The LIBOR transition:

Intelligent automation
to the rescue
Automation Hero
The LIBOR transition: Intelligent automation to the rescue

The London Interbank Offered Rate, also known as LIBOR, has been
the de facto benchmark for setting interest rates for more than 40
years. This has primarily impacted adjustable-rate loans, but because
of the growing complexity of financial markets, LIBOR has also had
an effect on lending between banks, as well as consumer services,
such as mortgages and insurance premiums. This all-encompassing
application has made LIBOR one of the most important benchmarks
across the globe. And now, it’s all going away.

In 2012, investigators uncovered a scheme where major financial

institutions colluded to exploit LIBOR rates for their own benefit,
sowing even greater distrust in the industry during the ongoing
fallout of the 2008 recession. In fact, evidence indicated the market
manipulation went as far back as 2003. After these revelations came
to light, regulators and industry leaders began working on a new
system to set rates that would overcome LIBOR’s shortcomings and
resist future interference.

Since the LIBOR scandal was uncovered, regulators have pushed

financial institutions to establish and adopt alternative reference
rates (ARRs) that would be secure from insider manipulation. After
years of refinement and negotiation, the central banks have agreed
to adopt “near-risk-free” reference rates for different currencies in
the financial marketplace.

Secure Overnight Financing Rate (SOFR) is the new standard for

the U.S. dollar, and Sterling Overnight Index Average (SONIA)
governs the Great British Pound. Both are based on significant
transaction volumes, providing greater transparency in how rates
are determined and ensuring rates are more reliable in transactions
made moving forward.

Automation Hero
The LIBOR transition: Intelligent automation to the rescue

The challenges
of the transition
As the primary international interest rate, LIBOR is embedded in more
than $200 trillion worth of financial transactions in the U.S. Globally,
that number increases to more than $300 trillion in contracts that will
extend past the deadline for LIBOR to be phased out.

Companies can face a number Even though many contracts were written with fallback language in the event that
of dire consequences if they LIBOR ceases to exist, this can be inadequate in the current regulatory environment.
fail to update their contracts
Updating these contracts is easier said than done. Organizations of every size have
by the new deadline, including
faced an uphill battle toward accurately and effectively making these changes while still
regulatory fines, bad press,
meeting the deadline due to the sheer volume of documents to process. Companies’
and even completely voided
existing teams could spend every waking moment during the next few years on the
contracts.
LIBOR transition and still not complete it in time. Hiring additional team members may
speed up the process, but this would also increase internal operating costs.

Obsolete systems
While most operations aren’t manually transitioning away from LIBOR,
the automated solutions they are using most likely yield less-than-
stellar results. Here are a few of the common situations companies
are combating with their current technology:

Template-driven Intelligent Document Processing

Setting up templates requires Early on in the LIBOR transition, legacy intelligent document processing (IDP) solutions
skilled labor, draining valuable helped many organizations achieve success in the transition because it streamlined
resources and limiting the processing for the most common types of contracts. However, each variation of
ability to scale. contract format and language requires a new template, because older, legacy IDP
systems can’t automatically understand and label data that it hasn’t been specifically
taught to identify.

Legacy IDP systems run into even more problems with paper contracts. Unfortunately,
the shifting needs of many organizations have prevented all contracts from being
uniformly digitized and saved. Template-based IDPs can struggle to recognize text
scanned from printed documents, especially if they’re copies of originals. The additional
handling these documents require can drastically increase processing times.

Automation Hero
The LIBOR transition: Intelligent automation to the rescue

Robotic Process Automation

Incredibly expensive and time consuming to set up, robotic process automation (RPA) is
a long-term investment that can reap major benefits — but often falls short in the LIBOR
transition due to the sheer complexity of the project. Breakdowns in the automated
workflow are common due to slight changes in document formats, which in turn require
additional set up and patching.

Many companies compare This is impressive to watch in theory, but in business practice, the fragile processes
their RPA to a Rube Goldberg are a major hindrance to productivity and efficiency. Workflows can break if there’s
machine, running through a slight deviation, or even for no apparent reason. Typically, only a limited number of
complex scripts to accomplish employees will learn the nuances of the process and how to fix it or prevent issues
what should be basic tasks. from happening, distracting them from more important work. Therefore, it’s true that
the LIBOR transition cannot be completed by scripting alone.

