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so good morning and good afternoon to everyone who has has joined the standard bank booth for today and for our discussion around due diligence questionnaires and i really want to introduce so i'm sally jakes and i head up in information management at standard bank and with me i've got two two guests sanjeeva the ceo and founder of central um and it's going to come in particularly around technology on our our discussion today and then peter tomlinson comes from aphme and is particularly has been working around the the fme ddq so the kind of post-trade work around afme we we wanted to start this discussion because i wanted to look at how is the industry progressing towards standardized due diligence um have standardized ddqs such as fme post trade questionnaire made it easier for network managers and for respondents um how will due diligence evolve digitally when sub-custodians are responding on multiple systems and is there a role for industry stand certifications to to to reduce the number of due diligence questionnaires so i'm going to start off with standardization and please this is a an interactive session so please put your questions um in the q a section and and and let's and let's have a look at those i will be keeping an eye out on there so are we really achieving standardization um i'm looking at standardization for the efficiencies it will bring to both issuers of ddqs and respondents and i'm going to look at two angles content and technology let's start with technology so over the last five years we've seen more global custodians and brokers using portals such as central thomas murray codude ky3pe to issue their questionnaires as a respondent i start losing the efficiency when i've got to copy and paste these responses into different portals sanjeev do you believe we can standardize our technology for questionnaires such as fme thank you sally um i think your question about standardization in general um and particularly as it pertains to technology in my mind sort of speaks to two important underlying realities the first as you as you mentioned more and more global custodians uh are adopting systems uh and and uh digitized uh platforms for issuing their due diligence questionnaires and that trend will continue to increase and accelerate over time but the second important reality and i think you just refer to it is that due diligence by definition is a two-sided process and whenever we're thinking about standards it's important to realize that it's not just to bring the efficiencies for the issuers but also for the respondents and that's where technology standards can go a long way to your specific question i do think technology standards can help in reducing the friction for both sides in in the following ways for the standardized questionnaires such as for afme if the industry were to adopt a common electronic format in which the respondents could provide the responses and that could be ingested by all of the different systems that are being used i think that would go a long way towards reducing the kind of friction you were referring to such as the cut and paste and go across the systems i will say that it will help tremendously for the standard format of an afme questionnaire for example but it won't solve all the problems so for example i happen to be in the camp that the goal of a hundred percent content standardization is an unrealistic goal the industry is evolving rapidly different institutions approach risk in different ways so they will continue to be proprietary questions and diversity in the way people will want to do their due diligence process and here again you know i sometimes say that there is the a race going on between the desire for 100 content standardization and the advancement of technology and you could argue that whoever wins that race may render the other pursuit obsolete and i certainly would would put my money on technology and what i'm thinking of is that today there are well-established uh tech technologies available that can automate the response process to a great degree by leveraging intelligent search or artificial intelligence so even when you get outside the world of standard questionnaires such as aphme i do think that these new technologies will come to be leveraged and i see a future where more and more response automation systems will fall into place which will enable respondents even for those uh due diligence questionnaires that are proprietary to bring a great deal of efficiency to that that's great thanks sanjiv and and i like that the kind of the race of who's going to to win in this and um so if i move on to content and it links a bit to the first question we've had so with our standard afme questionnaire pete this question has got over 450 questions but are they all useful for network managers are we introducing inefficiencies for both evaluators and respondents with large percentages of superfluous questions which links to what kevin brokaw has asked where where he said would it not be beneficial if we eliminate some of the non-risk items i the name of the custodian the address to start reducing the question so over to you peter thanks ali um it's a very good question um it's and something that's that's definitely at the sort of forefront of our minds as we start thinking about the next iteration of the acme ddq um we've sort of settled into this cycle of updating it um one significantly once every two years so so we're looking now at the version for use in 2023 um over the years the questionnaire has grown and grown with each iteration so you mentioned 450 questions in the current version i took a look back 2016 we had just about 300 questions so it's grown 50 in in five years which is you know not insignificant right um as we start to have these conversations about the next version i i think that the starting