The company’s IT teams work in conjunction with clients to develop products to meet their needs. Such proprietary solutions include the recently developed after-tax investment tools and reporting accommodations for taxation of financial arrangements legislation. “When you are using proprietary technology, you’ve got the flexibility to develop what your customers need and, more importantly, you’ve got that natural connectivity between accounting and trade information as it flows down to the tax systems,” O’Sullivan says. This focus on clients’ needs leads O’Sullivan to dismiss Rice Warner’s recommendation that custodians adopt standard operating models. He says a custodian needs to present what is best market practice to clients and explain how they support it – but also how they can be flexible to meet any specific client needs. “To say there is going to be one standard model – I would disagree with that. I think there’s a balance between saying here’s what is best practice and here’s how we support best practice in the industry and what we believe is the most efficient and risk-averse way to operate. “There’s always going to be that 20-25 per cent that sits outside [the standard operating model] that’s going to be very much clientspecific” and require a customised solution, he says. The need to allow for flexibility within a standard operating model is echoed by BNP Paribas’ Jond, although he says the adoption of a standard operating model is “essential to optimise STP [straight-through processing] and provide economies of scale”.

“We also recognise the need to be responsive in an automated environment and offer services that support the unique requirements of each client. We therefore adopt a concept of ‘automated flexibility’, which means we build our standard operating model with the flexibility to cater for complex client requests and requirements,” Jond says. He adds that BNP Paribas’ systems are developed and supported at regional and global levels, which ensures that its services are not “exposed to the keyperson risk inherent in many local proprietary systems”. RBC Dexia’s Travers says Rice Warner’s recommendation is aligned with the findings of the influential Cooper Review, which recommended greater efficiency in investment administration. He says standardised processes can deliver greater efficiency. “Operating models need to be reviewed and streamlined and standardisation helps achieve this. They need to change and efficiency can only flow in the industry if there is standardisation of market processes, practices and integration.” Offshoring ris ks As custodians roll out additional services, such as tax propagation, it behoves super funds to conduct more intensive due diligence on these offerings – particularly as custody contracts become fewer in number but bigger in size. “Regulation dictates that you can outsource services and processes, but you can’t outsource the risk.