in turn, effectively extracts the overdraft position in the Nostro account. It categorizes unused funds that are spending on non-interest bearing sources. This step motivates businesses to reap benefits from using unused funds in some useful activities.

Pre & Post Settlements

For middle office operations, automated reconciliation shows its efficaciousness to identify the settlement differences in the initial stage. Confirming & reconciling future deal coupon flow projections are done with counterpart bankers.

In the post-settlement section, automated reconciliation identifies a real-time exception to handle the exception management effectively. A thorough analysis of AI-supported automated reconciliation steer organizations in resolute discrepancies found in the system.

Back Office

These are the activities that pose challenges in the back-office operations of enterprises.

Confirmation Matching

One of the major tasks that often heightens the possibility of error in the system is the manual reconciliation of confirmation matching. Preparation, execution, and the delivery of the document takes place per ISDA rules. Matching the documents received from counterparts through automated reconciliation eliminates the possibilities of discrepancies from the very beginning.

P&L Calculation

Performing daily P&L verification between the general ledger and official P&L can be exhaustive, yet a crucial step of back-office operation other than balance sheet management. Financial experts recommend automated reconciliation in this step for effective calculation of profit arising from different sources.

Banking Operations

Cash Management

For businesses, automated reconciliation brings the best through error-free & timely cash management. It ensures accurate revenue identification and instigates enterprises in making optimum utilization of cash.

Financial Statement Validation

Uniform commercial code controls activities that take place in between clients & enterprise. Using automatic reconciliation helps enterprises identify process gaps and notify clients about inconsistencies found in the statement due to error or fraud. Experts have confirmed that this service’s integration in your system eases the gap identification & rectification process.

Compliance Risk

Compliance risk is not new in the banking industry. Fraudulent activities, including suspicious deposits, usual wire transfer, and other unwanted events, come under this category, easily detected with automated reconciliation.

Risk Management

In the capital market, enterprises prioritize the minimization of loss & protection of assets. Implementation of automated reconciliation makes certain that the goals of risk management are achieved with minimal efforts. Exception handling and timely settlement help organizations to get protected from unwanted reputation loss.

Please click here to know more about how Ascent AutoRecon, an automated reconciliation solution can help your business!