Reconciliation – Reduce Cost and Ops/Regulatory Risk

Reconciliation is that tried and true approach to ensure that two separate sets of records are accurate / consistent.  Through multiple client projects and discussions with executives and managers alike, the topic of reconciliation emerges as a constant and consistent theme.  Surprisingly few believe they do it well, efficiently and cost effectively. And, the number of reconciliations conducted through the enterprise is simply increasing due to complex deal making, regulatory dictates, product expansion, risk management and many others drivers.

A common theme is that reconciliation is most commonly conducted without specific tools; organizations most typically rely on Excel.  In fact, the capital markets industry conducts 70-90% of its reconciliations in Excel. Excel is a great tool; however, few have figured out how to manage operational risk associated with the tool.

It seems that part of the challenge for many organizations is driven from the nature of reconciliations being conducted from a departmental perspective. That is, each department does their own reconciliations. With that approach it is not likely that a department can optimize with tools and best practice processes.

If organizations take an enterprise-wide, shared-services approach to the countless reconciliations conducted in-house, it is highly likely that efficiencies will be gained and operational risk reduced. Conservatively, the cost saving for an organization should be in the neighborhood of 25-40%. This magnitude of savings can fund a transformation that includes people, process and technology. Fixing reconciliations is not glitzy, but it can be compelling.  To understand the magnitude of opportunity, an organization should conduct a simple inventory / analysis of the number of reconciliations, their frequency and the costed effort.  A business case for change will emerge.

2 Comments

  • Tom Ekin May 10, 2013 3:09 pm

    I am intrigued. I realize efficiences can be gained if individual department’s reconciliations overlap particularly in various aspects of enterprise risk and increase independence but make collusion easier. Need more insight.

  • Stuart Anderson May 13, 2013 11:41 am

    Clearly the objective is not to diminish segregation of duties that are intended. Rather, it is to implement best practice and toolsets for efficiency. I can understand why you would raise the question about the risk of collusion. I actually I have seen it improve audit trails and independence.

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