point is moving not just from kind of looking at what's missing but also you know what can we get rid of and i think that there is a shared desire from the afme kind of subcommittee to really look at um options or ways in which this this next version can be slimmed down um you know there are some emerging areas where we might need to add more questions but hopefully you know we can counteract that by removing some as well i guess that yeah the the sort of uh the issue at hand really is about how do you define the threshold at which a question becomes useful so we don't want to remove something that there will still be a sort of a a rump of network managers who want to know the answer to and if we remove it they're simply going to ask it or a variation of it in in sort of side questionnaires and then we lose we lose that efficiency right so um yeah i think there's there's a balance to be struck but sort of you know in principle if if if there's something that multiple multiple kind of custodians or multiple network managers sorry are going to ask then it's better to do it in this in the same way in a standardized way in a questionnaire it makes the document quite unwieldy but hopefully you know you know it's serving a purpose and reducing the the number of additional questions which uh are going to be asked but yeah there's a there's a balance to be found and that's kind of our job to uh to try and find it thanks peter i suppose they said we would really need some sort of technology solutions to see how all those questions are being used um and and how many of them are being used to to get a real answer out of that now i'd like to ask other participants in the booth of of i've got a question for you is do you think there's room for using industry standards certificates to reduce the number of of of questions i've sometimes asked that myself of clients but so i'm going to put that that question to you um i can i can um i can copy it and put it into into the into the poll there and answer the questions and ask answers and see let's see what we get there while i move on to on to the next question and hopefully we can come back to that so please have a look and see what you you you think that so now i want to move on to to the topic of ongoing monitoring versus time-bound due diligence um and we know that network managers want to know of any immediate risks um and that's certainly been highlighted in the last few weeks with the the russia ukraine war um but that said there's still a reliance on the ddqs for the full risk picture um so to be able to assess risk in real time we have to do this digitally um if we're all on different digital journeys where we're not in the same place and sometimes i feel not even on the same road so i want to explore how we navigate these different journeys between those completing due diligence and those responding so sanjeev what are the top two or three pain points that your clients are trying to solve by looking for a digital solution thanks sally um i think your point about different institutions being on different digital journeys is absolutely right um you know every institution is moving at its own pace and and uh you know not adopting digital technologies at a speed that is suitable for them i will say that you that virtually in every industry i mean if you step back and kind of think about the adoption of digital technologies for any business process or industry while every well a company's specific companies have their digital journeys the industry as a whole is also has a macro journey that is on and you get to a tipping point in an industry where the the path for every one of the companies gets significantly accelerated it's hard for me to tell whether that tipping point has been achieved in the in the case of due diligence in in this space but um sort of the s-curve as they speak about in the industry is definitely an important and important accelerator in in driving momentum to your specific question of the pain points that we're seeing clients trying to to solve i'd sort of break it up into three categories the first is just the basic level of efficiency that that clients are looking for so to be able to go from what could be a semi-auto digitized or a manual process over to a fully digital platform and i think what they're what they're looking for is are systems which can uh which can meet a few important criteria first it is that they have to be able to solve the sort of provide this level of automation and digitization in a complete way in some ways you can create more inefficiencies by doing partial uh digitization of a process so this the systems have to be complete the second they have to have a degree of flexibility because uh every institution has its own process and to be able to reap the benefits of adopting technology it has to be able to adapt the technology to its needs and then the third is essentially to generate the kind of quantitative analytics required for risk management because that's kind of the ultimate purpose of all due diligence and to be able to reallocate their time from the tedious process itself to to analyzing the results so i think the first thing that they're looking to solve for that we see is just getting to that level of efficiency and better risk uh risk management um i think the second the second pain point is uh to go from thinking about your diligence kind of as a isolated system to the entire infrastructure for network management as you can imagine the diligence process doesn't exist in isolation the diligent systems are connected to multiple other systems within the overall network management function this could be the depth and flexibility of their agent bank database of the account management systems about the attestation systems so what we're looking what we're seeing with some clients is a desire to move that whole infrastructure