Transformation in securities services is nothing new, yet Covid-19 has brought unprecedented challenges and change for network managers at global custodians, broker-dealers and financial market infrastructures. This report canvasses network managers to understand how they have adapted to date, and how their roles could be further transformed in the future
The role of the network manager has evolved considerably post-financial crisis, to go beyond managing the entire information flow through an institution to include responsibility for managing risk – including loss of client assets in the event of something going wrong or a default – and monitoring sub-custodians in their agent bank network.
Covid-19 has made this evolving role more difficult. Deutsche Bank’s new white paper, “Re-imagining network management”, surveys several network managers at global custodians, broker-dealers and financial market infrastructures (FMIs) to understand exactly how they have adapted to continue to perform this vital function amid such unprecedented circumstances.
“As a once in a century crisis that continues to upend nearly every area of financial services, it has precipitated large scale home working and the increased use of digital tools by institutions to facilitate engagement between buy side and sell side,” write Deutsche Bank’s Rebekah Flohr and Stephen Wilkes in the paper’s foreword.
Despite some short-term logistical challenges in certain markets, network managers acknowledge that banks and FMIs are performing well from an operational resiliency perspective during the Covid-19 crisis.
The key conclusions from the report are as follows:
- Most request for proposals (RFPs) are currently on hold, although network managers will conduct virtual due diligences as a last resort if the crisis is prolonged;
- If virtual due diligences are successful, then these will prevail if cost pressures continue;
- Conversely, if deficiencies are discovered in some markets post-Covid-19, then the pressure on network managers to increase individual market visits could grow;
- The future of the Association for Financial Markets in Europe (AFME) Due Diligence Questionnaire is uncertain. While some network managers believe that the questions on business continuity plans (BCP) should be tightened, others feel this is not the core function or skillset of a network manager;
- A greater emphasis on real-time risk monitoring is expected post-Covid-19.
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