VIDEO | Network managers are grappling with rising challenges related to ESG standards and global sanctions, as discussed at PostTrade 360° Nordic 2024. As sustainability and regulatory compliance become central concerns, network managers are under increasing pressure to integrate ESG metrics into their operations while navigating complex sanctions regimes. Industry leaders emphasised the need for proactive approaches to address these issues, including enhanced data management and collaboration with external partners, to stay ahead of regulatory demands and market disruptions.

Alexia Salesses from Euroclear, highlighted Euroclear’s strategy to build resilience by securing direct access to central securities depositories (CSDs) and central banks. “Our strategy is to go as much direct as possible to the CSD or central bank,” she explained, noting that reducing intermediaries helps strengthen operational security. However, non-EU markets still present significant regulatory challenges.

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ESG: A growing focus

As ESG standards become increasingly embedded into network management, firms are revamping their due diligence processes. Beatriz Molina from BNY, spoke about the heightened focus on sustainability in network operations. “ESG hits absolutely every business in the firm,” she said, adding that ESG-related questions have become central to due diligence questionnaires. BNY is also working with external partners to ensure comprehensive ESG assessments.

Salesses shared Euroclear’s initiative to stay ahead of incoming ESG regulations. The company has partnered with EcoVadis to develop a neutral ESG rating system for sub-custodians. “We wanted to start ahead and have a rating system in place before the regulations become law,” Salesses explained. This proactive approach is expected to drive industry-wide benchmarking and comparisons.

lessons from Russian sanctions

Sanctions, particularly those against Russia, have significantly impacted operations. Salesses described the complexities Euroclear faced when dealing with both European sanctions and Russian countermeasures. “Sanctions triggered an enormous workload, especially for compliance,” she noted. Euroclear worked closely with regulators to navigate these operational challenges and ensure compliance across multiple jurisdictions.

Godefroid Lamboray of Clearstream echoed the difficulties associated with sanctions, describing them as “bad investments” that are costly but essential. He called for greater industry collaboration to streamline sanctions compliance, arguing that pooling resources could reduce inefficiencies. “We could do better by trusting each other and pooling resources,” Lamboray added.

Data and AI

The role of data in network management is expanding, particularly in areas like performance monitoring and crisis management. Molina emphasised the importance of leveraging AI to handle the growing volume of data. “AI will become an amazing tool to digest all that data quicker than we can,” she stated, noting that AI will assist with tasks like sub-custodian performance evaluation, though human oversight will remain critical.

Molina also highlighted the need for enriched data to improve client services, such as quicker resolution of settlement fails. “We need to offer better services for clients, and for that, we need enriched market information,” she said. This requires stronger collaboration between network managers, sub-custodians, and CSDs.

The expanding role of network managers

To conclude, Alpana Patel Johnsson of SEB reflected on the expanding responsibilities of network managers. “The spectrum of knowledge needed has grown to include everything from sustainability to sanctions, cyber risks, and regulations,” she explained. With many markets to oversee, network managers are finding it increasingly difficult to maintain expertise across multiple domains. However, despite these challenges, Patel Johnsson described network management as “the most fun job,” highlighting the dynamic and evolving nature of the role.

Panellists:
Godefroid Lamboray, Head of Network Management, Clearstream
Beatriz Molina, Managing Director, BNY
Alpana Patel Johnsson, Head of Risk and Market Advocacy, SEB
Alexia Salesses, Director, Network Management, Euroclear Bank

Moderator:
Ulf Noren, Sales and Relationship Manager Sub-Custody, SEB

• The consolidated PostTrade 360° Nordic conference, in Stockholm on 4–5 September 2024, came to host 1,200+ delegates and featured 70 sessions.
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