to the next level and as one client refers to it it's sort of future proofing the network management infrastructure so that's the second level of sort of digitization that we see some clients and that represents the different stages of the digital journey as you spoke to and the third one is where you started with with the desire to get to ongoing monitoring this is still relatively early people haven't really moved to to sort of adopting real-time monitoring but we see that as an absolutely powerful trend that is coming and what's driving it what's driving the urgency of it is is cyber risk with cyber risk evolving at such a rapid pace it's not something that you can measure and appropriately monitor in in an episodic way or in an ad hoc way because it changes so rapidly so we're definitely seeing the trend towards ongoing monitoring being driven by real-time constant oversight of the cyber hygiene of their third parties i also think that when you get to it you know more interactive messaging across the network will be required in order to provide the kind of ongoing monitoring that that you are speaking of super thank you and certainly um all the questions i've had lately on our current risks have have been issued to me manually as well um around that so we can see that change um now if i move on to peter i've heard of members of your afme questionnaire subcommittee ask for more binary or multiple uh question type questions so they can be auto scored however as a respondent i see issuers ask for more and more commentary do you think there's room for a pre afm ddq which only has binary questions and is quick to complete and evaluate and then issuers can ask for further information on on their risk areas only our focus first and foremost has always been on on the content um not what i'll call the delivery mechanism but absolutely right there is clearly more and more interest in how can we share this information in a more efficient and effective way and you know we're certainly um [Music] you know open to sort of helping to facilitate that as as best we can um clearly again um you know sort of going down that middle path there is a need for a balance between you know these binary or multiple choice questions which can be automated and a need for for sort of further commentary and that nuance detail which which is impossible to to kind of fit into into a sort of a multiple choice or a yes no type question so you need that that balance again um something you're right it's something that this kind of working group has also identified as a sort of priority for this year having another rake through the document and looking at further areas where questions can be refined from sort of open-ended type questions into something scorable or sort of more more binary so we'll absolutely be looking at that as well whether it makes sense to separate that into two separate questionnaires i i personally i'm i'm i'm not sure probably not something we'll do within afme but you know i think that there are kind of smarter and better resource people than me who can potentially you know facilitate that if if there's a sort of market appetite for it and you know we're happy to to do what we can to as i say to try and facilitate that i mean i i can kind of completely get it sort of going back to to some of sanjeev's points you know if we're updating this once every two years think how much the world has changed within the last two years or all of the sort of new um new topics coming to the sort of kind of forefront of people's minds there is definitely a need for [Music] um a more sort of dynamic or or ongoing um monitoring process than than this sort of um yeah quite sort of uh quite sort of fixed um document that we have currently also it's a bit of a maybe it's a bit of an anachronism that you know it's it's a word document everyone is is kind of going digital and looking at other digital solutions so um yeah it's something that i think will always remain focused primarily on the actual content but if we can create better content that better meets the needs of the market and makes it easier to respond than we are 100 open to uh to helping to to get there um and i see we've got a question of kind of to manage the workload is it possible to have a standardized ddq be a purely annual event separate from real-time monitoring rather than expecting a a live ddq um peter if you want to start on that or whether um of whether you've got any kind of comments comments on that i i certainly feel as if we we do actually have that we have the annual ddqs but events happen and we get the questions um it's it's very difficult to know how it's something that maybe we have to learn from sort of these kind of big events which have happened in 2020 2021 2022 which have sort of created this um this need for immediate answers outside of the annual process that we currently have that isn't that kind of isn't within the current scope of of what we looked at at me right but you know is there a role to to sort of to help in these types of scenario to um to again consolidate questions and and kind of make this process more efficient it it's very difficult to to know precisely how that would work but i absolutely agree it's something that needs further um further consideration these quick standardized questions that don't take six months off subcommittee meeting exactly yeah sanjeeva is there any kind of comment that you'd like to make on that absolutely i mean i think um it's very clear that there is a place for standardized uh annual or whatever frequency there is to it to to be asking those kinds of questions because they you can get certain uh types of very rich qualitative information from it but that will never substitute for the kind of ongoing need to constantly uh both ask and respond to you know events that are happening around us and honestly uh you know the