Intelligent network management contingency

Abstract

Ensuring the safety of assets against adverse events is a key service requirement for custodian banks today and a primary concern for clients and regulators. This paper examines the benefits of using a ‘contingency sub-custody network’, with secondary providers running live business in parallel with a primary sub-custody provider in each market. This approach is found to greatly improve operational stability when compared to the traditional ‘shadow network’ method, whereby secondary custody agreements are in place, but business is not run through the secondary provider. A real case study is used to demonstrate the effectiveness of this set-up, and the main implications for establishing and maintaining such a network are explored. The paper concludes that the benefits of custodians running live contingency networks are considerable: assets are better protected from market disruptions, clients are better able to manage disruption and crisis, and regulatory requirements concerning asset safety are met or even surpassed.