In his latest blog post, System Logic principal Chris Clearfield explored the implications of "a recent, and costly, proxy voting mistake" by an investment firm and offered recommendations that could help firms avoid making a "spectrum of possible errors."
Mr. Clearfield stated that the challenge for any firm using complex technology is to identify where errors might lurk. "More likely than not," he suggested, "the next costly and unexpected error (at [nearly any] firm) won't have anything to do with proxy voting. Instead, it will be a mishandled options conversion, dividend election, or something outside of the corporate actions space entirely."
Mr. Clearfield recommended that firms protect themselves from technology-based errors by doing the following:
- reimagining complexity itself as a risk factor, and scrutinizing "near misses" – instances in which a "vote or other corporate action was almost recorded incorrectly, but was caught" – in order to correct deep and systematic errors before they become costly;
- recognizing that organizational (and technical) boundaries often obscure circumstances and diffuse responsibilities, which can create risk; and
- designing systems defensively under the assumption that individuals are fallible: "humans struggle to accomplish tasks that require exceptional precision with little differentiation."
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