Firms tell us all the time that they want control – of their data, of their processes and of their Operations function.
But for many, control looks like end-user computing solutions (EUCs), such as reconciliation processes run in a spreadsheet.
It’s a shortcut to getting something up and running, but it’s also a shortcut to complexity, risk, opacity and more. Data challenges and the limits of legacy technology have forced firms to pay this price for decades.
That can stop now. Firms like CIBC Mellon and Blackstone have turned to the latest in data automation technology to replace EUCs with scalable, automated controls.
They joined us for a live virtual event to explore the challenges they were looking to solve, the benefits of unlocking widespread automation, and how the Duco platform makes it all possible.
Diving into these essential issues for Ops leaders were:
- Saumil Shah – Vice President, Blackstone
- Jeremy Hulme – Vice President, Operational Excellence and Transformation, CIBC Mellon
- Laurie Schuster – Head of Professional Services, Americas, Duco
- Steve Walsh – Managing Director, Reconciliation, Duco
Here are the top takeaways from their conversation.
Why does end-user computing exist?
Walsh, our host, kicked things off by summarising the key operational challenges that drive firms to adopt end-user computing solutions in the first place.
Control is especially important during periods of high growth or volatility, both of which create additional data quality requirements. Activities such as mergers and acquisitions, onboarding new funds, comparing fees, cost control and so on need to happen. Yet hard-coded legacy technology, and the complex change management processes that govern it, cannot respond quickly enough to these needs.
Enter EUCs, such as reconciliations on an Excel spreadsheet. “These EUCs and Excels make up somewhere in the region of 50-70% of incumbent controls,” Walsh shared, a statistic based on the many conversations we’ve had with clients across the financial services industry.
But, while these controls may deliver what firms need in terms of speed, Operations teams are agreeing to significant trade-offs as a result.
The challenges of end-user computing
While EUCs plug the automation gaps between legacy systems, performing a vital function, they create far more problems than they solve. In fact, these so-called ‘quick fixes’ often end up becoming an integral part of a firm’s control framework.
“Every time you introduce an EUC, you're fixing something, and it's quick and it's easy, but you're introducing a degree of ‘EUC debt’ that diminishes the business case for dealing with this strategically,” Hulme explained.
“How many times have we seen somebody does an EUC, and it's supposed to be tactical, and then a few years later, you find it still running?”
“These EUCs and spreadsheets were created years ago,” Schuster added. “They're handed down like prized jewels, and there may be a handful of people who understand how to execute these recons based on the original build.”
This highlights one of the main issues with controls such as spreadsheet reconciliations: the lack of understanding about how it works and what it’s doing. As Laurie said, these controls can persist for years – long after the person who built them has left the company.
“I think the transparency is one of the things that probably keeps me up at night,” Hulme said. “If you've got activity going through spreadsheets, you haven't really got a good framework for understanding what's causing the breaks. What's the root cause? How do you address that?”
EUCs, he added, tend to proliferate.
“You'll introduce an EUC and, before you know it, someone else has cloned it, and then it's been cloned again. You haven't got the visibility to remediate that. It's a problem that compounds itself.”
The result: processes that are meant to flag data quality errors end up burying them. Schuster noted that Operations teams often have a lot of work to do in finding the breaks before the actual work of fixing them can even begin.
“Our clients are often desperate to quickly identify and risk rank the breaks in order to have speed and transparency to communicate the action plans and break resolutions. It can feel like a daily game of tiptoeing around landmines.”
This also has an impact on your ability to monitor risk and demonstrate robust controls to both internal and external parties, such as risk teams and auditors.
The tipping point – when EUCs become unsustainable
EUCs bring many challenges but, as explored in the first section, there are a number of pressing business needs that make them a necessary compromise for Operations teams. The short term gains overshadow the long-term challenges.
But firms like CIBC Mellon and Blackstone have taken action to replace their EUCs with scalable automated controls on the Duco platform. What drove their decision to take action against these manual processes?
For Blackstone, the main driver was to remove the repetitive manual work in order to free up time for better decision-making, underpinned by a foundation of trusted data.
“Most of our growth is in private markets,” Shah explained. “And since private markets information is not perfect, what we're trying to focus on is automating some of those repeatable and judgment-heavy tasks. So we can provide more focus on accurate records, and making more efficient decisions based on the data that we get from our service providers.”
For CIBC Mellon, it was the fact that spreadsheets and other EUCs just aren’t sustainable in today’s environment, explained Hulme.
“There's a bit of a perfect storm here; increased volumes, increased complexity, higher client demands - and we want to exceed those client demands - and then increasing regulatory oversight. You put all those together, and if you're trying to manage that on spreadsheets, you're going to have a really hard time.”