Artificial Intelligence
Some IDP systems use “artificial intelligence” to describe their capabilities, but are
using the legacy templated approach and point solutions. As a result, they have a high
set up cost and often lack flexibility, making it difficult for users to modify approaches
to workflow. Productivity is also hampered by their inability to integrate with other
systems, limiting workflow automation. A new generation of IDP solutions, like
Automation Hero, do use true AI to process documents.

Intelligent Automation
is the solution
Businesses are recognizing the limitations of legacy IDP and RPA,
and are seeking solutions that can help switch their LIBOR transition
project from undoable to done. Many are turning to deep learning
AI, offered through platforms like Automation Hero, which does
more than mindlessly execute tasks. The technology is capable of
understanding every document in the workflow and responding
appropriately, so companies can spend more time on core business
functions rather than building and maintaining their RPA.

AI-driven IDP
Traditionally, IDP and workflow automation are housed in separate systems that must
be linked to realize their full benefit.

Automation Hero
The LIBOR transition: Intelligent automation to the rescue

Automation Hero is capable These capabilities can help throughout every step of the transition project, including
of serving as a full end-to-end finding the many iterations of LIBOR clauses throughout contracts and even learning
solution that covers the entire which language to replace it with — no need to manually build templates.
document processing lifecycle:
recognition, understanding,
Greater Accuracy with Less Input
analysis, and action.
At their core, RPA and legacy, template-driven IDPs are simply replacing physical human
actions with robotic repetition — without the ability for the machine to understand
what it’s doing. This means team members have to manually pre-screen every contract
containing LIBOR language, categorize it based on the wording it uses and where in
the document it’s located, and then program the RPA to process those different types
of documents. Just setting up the automation is incredibly challenging and labor
intensive, and if a document is categorized incorrectly by accident or if there’s some
variation unaccounted for, the entire workflow will break down and force an audit in
order for the error to be identified.

True AI can bypass all of these challenges — simply show the system what to look for
in the different contracts and how to respond in different scenarios, and the system
will learn by example.

Self-Serve Automation Design

Traditional RPA solutions often required full IT support during setup, not to mention
months of research, design, and testing. Even worse, if something changes in document
format or in the process itself, IT will be required to go back to square one of setting up
the workflow.

Platforms like Automation Hero connect with existing systems natively, and put
workflow building directly into the hands of the users. Setup is intuitive, safe, and fully
guided, so users with no coding experience can build the workflows they need, and IT
is free to focus on their other work. The intuitive interface makes it possible to design
and test robust workflows in just minutes. Any changes to the process can be made on
the fly without breaking the entire system.

Flexible & Scalable Implementation

Automation Hero integrates No doubt, companies have already invested considerable time and resources into their
with an impressive number of LIBOR transition project, and are weary of starting from scratch. But compared to most
outside platforms, including legacy RPA systems that have a steep upfront price tag along with burdensome setup,
customers’ existing systems, advanced AI solutions can be more affordable and easier to implement. The platform’s
and can fill in any gaps in flexibility can help them pick up where they left off, cut through the backlog, and get
performance — such as to the finish line with additional capabilities.
inability to recognize old
The technology can scale to manage the entire transition project, and even help
legacy documents, or inability
automate customer notifications and new contract distribution once documents are
to identify language variations.
updated with LIBOR replacement language. Automation Hero follows a consumption-
based pricing model, so users pay as they go, only for the workflows they actually run.

Automation Hero
The LIBOR transition: Intelligent automation to the rescue

Automate Smarter
With end-to-end, intelligent document processing, Automation Hero
can streamline every step of the LIBOR transition workflow. With an
easy-to-use interface, flexible features, and scalable capabilities, the
platform can adapt to other time-consuming business processes in
accounting, customer service, invoicing, and more.

The transition from LIBOR to SOFR and other new interest rate
benchmarks sets the stage for a new era of the financial industry.
Use this opportunity to break out of the old RPA model with
Automation Hero, and enter a new level of productivity.

Automation Hero