Digitization of Asset Management - KPMG Robotic Process Automation & Digitization RPA is the digitization

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  • Digitization of Asset Management September 21, 2016

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 4

    Rationalization for a Global World1

    Robotic Process Automation & Digitization2

    Disruptive Technologies3

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 5

    Rationalization for a Global World1 1. Modernization often

    means we pile new shiny things on top of legacy

    2. Eventually we have a tangled and unsupportable Rube Goldberg machine

    3. Platform modernization often means re-thinking your operating model for efficiency, resiliency and risk management

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 6

    Rationalization for a Global World1

    Data Warehouse (Golden Copy)

    Transactions Positions Pricing

    Book of Record

    Fund Accounting

    Portfolio AccountingReporting

    Post-Trade Risk & Compliance

    Performance & Attribution

    Reference Data Security master & classification, corporate

    actions / announcements, prices, indices, clients

    3rd Party Providers External Data Sources

    Location 1

    Portfolio Management

    Pre-Trade Compliance

    Trade Order Management Modelling

    Integrated Risk Reporting

    Location 2 Location 3

    Fr o

    n t

    O ff

    ic e

    B ac

    k O

    ff ic

    e C

    o m

    m o

    n S

    er vi

    ce s

    Global Custodians Order Execution

    Reconciliation

    North America Europe

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 7

    2 Robotic Process Automation & Digitization RPA is the digitization of labor enabled by advancements in machine intelligence, digital, analytics, cognitive, big data, social, mobile and cloud to replace business process functions.

    Basic process automation implemented without IT involvement. Solutions are easily designed, quickly tested and implemented with a relatively low investment or expenditure.

    Incorporate more advanced technologies enabling use of structured and unstructured data to support elements of self learning.

    Decision support and advanced algorithms to allow automation of processes that are more cognitive in nature. Solutions incorporate advanced self learning capabilities.

    02

    01

    CLASS 3: Autonomic/Cognitive

    CLASS 2: Enhanced Process Automation

    CLASS 1: Basic Process Automation

    Service Providers & Examples*

    Potential applications: Trade entry, trade confirmations, manual collateral movements

    Potential applications: Exception handling (i.e., trade failures, trade amendments)

    Machine Learning

    Large-scale Processing

    Adaptive Alteration

    Artificial Intelligence

    “Big Data” Analytics

    Natural Language Processing

    Processing of Unstructured

    Data and Base Knowledge

    Potential applications: Break reporting and analysis

    03

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 8

    2 Robotic Process Automation & Digitization Wave 1: Labor arbitrage Wave 2: Labor automation

    Source: The Outsourcing Institute, Three Secrets Your Traditional Service Providers Are Not Telling You, June 2014 KPMG analysis

    Social

    Mobile

    Cloud

    Data/Analytics

    Cognitive Digital

    Business Models

    Revenue/profit correlated to people Revenue/profit not correlated to people

    15 – 30 percent Cost take out

    40 – 75 percent Cost take out for relevant functions

    Model is scalable to the extent that you can scale labor

    Model is scalable, and is largely independent of labor growth

    Access to low cost labor necessary to provide continuous value

    Access to “rocket scientists” who can codify manual processes

    Custom/complex, legacy: “Your Mess for Less”

    Transformative – new way of doing business

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 9

    3 Disruptive Technologies: Blockchain BLOCKCHAIN IS A LOG OF ALL TRANSACTIONS, IN A MUTUAL DISTRIBUTED LEDGER, THAT ARE VERIFIED INDEPENDENTLY ON A NETWORK ALLOWING ANY PARTICIPANT TO SEE THE SYSTEM OF RECORD (LEDGER) WITH A CRYPTOGRAPHIC AUDIT TRAIL.

    The current traditional ledger structure relies on third custody parties owning transfer of an asset: • Legacy infrastructure • Slow clearing and settlement T+n • Manually intensive • Prone to errors

    The transfer of the asset ownership is carried out by the blockchain network: • Shared infrastructure is shared • Decentralized ledger • Automated processing • Cryptographically secured

    Transfers – with BlockchainsTransfers – Today

    Clearing House

    Legend

    TransactionCustodianFinancial Institution Custodian Source Destination

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 10

    3 Blockchain Benefits Fully digitized

    trade cycle reduces # of

    apps and infrastructure

    Operational efficiencies

    due to blockchain inherent

    automation

    Settlement time

    reduced to near real

    time

    Lower compliance

    and regulatory coverage costs

    Lower risk management

    costs

    Cost of capital reduced due

    to lesser balance sheet

    exposureC os

    t sa

    vi ng

    s Q

    ua lit

    at iv

    e be

    ne fit

    s

    Compliance through audit

    trail

    Transparency of history of events (one

    truth)

    Immutability: Data stored in

    multiple locations

    Regulatory automation

    Record of consensus, cryptographically ensured,

    auditable trail

    Counterparty and settlement risks addressed in permissioned systems

    Introduce unprecedented cohesion to the internal record-keeping process

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. 11

    3 Disruptive Technologies Cognitive automation and artificial intelligence

    https://www.youtube.com/watch?v=4hC9VxqQKiE&feature=youtu.be

    https://www.youtube.com/watch?v=4hC9VxqQKiE&feature=youtu.be

  • © 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

    The KPMG name and logo are registered trademarks or trademarks of KPMG International.

    The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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    Networking Break Digitization across the industry Digitization of Asset Management Slide Number 4 Rationalization for a Globa