PwC's point of view outlines how financial services firms can look toward exception prevention as part of an overall strategy to reduce costs and increase controls and transparency and a framework for transforming the reconciliation process.
In the average financial institution, reconciliation of transactions, positions, and balances still accounts for between 1.5 percent and 2 percent of operating expenses. Although a mere 0.2 percent of reconciliations turn out to be exceptions, even a single exception can result in million-dollar losses. Most institutions have multiple manual workflows within product or line-of-business silos, and rely on disparate, outdated, and semi-automated solutions.
The demand for companies to improve their reconciliation process is coming from multiple parties. Regulators are putting pressure on firms to improve controls, including process controls over investment position reconciliations. Financial services companies continue to be battered by fraudulent acts that reconciliation is designed to prevent. Clients are demanding improvements in transparency of positions.
Reconciliation-related costs can be largely eliminated through creation of shared service centers and adoption of new technologies that facilitate the flow of information and expedite the resolution of exceptions. The adoption of new technologies and leading practices can cut more than 20 percent of reconciliation costs in a sustainable manner.