Richard Schwartz

Hello. I'm Richard Schwartz. I am Head of Research at Global Custodian. And I'm here with Jatan Pathak of S&P Global. He is a Product Manager responsible for Corporate Actions. And we're going to be looking together at how the industry and the customers of service providers can improve corporate actions automation, which is a long-standing issue for the security services industry.

Jatan Pathak

I think the first one is corporate actions are complex. They are just -- the nature of each corporate action is different from the other one, right? So in some cases, the companies are just trying to pay their investor. In some cases, they're trying to restructure their debt. In some cases, they are trying to reissue more capital. In some cases, they are trying to reorganize their firm, right? And if you add the market nuances on top of it, because each market has its own regulations that they need to follow, it makes it very difficult for a complex corporate action to be standardized in a way. So that's why corporate action are fairly complex and makes it very difficult to automate to a certain degree.

Second piece is, corporate actions are risky. So the complexity itself brings in risk, right? Like companies, if they miss out on processing one corporate action correctly, it can mean millions of dollars of losses, not to mention the reputational risk that they will have to face if they completely miss out on the corporate action processing, right? There is also an opportunity cost missed. So if you, let's say, pick a wrong option or if you don't understand the corporate action properly and you make a bad investment or bad judgment call, you could miss on a good opportunity to make some money in-house, right? So that's why I think there is an inherent risk with the corporate action, and there's some sort of a manual oversight always required to make sure that the corporate action is fairly well understood.

The third piece is that there are a lot of players involved in it, between issuer and investor who's paying and investors that eventually are impacted by it. A fairly decent amount of intermediaries, which are involved into that process, makes it very difficult to bring all of them on to same page and sort of have them sing the same song, to say. So for those reasons, it makes it very difficult to like automate the complete corporate action workflow.

Richard Schwartz

So how does that work with the start of the pandemic and everyone working from home? And this kind of distributed work environment, was that good or bad for corporate actions automation?

Jatan Pathak

Corporate actions in its own nature have become more complex like you're seeing just a new type of complex corporate action come into the industry. Like you see like -- [ vision of SPAC ] suddenly in the market. You see companies are reissuing like their debt differently than how they used to. The interest rates are lower. So a lot of companies are like trying to restructure the entire debt position and all of that. So I think the corporate action itself became fairly complex.

I think the second aspect of it is that since -- like there is so much new skill set that now the companies need to have in-house in order to -- or support this complexity of corporate actions that you need to know about the [ SPACs ]. You need to know about like how the restructuring works. You need to know on top of it the market nuances. Cryptos are not helping anybody, right? So that entire space is becoming fairly complex.

And as you -- I'm sure, we all know that there is a whole sort of a reshuffling, the great reshuffling that's going on in the industry right now. A lot of people -- it's difficult for companies to retain talent in-house right now who manages that expertise. So what we are seeing is more and more companies are trying to balance this by leaning on to some sort of a managed service, some sort of an external help, right, to make sure that they can scale, they can keep some sort of an expertise available to them whenever they need it, right?

Richard Schwartz

Where does S&P Global's set of solutions seek to address the challenges that you've identified?

Jatan Pathak

S&P Global offers a complete solution of products, right? So we have a data managed service. We have more custom managed service, which we recently launched called Agent Validation Service. And we have a complete suite of software solution, which we offer as a hosted and installed software as well. Our data service is fairly known in the market, right, like essentially, we have coverage over 3 million-plus securities across all markets and event types. We have dedicated staff of over 300-plus people who are working just on corporate actions only, and that's unparalleled in the industry.

I think one of the unique thing that we -- S&P Global does, which we don't see in the market, is that we don't take sort of a prescriptive approach on what solution clients should use in order to increase automation in-house. We take it more as a consultative offer, right? Like we seek to understand what customers' problems are, and we try to come up with a solution that basically meets their needs or help them solve those problems.

If I take an example of that Agent Validation Service, what we've been doing is that even after creating the issuer golden copy that we create, we knew that the firms had to do certain manual processes in-house in order to create a solution that meets the standard of their firms, right? And we realize that's an extra step where -- again, which was preventing our customers from having that automation completely done.

So we have designed this Agent Validation Service, which allows our customers to recreate how they would like their golden copy when they compare it against their agent records and compare it against their custodians, how it should look like. And then we produce the copy exactly the same way so that they can completely automate that workflow in-house.

Richard Schwartz

Thank you for joining us today, Jatan. That was very interesting.

Jatan Pathak

Thank you for having me, Richard.