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The ideal platform for CFS John Paull, Head of Investment Operations, Colonial First State

Profile: Colonial First State (CFS) Colonial First State (CFS), part of the Commonwealth Bank of Australia is a leading investment manager with AU$180 billion in assets under management. Business situation After a business review, CFS found it had disparate trade processing systems that created a complex operational model and process duplication. This infrastructure was expensive to maintain and operate and no longer capable of supporting the firm’s global business strategy. Solution TLM® Trade Process Management was selected by CFS to deliver a single Trade Management platform to automate its cross-asset transactions from the point of execution through to settlement confirmation. Key benefits - Manage higher transaction volumes more efficiently and cost-effectively - Delivers single view into all daily positions, reducing the risk of failed trades and penalties - Reduces time pressures on daily unit pricing release schedule - Develops new revenue streams through reduced time to market and improved client services - Reduces operational risk through the removal of manual components - Lowers IT risk by reducing the number of systems, addressing compliance issues - Reduces operational costs and improves revenues - Reinforces and protects the CFS brand through improved accuracy

Colonial First State (CFS), part of the Commonwealth Bank of Australia has been helping Australians with their investment needs since 1988. In that time it has become one of the countries leading wealth management groups and today has more than AU$180 billion under management globally. As a result of rapid growth, CFS examined the infrastructures that supported its trade cycles across all asset classes with a view to how it could manage future processing requirements. This revealed disparate systems that required manual intervention at various stages of the trade lifecycle that were no longer capable of supporting the businesses growth. For example, its middle office systems were built to support a single line of business delivering relatively simple products. However, as new, more complex products were added, the level of manual intervention and chance for error increased. CFS had to source information from 11 disparate systems to manage trade processing, which led to a complex operating model that lacked the desired transaction visibility and created process duplication. Furthermore, two of the six instrument types handled by the Investment Operations team had to be processed manually leaving them prone to error and increasing their risk profile. John Paull, Head of Investment Operations at CFS, explains: “One of our priorities is ensuring we remain a market leader. Therefore, we are constantly looking to identify opportunities to further enhance our services and deliver continuous process improvement to maintain the competitive edge that is essential for continued business growth. Our internal review revealed the current infrastructure was expensive to maintain and operate, and was unable to support CFS’s global business strategies. It was clear we could significantly improve trade processing to support business growth strategies while at the same time reducing risk and cost.”

Removing manual processes through scalable automation CFS initiated a project to create a global operating model, exploiting regional centres of excellence and economies of scale. This included a single technology platform that offered flexible processing capabilities in terms of the receipt, capture, transformation and validation of data. Mr Paull elaborates on the project drivers and technology requirements. “It was crucial that the technology platform for our middle and back office operations could deliver greater automation to validating, matching, processing, settling and reporting trades,” he says. “Where transactions did fail it needed to highlight those exception items in real-time for immediate investigation, providing drill down capabilities to understand the root cause. We also required effective storage and retrieval of historical data, alongside customisable reporting on that data in a variety of formats and delivery methods.”

TLM Trade Process Management workflow

After examining a number of potential solutions, CFS selected SmartStream’s TLM Trade Process Management solution as the new Trade Management System to automate transactions from the point of execution through to settlement confirmation. TLM Trade Process Management is built on a flexible Service Oriented Architecture model. At its core is SmartStream’s Business Process Management engine, TLM Control, built on a J2EE architecture that enables easy customisation of the core services that encompass matching, alerting, exception management, aliasing and reporting. The entire solution is delivered through SmartStream’s zero footprint, zero download thin client interface, TLM WebConnect. “The strength of the SmartStream solution was that it leverages proven technologies and packaged them together to create an ideal platform for CFS,” comments Mr Paull. “For example, it uses the integrated exception management and matching of TLM Reconciliations, which with flexible matching and aliasing capabilities help to minimise exceptions and manual intervention. As a result, CFS can maximise user productivity and reduce the number of trades being held in suspense.” “The thin client delivery is also a significant step forward for the firm both in terms of immediate visibility into transactions and also the on-going upkeep of the solution. TLM WebConnect ensures that with a single hub, the solution is accessible remotely from anywhere within CFS’s internal infrastructure. All updates are downloaded on use from the centralised TLM WebConnect environment which means new releases are deployed automatically on first use, reducing upgrade and deployment costs.”

A single processing platform – from trade validation to settlement At a time when risk is in the spotlight, the implementation of TLM Trade Process Management has enabled CFS to reduce the level of risk faced by its business. Management now has the ability to view daily positions across the whole business and failed trades can be spotted early in the lifecycle, reducing the risk of CFS incurring financial penalties.

Colonial First State (CFS) The strength of the SmartStream solution was that it leverages proven technologies and packaged them together to create an ideal platform for CFS

TLM Trade Process Management has provided CFS with a platform that delivers a volume insensitive, instrument agnostic, post trade environment. The new system supports the processing of trades across all asset classes, in all markets and all currencies. Due to the scalable and flexible nature of TLM Trade Process Management it will enable CFS to develop new revenue streams through reduced time to market and improved client services capabilities. Mr Paull elaborates: “This project marked a major transformation for CFS and how we managed our trades across the enterprise. The main objective was to re-engineer all of our previously disparate transactions and instruments into a single, cross-asset platform that offered standardised management of trade processing. Throughout the project SmartStream used its experience of previous trade process automation projects to advise on industry best practices and implement that within the new workflows.” The new trade processing platform is enabling CFS to manage its transaction volumes more efficiently and cost-effectively. Its middle and back office operations have been improved through the automation of previously manual processes in trade management. As a result, it is supporting CFS’s strategic wealth management objectives in terms of headcount control requirements, reducing the considerable time pressures on daily unit pricing release time and providing scalability for future growth. There has been a reduction of significant and material operational business risk through the upgrade to a single, enterprise-wide platform that has removed the manual components supporting business critical processes. Mr Paull says: “The replacement of the previous trade management STP system has lowered IT risk by reducing the number of systems, addressing several outstanding compliance issues and increasing security. The consolidation of systems and processes has also reduced operational and on-going business costs, while revenues have increased through the reduction of human error costs.” A cornerstone of the CFS business strategy is to develop boutique alliances and the offering of increasingly sophisticated products which was not possible without taking on additional operational risk and significantly increasing operational costs. However, as Mr Paull explains, with TLM Trade Process Management now in place, CFS can now aggressively push this strategy. “The CFS brand has been reinforced and protected as a result of the improved accuracy of unit pricing and efficiency and accuracy of trades placed in the market. The significant benefit is that it has reduced the need for client account corrections and also lowered the incidences of failed trades. Critically moving forward, we have the ability to scale the solution to manage higher transaction volumes and allow for further growth in profitable boutique fund partnerships.”

About SmartStream

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SmartStream is a recognised leader in financial transaction management solutions that enables firms to overcome their post trade processing issues through increased automation. SmartStream’s industry-leading automated match rates create more proactive, exceptions-based processes, lowering the cost-per-transaction while enabling firms to reduce operational risk, aid compliance and

improve customer service levels. As a result, more than 1,500 clients, including over 70 of the world’s top 100 banks, 8 of the top 10 asset managers, and 8 of the top 10 custodians rely on SmartStream Transaction Lifecycle Management (TLM®) solutions to deliver greater efficiency to their middle and back office operations. For more information please visit:


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