It is widely acknowledged that business internationalization has driven the need for financial translation with the requirement (sometimes regulatory driven) for all parties in a transaction to understand the terms of business in their own language. In this blog, let me show you the best practices for translating financial documents. 

What is Financial Translation?

Financial translation can broadly be described as the translation of information (legal and financial) required to facilitate a commercial transaction or investment. This can include one-off transactional documentation for the offer of equity shares or bonds, the proposed merger between multinational companies, or the launch of a new investment fund. Alternatively, repeat content in the form of updates for investors, quarterly and annual financial statements, tax reports, insurance information, and equity research reports can be issued several times over a 12-month period. 

At the start of any financial translation, it is important to recognize the highly confidential nature of certain information and the production timelines, on occasion very tight, for delivery. There is a correlation between the sensitivity of the information and the required turnaround of the translation. For publicly traded entities, companies and their advisors want to avoid a stock valuation, or an offer price, being widely circulated before publication. Consequently, the final source content for translation can come late in the process and require a fast turnaround.

Here are the best practices for translating financial documents

1. Assemble a team of translators and editors with contingency capacity. If there are last minute changes or quick turnaround requirements, timelines can be shortened; having a team of translators will enable the ability to meet deadlines without affecting quality.
2. Engage the right subject matter expertise alongside language competency. Whether experienced with investor communications, corporate finance, or commercial law, appoint linguists who understand the context and are aware of local regulations.
3. Appoint a lead for each target language to work with the project managers and coordinate the linguistic teams.
4. Obtain or create glossaries or termbases for the specific type of financial content. Work with client reviewers to approve preferred terminology in advance. It is important to create consistency within the content and if a Translation Memory exists, use it and keep it updated. This will help ensure consistency across the team and translations as well as offering cost-savings during updates.
5. Arrange a meeting between the lead linguists and the client in-country reviewers to discuss the glossary or termbase and agree on the tone of the translation.
6. Understand formatting differences. For example, the presentation of numbers between countries. In English-speaking countries, decimals are usually separated by a full stop and thousands by a comma. In other countries the opposite is the case.
7. Proofread the translation. Accuracy is essential with financial content. An incorrect number within a balance sheet, a misplaced decimal point, or a mistranslation of critical content can have significant repercussions. Ideally your translators and proofreaders should work as a team communicating with each other as needed.
8. Ensure a secure portal is available for receiving and delivering content in a confidential environment.

In summary, successful financial translations require pre-planning:

• Assemble an experienced language team with the right financial experience, making sure to build a team that can support changing or accelerated timelines.
• Create a glossary and use an existing, client-approved, translation memory or build a new one.
• Design a secure workflow to facilitate the successful transfer of materials during the production process.

Due to the dynamic nature of financial translations, ensure that your project management team is accessible outside normal business hours, which is easier when you have a geographical footprint in multiple time zones. Be clear on the escalation process with your client, always carry your portable communication device and be available!

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Growth in Financial Translation

In the early to mid-1990s, the privatization of large government-owned utilities across continental Europe, led to a surge in capital markets advisory work for both domestic and international investment banks, and leading financial institutions. Although banks were not previously averse to cross-border business, with many already establishing a presence in countries outside their local domain, capital raising from international markets appeared to accelerate during this period. Large European utilities were taken public via listings on multiple stock exchanges and, as a consequence, shares in these companies were also offered through international markets. This was a boom time for the banking and legal industries but also for those companies providing support services to the capital markets.

Language services were one of those industries that saw a significant increase in demand for financial translation with initial public offerings and, in some cases, secondary and tertiary offerings of shares in these state-owned entities. For a number of these projects’ prospectuses (documents) were being created for over 20-different jurisdictions, with investor and regulatory information translated into 19+ languages. The timelines were aggressive and the importance of managing multiple languages and delivering accurate translations on time was a challenge. The language industry continued to accept and deal with this challenge well into the 2000s with China’s transformation from a centralized economy to a market economy. Once again, localization companies were called upon when China’s state-owned enterprises were privatized, translating prospectuses for the international markets.

How is Retail Banking Changing and What Does it Have to Do with Language Services Providers (LSPs)?

Although investment banking has long operated across borders, the retail banking industry has been more domestic-centric with international banking partnerships being the preferred option to facilitate cross-border transactions. The impact of ongoing regulation and the significant changes in technology and customer behavior is now challenging the traditional banking model. Language services providers (LSPs) are also having to adapt to the same challenges to ensure their businesses not only survive, but prosper in a changing environment.

With industry transformation comes opportunity, particularly for LSPs who have long had to engage with new and transformative technology, adapt to changing regulations, and proactively engage with customers to deliver impactful multilingual content. With the emergence of challenger banks and digital payment gateways, the traditional retail banking experience is changing. Interestingly, emerging markets are leading the charge in ‘banking the unbanked,’ and have benefited from not being hamstrung by legacy banking systems and operating models prevalent in established markets. With governments granting regulatory licenses to banks with operating platforms built for smartphones or tablets, the physical presence of bank branches in mature economies is becoming less of a customer necessity – in some cases controversially so!

