MIDDLE EAST FINANCE
Linking Contracts to Transactions Using Semantic Technology to Transform Client Onboarding, Netting and Collateral Agreements By Rupert Brown, CTO Financial Services, MarkLogic The combination of bankers & lawyers can be a potent mix at the best of times and when it comes to drafting derivatives trading agreements between a financial institution and a complex multinational you have the potential for endless confusion and disputes. This is exacerbated by the need for all financially interlinked businesses to improve the precision and scope of their transactional risk reporting to their political masters and global regulators. We really need to create a systematic way of binding transactions to the agreed contracts that can be validated at scale, and consistently, by machines with their human overseers. The good news is that semantic technology now has the potential to clarify and reduce the current spectrum of contractual risks in Financial Services. But first, let’s take a look at why they exist as part of the process today.
Inconsistent Definitions, Complexity and Problems with Paper Defining the relationship between a contract and the subsequent transactions that it facilitates can be a drawnout process. For most organisations, contracts are the result of negotiations and include the “who, when, where, why and how,” while transactions are typically defined as “what is done.” The ongoing evolution of these definitions, as well as related and evolving standards associated with them, has created numerous ontologies, taxonomies and coding schemas that are difficult for legal and accounting teams to utilise consistently and then maintain over the lifetime of a business relationship. Speaking of complexity, it is difficult for financial institutions to grasp the variety of the products that they trade - especially when new “Special Purpose” structures may need to be created to meet a client’s specific needs or retain their loyalty.
Rupert Brown CTO Financial Services MarkLogic
Summer 2015
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