25 May 2023
The Likezero team had a fantastic time at this year’s ISDA AGM in Chicago. It was the perfect opportunity to take a break from screens and collaborate with industry participants and clients in person. We were greeted on arrival by sun and tulips: an auspicious start to an action-packed event.
We heard from ISDA and the industry on their response to the recent market turmoil. Given the city’s history and role in the derivatives industry there was much to reminisce about, but also a strong focus on the strategic initiatives for the future.
Discussions were around a wide range of topics, from LIBOR replacement and UMR, to the Voluntary Carbon Markets, industry diversity, regulation and of course digital initiatives including contract and data management – a topic close to our hearts at Likezero.
The digitisation panel reviewed some of the challenges firms have faced in repapering exercises and document digitisation, but also, the benefits that this can bring. It was an impressive panel and it was great to see our partner S&P Market Intelligence discussing our joint proposition in this space. On the sidelines, we managed to engage with multiple firms grappling with this issue and explored the myriad ways Likezero could support them.
There is mixed feedback on the challenges and benefits of digitising documents. Some participants find the standardisation available appealing, whilst others bemoaned that this led to less optimised contracts. From discussions with clients, the main drawbacks appear to be around flexibility of negotiation, process change to accommodate adoptions and issues around digitising their legacy agreements. Firms are looking to understand the business case for them to make investments – with focus on the compelling cost benefits. However, there are many other benefits to bolster the business case, such as risk mitigation, client service improvement, contract optimisation (which in turn provides attractive business opportunities and profit) that are overlooked. Firms also need to look at how they get initial payback, as early as possible whilst they work on their longer-term strategic initiatives in this area.
Part of the challenge for the industry is the treatment of their legacy documents and how they can digitise these efficiently. In addition, decision makers can take advantage of the emerging negotiation platforms that support digitisation of new contracts in the long-term.
Whilst these challenges were discussed, the benefits and business case for firms is only slowly starting to be realised. With better-quality contract data available, there is greater ability to analyse and react to market and credit events (for example SVB and Credit Suisse). Additionally, more and better-quality data can support contract optimisation to provide benefits in client management, business PnL and risk and regulatory oversight.
Read more on our contract data operations solution which solves the legacy documentation challenge, and enables better legal risk management and contract optimisation.
Next year, we’ll be replacing tulips with cherry blossoms as 2024’s AGM will be held in the future-forward city of Tokyo. See you then!