current methods of doing that are inherently inefficient i mean if you're sending information via emails or uh you know multiple questions flying around so from a pure technology perspective i mean the end game where would be if you could have a common platform that could be used either a common repository where people could put in you know questions and answers but also real-time messaging you know to be able to ask questions that you can respond to or proactively push information as a as a respondent i don't know what the path to it is and whether whether some you know peter and aphny has a role in kind of helping define and create that environment but in the absence of it i think um you know you'll still continue to have sort of this type of bilateral conversations that will need to happen and everybody asking the uh and i was thinking about you know how have other industries solved for it and i'm not sure that there's a lot of good examples that that you can point to i know that if you kind of look at the broad industry sort of third party risk uh process which is becoming increasingly important with all of the cyber risks um you know people are trying to get to common databases but it is not an easy problem to solve yeah yeah which sort of leads me to to to my next question is is is this industry ready for a central place to hold documents and q a pairs or for external providers to deliver risk assessments that can be shared among different global custodians i don't know if you want to to comment on that and see if we've got any comments from our from our audience i see caroline has asked us can there be a stronger pushback to members separating due diligence risk oversight questions to those that are product and service related which could create more closed statements in in in the afme document i must say from a respondents perspective i am seeing this i am seeing a little bit um of the difference there is still some product service questions that are are coming through but if i compare it to say if an rfp is issued um the questions are quite different because i think you're looking there at in my mind pre-sales for an rfp and and post sales for a due diligence um sanjeev would you like to comment on that at all well i think that there is definitely room for common repositories where uh you know you could you could store information that can be retrieved i'll tell you what i see in in other industries so for example there's an attempt to create these databases where third parties can store their stock reports and uh anybody who needs a stock report can kind of access it in in a in an efficient way so infrastructures like that i think could actually absolutely come to prevail especially in this space because it's a relatively small uh vertical industry with with folks who work with each other uh quite closely so i think that if any industry could do it um the um this this industry can can accomplish that uh for sure okay that's great and perhaps peter we we're looking at afme playing a different role in terms of just content which is really switching things around i don't know if that's ever been considered [Music] yeah um i would say you know now is is a good time to be providing that feedback um [Music] we're obviously kind of somewhat con constrained from a capacity perspective and a sort of resourcing perspective as to what we can deliver so i really see our role about it is still the content but maybe providing that content in the best format that allows people like sanjeev and others to to do things with that content and and you know make it more more efficient and more effective for sort of market participants um we want to avoid duplicating sort of um information that's already provided elsewhere and and kind of going back to what you said at the start we want to to make sure we're kind of only including questions where um you know the issuers are doing something with the responses right we don't want to ask questions for the sake of it um the key principle for the acme ddq has to remain it has to add value each question has to add value to provide some new information which is useful to to um to the askers of the questions so um yeah it's it's obviously um sort of a changing environment and we have to be cognizant of that but there are probably limitations as well on the sort of a role that afme can can play in this and what we can achieve um but as i say now is the time we're sort of openly consulting for feedback and it's good to get feedback not just from uh the issuers of questionnaires but also those who are responding to questions people like you sally it's it's great to get that feedback um [Music] so you know welcome any um any sort of direct feedback via email or telephone is is certainly welcomed by me um at this stage okay right um thank you and i think i'm going to that's that that's going to be great and i hope that also people who are listening who are going to to provide to this um kevin's made a comment about bringing in in more questions for our free so we have fewer supplemental questions which which would be great from my my perspective we haven't had an answer to the industry certificate i've only ever asked one person who said no they didn't think so so i want to take this opportunity to to thank sanjeev thank you for coming in bringing your insights um we've had some wonderful conversations as well leading up to this which i have really enjoyed as well so thank you um and and thank you peter as well i think bringing in um that standardized side of of fme has been fantastic and and i'll see you in the subcommittee so we will also still have more conversations so thank you to everyone for attending and for your questions um it's been great spending the last half an hour with you it has just flown by um and enjoy the the the rest of the sessions thank you thanks cheers thank you [Music]