by Geoff Spindler, Co-head of Network Management
Investors rely on global custodians such as RBC Investor Services (RBCIS) and our network of sub-custodians throughout the world to navigate global markets.
The network management role is growing in importance as investors increasingly seize on global investment opportunities to diversify their portfolios and enhance returns. A strong network manager enables our clients to focus on expanding their businesses.
The protection of investor assets is at the heart of network management
It is essential that global custodians appoint a network of best-in-class agents to handle the operational complexities of global markets in which clients choose to invest. This especially applies to emerging markets where access can be cumbersome, including complicated documentation requirements and challenging regulatory regimes.
The protection of investor assets is at the heart of network management. It’s the litmus test for rating the performance of an agent network. To this end, we have identified 10 key features that have been adopted within the RBCIS network management model to safeguard our clients’ global portfolios. These important attributes include:
- Ongoing risk assessment
Our robust Continuous Risk Assessment (CRA) framework helps ensure that the necessary controls and sub-custodians are in place to protect clients’ assets.
- Formal annual reviews
We perform annual due diligence reviews, using the industry-approved CRA questionnaire. This rigorous review process serves to confirm that each sub-custodian is delivering the services required to support our clients.
- In-person inspections
Regular on-site visits provide us with the opportunity to validate responses to the CRA questionnaire and “kick the tires” of our sub-custodians. We also take the opportunity to schedule meetings with the local depository, stock exchange and regulators. These in-person visits are essential to ensuring the safety of our clients’ assets.
- Quarterly service meetings
The RBCIS Network Management team holds quarterly governance meetings that bring together operational contacts from our strategic sub-custodians and the RBCIS operations teams to enhance operational efficiencies for clients.
- Timely market updates
We curate market updates received from our sub-custodians and communicate timely, relevant information to clients, facilitating informed decision making.
- Client advocacy
Members of the RBCIS Network Management team actively participate on industry committees and as part of conference panel discussions, advocating on behalf of our clients to effect beneficial market change.
- Easing market entry
A dedicated Client Market Account Opening (CMAO) team eases market entry for our clients. The CMAO follows a strict workflow for external account openings, ensuring controls are in place based on a thorough understanding of the unique local practices and documentation requirements in each jurisdiction where RBCIS clients invest.
- Key escalation point
Leveraging our extensive sub-custodian contacts and operations experience, the RBCIS team is well positioned to act as the escalation point in resolving issues between clients and our operations team, reducing operational friction and related risks in local markets.
- Efficient FX funding
As part of RBCIS’ Hub network management model, we contract with our Hub agent to provide foreign exchange (FX) protection at the contractual location, avoiding exposure to the currency of the local market and obtaining the best possible FX rates. This is particularly important in markets with heightened volatility and limited liquidity.
- Alternative providers
RBCIS has a formal process in place to appoint alternative sub-custody providers should an immediate change in agent be required, demonstrating our ability to protect client assets during extreme market turmoil. Following launch of the Russian war with Ukraine, RBCIS’ local sub-custodian was acquired by a Russian oligarch, who was sanctioned by Canadian authorities. We mobilized a dedicated Task Force, successfully managing the migration to a new sub-custodian within two weeks of the acquisition announcement.
Sound network management enables clients to focus on investment returns
The RBCIS sub-custody network adheres to the highest industry standards as we work to safeguard our clients’ global assets. RBCIS’ sound network management model, including best-in-class agents, manages the operational complexities of global markets—particularly emerging markets. This enables investors to concentrate on generating returns from their investments.