2021 — Uncertainty, expense management and technology

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Budget season is always interesting as organizations look to their crystal balls to set goals for the coming year, which inevitably includes the arduous task of resource management.

With 2021 planning underway, most are bracing for the uncertainty of 2020 to continue: COVID-19, the election (hopefully this will be resolved by the end of 2020!), infrastructure spending, advance refundings, tax policy, federal support for municipalities. As we look ahead, it is important to embrace the future, lend support and deliver meaningful value to clients, whoever they might be.

A painful reality of the current environment is that headcount is a target for cost reduction despite the fact that the demands have never been greater — compliance requirements, client demands and the need to access and leverage data and information to avoid a competitive disadvantage. With the prospect of less human resources, cost-effective technology must be considered.

When contemplating how to best manage expenses, go beyond headcount and consider existing systems. Many firms are using antiquated third-party and homegrown technology solutions. It is no secret the use of third-party technology solutions, built by technology professionals to solve common problems for multiple players in an industry, are typically more innovative, more cost-effective, more efficient and better maintained.

Be sure to ask the following questions: Are there market solutions that meet our business needs and deliver cost savings? Would funds spent to build and maintain homegrown technology be better utilized on third-party solutions? Can we redeploy people to meet evolving needs and leverage technology to meet other needs?

Exploration of technological resources is key to managing the requirements and needs of the business. The evolution of third-party resources for the muni market have expanded and can, on a cost-effective basis, be leveraged. For example, Rule 15c2-12 diligence, a small but important part of underwriting a new issue, is a formidable requirement that can take a significant amount of time. Third-party resources are a cost-effective way to help address your diligence obligation thereby freeing up internal resources for other, more value-added needs. Several law firms offer services and Lumesis offers two levels of service depending on needs. Further, in some cases you may be able to pass on the cost of the diligence, thereby limiting the direct cost to your firm. Other compliance areas addressed by market resources include retail time of trade disclosure and best execution, to name a few.

Information and data about the municipal market, be it benchmarks, pricing and scales services, debt maps and consolidated obligor-related data, are requirements for many facets of a professional’s day to day. Underwriters, traders and analysts need to be able to leverage technology based on an obligor-based database to efficiently meet the quality requirements and demands of their constituents.

An example is the creation of scales for new issues — the desk is asked to write and rewrite scales numerous times from the time the banker first engages with the client until the deal prices. Leveraging technology like DIVER’s New Issue Pricing and Scales platform allows the desk to remain engaged as a critical part of the indicative and final pricing while freeing up valuable time. This is an example of technology increasing efficiency and data availability.

As we finish a tumultuous 2020 and look to the uncertainty and challenges of the year ahead, leveraging third-party technology is critical to managing expenses and providing your team best-in-class, effective and efficient solutions. Please join the discussions about technology and innovation at the Bond Buyer California Conference. Be sure to register.

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