“Because they're going to break. You're going to have issues. And so, those pressures are making that sort of transparency and control critical. EUCs just can't keep pace with that kind of environment. And it's a big part of why we moved towards better automation.”
It’s about more than just efficiency, Hulme said. The move to automation was part of a drive to underpin operational resilience.
“Platforms like Duco give us that governance, that scalability, and the ability to adapt quickly and respond to that ever-changing environment.”
“It becomes a strategic imperative to embark on this journey,” he added.
How to get your teams onboard with EUC automation
One of the challenges firms have when it comes to end-user computing is that the business case for automating any one process doesn’t exist. As Hulme noted, a single process is fast to run and, while it creates a lot of extra work, it’s not worth the effort to replace it.
So how can you make the case for full automation?
For Hulme, it was about highlighting the transparency that automation unlocks.
“If it was just about efficiency, then people will say, ‘Well, I'm not really seeing that’,” he explained.
“Some of the ‘Ah-ha’ moments we had were when we looked at that traceability, and the auditability, and the controls. And the idea that if someone came and said, ‘Tell me why you matched that item to that item six months ago?’ - that's going be a hard time if you're doing that on spreadsheets.”
Hulme also shared that the intelligence unlocked by automating controls onto the Duco platform made it easy to measure its impact. The team could “almost draw a straight line” to show the correlation between the number of processes they were running on Duco and the drop in time spent on reconciliation activity.
This, he said, enabled people to see just how much the incremental efficiency gains of automating each process added up to. The team could see the time they had saved versus carrying out manual activity, and instead focus on far more valuable root cause analysis to understand where breaks were coming from in the first place.
“The tools and techniques and framework that Duco's able to give us [means we can] spend more of that value-add time saying, ‘How do I stop this break appearing in the first place?’ It's that kind of analytics that is really moving the needle and making people feel more comfortable.”
Shah also shared that Blackstone’s automation efforts gained momentum once people were able to see the efficiencies it could deliver. People were hesitant to move away from Excel, or even the firm’s prior reconciliation tool, despite the low match rates, he explained.
“What helped change their minds was the percentage of auto-matches that we were able to get. From our old reconciliation platform, we were getting anywhere between five to 10% auto-matches. Since implementing Duco, we've gotten over 60% auto-match rates. Tremendous increase in auto-match, which helps speed up the tasks that people are performing on a day-to-day basis.”
And all that time saved adds up. Shah said that the number of days spent at the end of any given month clearing aged breaks is just a third of what it used to be before the EUCs were automated.
“Once the team saw that - the real-time transformation, real-time processing, less requirement of internal IT teams, and by building all these rules and multi-passes, the resistance kind of faded when they saw how easy it is for Duco to increase the auto matches.”
Key considerations when automating EUCs
The conversation had already touched on the fact that automating EUCs is best done strategically and not as a tactical response. But how do you do that?
“Number one is, if I try to build the business case for doing this from the ground up on an individual EUC basis, it would take years,” Hulme said. “Each individual EUC, you'll ask somebody, ‘Well, how long does it take to run?’ And they'll say a few minutes. You can't build a business case that way.”
The answer, he explained, was to look at it much more holistically. Instead of just considering the run time of an individual EUC, CIBC Mellon factored in the wider context, including audit trails, how much control they had over such processes, and the fact they didn’t have time to deal with the root cause of exceptions.
Ultimately, automating EUCs is an opportunity to think about your operating model.
“There are good and bad ways to do it,” Hulme said.
“There's some really interesting analytics there around different operating models for deploying Duco, how you think about centralising it, the use of COEs [centres of excellence], the use of IT, what the right roles are.”
“There's probably not a one-size-fits-all based on the organisation, but thinking about the operating model is vital, and how you start to scale and really make people want to go onto the platform.”
Motivation is an important factor. As Shah noted, change is hard. But the adoption of new technology depends upon people being willing to engage.
“So yes, you need to eliminate the EUCs, but what's the motivation for people wanting to go into Duco?” Hulme said.
“How do you communicate? How do you train? How do you institute that culture that will motivate people to say, ‘Oh, I've heard about Duco. How do I get onto this platform?’”
Schuster also stressed the importance of thinking about operating model design – which is a key part of her role when working with clients.
“What do you do today? What do you want to change for the future? And so my guys [in Professional Services] sit side-by-side, working with you to really be able to articulate what that looks like in terms of that overall operating model, but then actually executing it in that customisable way.”
A central pillar of that, she explained, is the journey to self-sufficiency; putting ownership in the hands of Operations so that they can design their own future, not just for reconciliations but more broadly for data automation.