The emerging markets have driven real transformation in money services for consumers. East Africa is a great example of mobile-based payment and online financing services; enabling deposits and payments using a network of agents and customers’ cell phones. Approximately two-thirds of the adult population in Kenya use this method. These telecom-owned and operated entities partner with domestic banks to broaden their services to offer loans, overdrafts, insurance, and wealth management with customers being able to build credit scores and access both individual and group savings products.

Opportunities for Technology Astute Global LSPs are Here and Now!

If we go back to that period of increased capital markets activity in the mid-1990s, translation was about ensuring that investor and regulatory information was available to potential investors in document form. In addition, the marketing of new banking products and services was delivered in leaflet form at bank branches, likely in conjunction with an in-person meeting. With the evolution of cloud-based banking platforms, customers are demanding that multilingual content be available digitally. With many digital payment gateways facilitating payments across borders and in multiple currencies, then product instructions, legal, and marketing material have to be available in multiple languages. This availability of financial services to millions of people who have mobile phones but do not have bank accounts, or access to financial services, is creating a whole new potential market for not only the banking industry but also for LSP services.

Both challenger banks and digital payment companies will require website localization to inform users and potential new customers of their services in multiple languages as they reach out to new markets. Whether it be product information, marketing, legal, finance, or customer communications; the whole point is to make this information available and readable via mobile phones and tablets. Experience in software localization for mobile apps will become a necessity and having global digital marketing experience to collaborate with customers and their digital agencies will be essential. As governments influence through regulation rather than ownership, banking regulations will play a part in the expansion of these services across new markets with global LSPs being asked to support this expansion with financial translation services.

PWC in their ‘Retail Banking 2020 Report’ stated that in the banking industry ‘Technology is becoming a potent enabler of both customer experience and effective operations.’ Sound familiar?

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Retail Investors – KIIDS and KIDS

There have been significant financial regulations instituted by the European Commission over the past decade to improve transparency and communication for retail investors. This is delivered through a Key Investor Information Document (“KIID”). Originally released in July 2011 under the ‘Undertakings for Collective Investment in Transferable Securities, (“UCITS”)’ as the UCITS IV directive, it was a significant reform to the UCITS regulatory regime.

A KIID must be created for every share class and sub-fund and is limited to 2 pages of plain English. There is a legal requirement for translation into the main language of any country within the European Economic Area (“EEA”) into which the fund or sub-fund is offered to retail investors i.e., individual investors as opposed to financial institutions or investment companies. For every creation of a new KIID, or an annual update or amendment, language services companies must manage the content to provide a consistent and accurate translation.

On January 1. 2018, the ‘Packaged Retail Investment and Insurance Products’ (“PRIIPS”) regulation came into effect. This comes with a 3-page Key Information Document (“KID”) with the purpose of further enhancing investor protection for retail clients. UCITS products have previously been exempt from the requirements of the PRIIPS regulation, producing their own KIIDs in line with UCITS regulations. However, this exemption is soon to end. Effective July 1, 2022, all investment and management companies offering products into the EEA are required to produce PRIIPS KIDS for all their UCITS products. It is rumoured that this introduction may be delayed until December 31, 2022.

Financial Regulation and Pressure on LSPs

Either way, the pressure on Language Service Providers (“LSPs”) will only increase with the additional information disclosure required to comply with PRIIPS regulation. This means, not only more content for translation but also new templates, the management of language expansion, and the effective use of translation memories to maintain consistency of content. It is however much more than this! With much of the content for each KID remaining static year-to-year, it is the ability to manage the flow of new content, between all participants in the translation process that delivers a well-executed project.

Corporate Mergers and Acquisitions and Management of Content

Moving away from retail investor documentation to the corporate mergers and acquisitions arena, also involves significant financial and corporate due diligence translation. Offer documentation must comply with the regulatory requirements of the target company’s country of incorporation or where they may have significant international holdings and may include the requirement for translation. In addition, translating material into the language of the acquiror, during the due diligence process, is essential to getting a real understanding of the nature and risks associated with the business.

Having the ability to connect a translation management system with the client’s Content Management System (CMS) creates a seamless flow of content between the client and LSP. In this way, the transfer of content is facilitated in a secure environment. However, the ability to create automated workflows incorporating translation memories (TM), machine translation (MT), linguists, editors, and in-country reviewers into the process is where having control over the development of your technology and tools is an advantage. Supported by in-house developers, file engineers, and desktop publishing experts, LSPs need to manage all aspects of content receipt and delivery, not just the translation.

In Conclusion

Although the regulatory requirements around financial documentation continue to change; there is still a significant requirement for translation. The ability of LSPs to deliver a project in a compressed timeframe is even more important. Financial transactions can involve multiple advisors and a variety of legal, regulatory, and financial pressures that all contribute to an intense process. An incorrect translation can do more than cause embarrassment to the client, it can also come with financial penalties and reputational damage. LSPs that develop, own, and manage their technology stack tend to have protocols in place to manage a complex and challenging process.

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