The importance of corporate governance in the global economy was demonstrated by the global financial crisis of 2008. One of its main reasons is the inefficiency of large corporations. The OECD report identified the most vulnerable areas in corporate governance: the remuneration system, risk management, board operations and the realization of shareholder rights. There is a wide range of applications of Distributed Ledger Technologies (DLT) in the sector of corporate actions.
- Overall transparency, cost reduction and eliminating any fraud from company management: Transparency and immutability of transactions in the blockchain provides an opportunity to improve the accounting of shares, increase control over the transfer of shares, eliminate the possibility of abuse by the company’s management. An intermediary and trust agent that supports the rules of the game will be replaced by impartial digital protocols. The social factor will give way to the technical one. Cost reduction and trust between the players are the first results that the sector of corporate actions will receive as a result of the integration of blockchain solutions.
- The new level of analysis of published corporate actions: Interestingly, more than 90% of corporate actions are published as long plain text and distributed by data vendors. After that, information is aggregated by several managers and re-written by vendors again. This work includes low level of automatization and frequent faults at interpretation, which can bring losses to investors. The global price for these activities is approximately US$ 10,000,000,000 every year. Blockchain can make this process much more effective with significantly reduced costs and mediators.
Summing up, as Forbes journal has claimed, the mass introduction of blockchain technology will occur in an interval of 4-7 years.
The Benefits at a Glance
- Client engagement for corporate actions processing
- Automatization of analysis of published corporate actions
- Overall transparency
- Fast and accurate dissemination of corporate events
- Reducing costs