Regulation of Derivative Dealers, Money Managers, Prime Brokers and Custodial Account Managers Drive Need for Advanced Approach to Analyzing Financial Contract Portfolios
Seal Software, the leading provider of Contract Discovery and Analytics solutions, today announced the availability of Seal Contract Analytics for Financial Services. A financial industry version of its existing platform, the new Seal offering has expanded its Contract Discovery and Analytics software with functionality specifically developed to meet financial service market requirements, including ISDA (International Swaps and Derivatives Association) and other financial contract specific provisions and terminology.
“Firms operating in highly-regulated financial markets are looking for expert solutions to help them efficiently manage their growing contract portfolios. This need is greatest in organizations with large numbers of complex, negotiated contacts, for example, those firms heavily engaged in derivatives contracts,” said Lloyd Alexander, Seal’s vice president of Contract Strategy. “Seal Contract Analytics for Financial Services is the industry’s only focused solution that directly addresses this growing problem. It can provide collateral management, legal, risk, and treasury departments with clear visibility into contract data, allowing them to rapidly respond to regulatory issues, mitigate risk, and efficiently on-board new counterparties.”
Financial service industry contracts, particularly those used by derivative dealers, money managers, prime brokers and custodial account managers, are generally heavily negotiated and contain a wide range of evolving technical terms and descriptions of unique tasks. This contract process becomes even more complex as banks, hedge funds and other institutions adhere to regulations in new laws such as Dodd-Frank, European Market Infrastructure Regulation (EMIR) and Foreign Account Tax Compliance Act (FATCA).
Until now, financial service firms have largely managed contract discovery and analytics manually, using internal legal and/or other outsourcing organizations – a costly, inefficient and time consuming effort. Seal Contract Analytics for Financial Services automates this process, providing stakeholders with dramatically accelerated access to the insights locked within these unstructured contractual documents, empowering them to take informed action, and giving them greater control of their contract portfolio. The power of contract analysis lies in the ability for a professional to “ask” the Seal solution specific questions about their contracts, either in response to a one-time market event (e.g. bank downgrade or failure), response to a regulatory compliance requirement (e.g. living wills) or planned corporate initiative (e.g. audit, M&A), and immediately isolate relevant contracts from the hundreds of thousands of contracts that exist in their portfolio.
According to Mary Kopczynski, CEO of 8of9, a leading regulatory change management firm specializing in banks and other large financial institutions, financial firms need to adopt a Best Practices Approach to Contract Discovery and Analytics. Her recommendation is based on experience and insight gained through financial service industry client engagements that required 8of9 professionals to restructure substandard contract portfolios previously managed by inefficient and outdated processes.
“Contract discovery and analytics best practices warrant the attention of virtually all strategic financial service decision-makers. And understanding these best practices underscores why most financial service firms should consider using a solution like Seal Contract Analytics for financial services,” said Kopczynski. “At the top of the list is cost. Manually reviewing hundreds or thousands of complex documents, even when outsourced to low-cost foreign markets, is a very expensive undertaking. Second is efficiency. No human can process the massive amounts of data that a computer can review in a millisecond. Third is accuracy, which speaks for itself. And, fourth, is the issue of business continuity. Software such as Seal’s provides a single repository of data on a company’s contracts, reducing duplicative efforts in different departments.”
According to ISDA, thousands of companies use OTC derivatives to manage potential risks related to businesses’ financial activities. Despite declines associated with the unstable economy and increased regulatory requirements, the gross market value of derivatives has increased by 300 million from 2012 to 20131. Dramatic growth in the derivatives market and within other financial service markets illustrates the inefficiency of traditional contract analytics and has heightened the need for proactive technology to allow financial institutions to better manage their contracts and further mitigate risk.
Seal Contract Analytics for Financial Services Features & Capabilities
Seal Contract Analytics for Financial Services is fully scalable with the ability to continually learn and create reusable content, improving accuracy and relevancy as it relates to an organization’s specific needs. It offers enterprises complete control of their contract ecosystem. Benefits include:
· Providing efficient search within storage locations for contracts with the ability to identify contracts containing critical information necessary to drive decisions
· Decreasing the time needed to identify problems and increasing the time available for action
· Pinpointing analysis toward specific text, language, and clause combinations
· Identifying non-standard clauses
· Ensuring consistency across the organization for contractual terms and clauses
· Developing a functional clause library to streamline future contract creation
· Ensuring the best overall terms are applied to all contracts regardless of origin
· Gaining insight into divergences from approved contract templates
Seal Software, 8of9 and D2Legal Technology, providers of expert legal capital market documentation solutions, will host a webinar on Thursday, Sept. 18, at 8 a.m. Pacific DST during which they will provide additional details on how the technology works and how it will benefit the financial services market.