As for how to begin that journey, for Blackstone the key was to adopt a phased approach to automation that allowed them to eradicate EUCs from a particular area, prove value, and then move on.
“It's not about eliminating single EUCs at a time, but thinking about how you could eliminate EUCs across cash and position reconciliations [for example],” Shah explained. “The way we went about onboarding Duco was we started with the trustee recs, no matter if we had Excel spreadsheets for cash position reconciliation or we were using our old platform tool. And then we started with the custodian recs and then prime brokers.”
“We slowly but structurally looked at the entire organisation and then moved everything onto Duco.”
The end result of automating EUCs
Walsh then asked our panellists what they see as the biggest benefit of replacing EUCs with automated, scalable controls on the Duco platform.
“The thing that definitely makes me sleep better is the idea that we've changed what our staff work on,” Hulme said.
“Previously you'd have somebody come in and the same break that they fixed yesterday has reappeared, because you haven't dealt with the root cause. We've changed it so that we can automate the easy stuff, and then we can devote their time to how you stop this occurring in the first place; how do you truly drive STP [straight through processing]?”
“The audit trail, the controls - that's what makes [Duco] a great platform for us to utilise,” Shah added. “I think predictive labelling escalation within the platform to the subject matter experts makes it very good.”
Hulme also shared a great story of how easy it is to get these controls automated with Duco, thanks to our no-code natural language interface, which replaces the need for development work and enables business users to build controls themselves.
“When we first started on Duco, we had a summer student come in who learned how to use Duco, engaged with one of our businesses, found an EUC that they were doing for reconciliation, and automated it - all in the space of six weeks. From learning the platform through to automation. And that was somebody who came in with no knowledge of the business and no knowledge of the platform, and was able to actually show to the business that this is real, and it can help.”
The pace of automation has only gotten faster in the subsequent months, Hulme said.
“Since then, we've reduced that time dramatically, but it just shows you that those small wins, those small incremental gains, they will add up, and you win people's hearts and minds through that sort of incremental change.”
Another real strength of moving all EUC processes onto an automated platform is the opportunity to streamline and simplify that it provides, Hulme said.
“One of the other fun things we found is that, yes, you may have multiple EUCs, but as you start to onboard them onto Duco, you start to realise, ‘Well, hold on. That looks very similar to that EUC over there, which looks similar to that EUC over there.’ They've grown organically over time, but you have an opportunity to consolidate. You can say, ‘This is how we transform, this is how we consolidate, this is how we rationalise and do things once so that we can fix it at source and minimise the noise associated with these breaks.’"
Shah gave an example of how this can work in response to an audience question around Internal Book of Records (IBOR), Accounting Book of Records (ABOR) and Net Asset Value (NAV) reconciliation.
“What we do in terms of price differences [is] we put in different thresholds. So if the price difference is out of the 10%, 15%, 20% threshold, then it highlights as a break. So if your price is up by five cents, and you don't want to see that as a break, then you can set up different thresholds and different rules. And by auto-labelling some of those, you can easily identify them as not a priority, and then look at your true break. If a market value is off by five million, then you can label that as a high priority and work on [it] accordingly.”
Finally, Hulme pointed out that automating end-user computing is just part of what’s possible with a platform like Duco. There are many other applications beyond getting rid of manual processes.
“Clearly there's the replacement of the existing EUCs where you have data comparisons going on,” Hulme said. “What’s been a joy to see is the emergent use cases arising. What we're finding is it's not just cash and positions reconciliation. It's all the emergent requirements that says, ‘I need to know that that data over there matches that data here.’ And we've seen that both in terms of internal controls, we've seen it for some of our client needs.”
“Almost daily, we're seeing new opportunities to say, ‘Yes, there is an applicability here.’ So it isn't just about EUC replacement, it's about how you transform your operating model.”
Key takeaways
And with that, it was time to wrap up this valuable conversation. Our panellists shared a lot of fantastic insights, including:
- EUCs create key person dependency, siloed knowledge and operational risk, while stymieing your ability to find and fix the most important data errors.
- An individual EUC may not cause too much trouble, but these quick fixes have a tendency to stay around for a long time and get duplicated across the organisation. This quickly results in a convoluted and opaque control environment that lacks explainability.
- The best way to convince people of the need to automate their EUCs is to show them the benefits that it can bring. You can start with a phased approach, proving value by automating all the manual controls around a particular use case and then expanding the scope of the project.
- Replacing manual processes gives you an opportunity to rethink your operating model. Ask yourself how you want to work and what the future state looks like, and design for that when planning your automation efforts.
Want even more insights into automating your end-user computing processes? Watch the webinar recording on-demand here.
