The quest for business process management

Straight-through-processing(STP) essentially amounts to the panacea of business process management, that is the complete automation of the process with no human intervention whatsoever. This greatly increases business processing speed, efficiency and accuracy, as well as eliminating the possibility of fraudulent activities creeping in.

STP seamlessly automates business processes, managing exceptions, escalating actions if required, and enabling real-time flow of information.

Mark Ehmke, MD, Staffware SA.

STP seamlessly automates business processes, managing exceptions, escalating actions if required, and enabling real-time flow of information. Furthermore, it facilitates the extraction and reporting of critical business information at any point in the sequence, thereby creating greater management control and awareness.

STP is invaluable, especially in the demanding context of the financial industry, where split-second timing on a trade (that is, stocks or shares) is everything, foreign exchange rates rise and fall with equally dizzying speed, and there is pervasive pressure to shorten transaction settlement time cycles, not to mention a huge need for transparency and accuracy.

This was not always the case. In the not-so-distant past, workflow engines typically could not handle the requirements of STP as we know it today.

Workflow was, and is, all about managing business rules externally to the applications involved. However, in order to make STP operate at the speeds necessary, developers hard-coded the business rules directly into the STP process. This served to make STP inflexible and has high-maintenance requirements.

These days, business process management can process STP processes as fast, if not faster, than the hard-coded instructions of the past, while STP processes have evolved to the point where it is critical for them to be both flexible and complex, including the introduction of external business rules, which can handle changes and exceptions on the fly.

By combining the power of the workflow engine with the automated nature of STP, the STP business owner can now benefit from all the process control mechanisms that have previously only been available to the human workflow process owners.

Let`s take a closer look at some of the drivers, or motivating factors behind STP, particularly in the financial industry context.

The "time is money" mindset has become increasingly entrenched in today`s financial sector, particularly in today`s tough economic climate, where the pressure on resources, specifically time and money, has become more and more acute. This has proven a very real driver in the development and employment of STP in the financial industry, due to its time-saving efficiency. In support of this, there are numerous examples of workflow supporting STP in operation within a financial context, including:

Trading floor transactions (selling of stocks and shares) by companies such as the Settlement and Operations Clearing Exchange in the UK; Many common high-volume, low value banking transactions such as changes of address; Foreign exchange transactions by companies such as American Express; Credit risk assessments (up to point of final decision-making in certain cases); Home loan grants-in-principle (building societies in Australia, using STP, have a three-hour turnaround time, while locally, this is currently benchmarked at around 24 hours; and Corporate actions (that is, the actions taken by a company which have to be published on the JSE according to financial legal regulations).

In the legislation context, the South African micro-lending industry is an excellent case in point, and an example of how certain legislation has become an important driver behind the need for workflow-driven STP in the financial industry. This is due to recent changes in legislation, whereby micro-lending institutions may no longer instruct their clients` employers to automatically deduct their loan repayments off their monthly salaries. Such changes in legislation require businesses to adapt their processes rapidly in order to minimise the effects, something that can be done easily through business process management.

Taking into account the fact that some micro-lenders have thousands of debtors on their books, this is potentially a huge opportunity for an outsourced service provider to offer an automated credit-checking (and credit cross-reference checking) facility, utilising STP.

Tying in with the above example, the financial industry is also awash with examples of high volume, yet (relatively) low-value transactions. Take many everyday banking transactions, or possibly the financial or billing departments of one of the local cellular operators or telecommunications providers, for example. In these contexts, the application of STP is hugely beneficial, in terms of quickly and efficiently handling huge volumes, with no human error to worry about.

Security is an obvious driver for straight through business processes in the financial services industry. Suffice it to say that, in an industry where the human element or fraud factor poses a serious threat, and other white collar crimes, such as industrial espionage, is escalating annually, the need for totally secure processing is immense. Again, workflow-driven STP removes the requirement for human involvement and provides control via an online audit trail of the events making up the transaction.

Transactionality refers to the need, within the financial industry context, to adequately define the different critical points of a transaction process - that is the points in time when the business process is considered to be in a consistent state. For example, in the trading field, a buyer would transfer funds to a seller when purchasing a share. However, if the seller were to default with the transfer of the share certificate, the buyer would need to try to manually reverse the payment of the funds.

Utilising STP, an electronic certificate could be transferred automatically to the buyer at the point of purchase. However, if anything goes wrong with the transfer, the entire transaction can be "rolled back", and the funds automatically returned to the buyer.

The prevalence of e-commerce financial transactions - particularly credit card transactions over the Internet, as well as e-banking transactions- has created a huge drive for a non-repudiation feature that is available via STP transactions today.

This means that once an e-commerce or e-business transaction, such as a credit card purchase or an e-banking transaction has been carried out, neither party can deny that they participated in the transaction.

STP makes this possible through the use of digital certificates, which identify each party as a participant in any given transaction. These digital certificates are then encrypted with the relevant transaction data, so that if the transaction data is in any way interfered with, at any stage of the process, this will be revealed once it is decrypted.

As the above drivers indicate, both in the financial industry and in many others, there is a huge need for the speed, accuracy, control, flexibility, transparency and efficiency of workflow-driven STP. However, not all workflow products have the characteristics necessary to participate in STP. Scalability, high-availability, transactionality and integration capabilities are features that are important to consider for business process management.