Decommissioning three legacy systems and consolidating reconciliations for a standardised operating model

Hedge Fund

“The broad scope of the Duco platform means we’re using it for applications far beyond what we envisioned at the start. Duco is about improving us operationally and commercially - out of around 90 services I use, it’s in my top three in terms of importance. The platform has helped us unlock a more strategic way of handling reconciliation. Our growth trajectory has been steep over the years, so we needed a scalable solution that could keep up and empower our current team to do more as AUM grew.”

We empowered a tier 1 hedge fund to standardise their operating model and lower total cost of ownership for reconciliation with our cloud-native data automation platform that puts business users in charge. Duco provided them with the flexibility and accessibility they needed to achieve their top priorities:

  • Free up both operations and IT by giving business users the ability to control data
  • Reduce the total cost of ownership (TCO) of reconciliation across the business
  • Standardise their operating model by consolidating reconciliation from three legacy systems on one platform

The vision: A platform to grow with the business

The customer is constantly refining their operating model to unlock more efficiencies. The firm has grown rapidly in recent years and so the team needed a data automation platform with the scalability and flexibility to keep up.

Costly reconciliation and a complex application landscape

The firm’s reconciliation needs are incredibly varied, spanning equity reconciliations, regulatory reporting verification across EMIR, MiFID and SFTR and cash nostro reconciliations.

Prior to Duco, they had experienced significant operational overheads, caused by disparity in formats from tens of brokers, custodians and fund administrators. They had previously required three different point solutions to perform the bulk of these reconciliation tasks. These legacy systems were on-premise and came with all the usual high expense, including mandatory upgrades and maintenance. Inefficiency spread out to their back office outsourcer, making it hard to cut cost.

On top of this, a recent acquisition meant the customer also had a large number of spreadsheet-based reconciliations.

“In total we’ve saved on the cost of having on-premise solutions, the hardware involved in managing those, IT headcount, tech support and development time. The value of Duco is massive.”

Reliance on IT for reconciliation support

The legacy systems in place were too technical for end-users to operate themselves and so Operations teams relied heavily on IT to build and update reconciliation processes. One of the systems even required on-site support from a full-time employee of the vendor.

By comparison, the Duco platform went live across the firm’s global locations in 24 hours and a team of just three Operations workers were able to build over 400 reconciliations in the first year.

“Duco enabled us to achieve our main objective: free our tech team from the burden of managing complex reconciliation solutions and give our business users control over those processes. We’ve been able to decommission three systems that required dedicated IT support and automate a large number of manual controls.”

The outcome: A new operating model, enabled by intelligent data automation

Consolidated data quality and control

The customer is able to utilise the platform to do far more than they anticipated. The team views Duco as a data integrity solution and a key part of their control framework. They use it for a variety of applications, such as data aggregation and normalisation, workflow processes, regulatory reporting control and reconciliations and reference data.

The interconnectivity of the platform has enabled the firm to achieve even greater levels of data automation, linking the Duco platform to Python functions and Robotic Process Automation (RPA), as well as feeding data downstream via API.

The main use case is pre-validation of data points for MiFID, EMIR and SFTR reporting. The customer reports over 10,000 trades every day, encompassing millions of data points per year. Duco is used to validate that data internally.

But due to the flexibility of the platform, the customer is also able to use Duco for collateral, mark-to-market, FX, total equity, CFDs, securities and cash reconciliations, where they achieved a 15% jump in auto-match rates, bringing them as close as the firm can get to 100% without fixing issues with external data quality.

A more efficient and resilient operating model

The customer’s operations teams are able to build, maintain and iterate reconciliations by themselves using Duco’s no-code interface. Natural Rule Language (NRL) functionality empowers business users to create and modify even complex data controls using drop-down menus and plain English. This heightened agility allows them to implement changes fast without going through the development queue.

“With Duco we’re able to take projects out of the prioritisation queue for the tech department and instead do them ourselves. This greatly increases our visibility as we can see that the work is being done.”

Reduced risk, increased auditability

Duco is a key tool for risk and control processes at the firm, helping mitigate risk by flagging exceptions and validating data. This enables the customer to deliver the error-free experience that clients expect.

The platform is transparent and self-documenting, greatly helping with auditing, as everything is clearly recorded. Because recs are built in plain English using NRL, it’s easy for external parties to understand what has happened to the data across the lifecycle of the process. Having users build and maintain the reconciliations themselves has also increased visibility internally as these are no longer in the IT pipeline.

“Duco is more than just a cash or position reconciliation tool - it’s a vital part of our control framework. We use it as a data integrity platform to build validations to make sure our records are correct. It’s a useful audit tool that can tell us what processes were run on what date, show that there were no issues with the data and explain which rules were run on it.”