Guest Contributer: David Kubersky, Managing Director, SimCorp North America
Against the backdrop of the global recession that engulfed the financial services industry over the last few years, the good news is the potential for 2011 looks bright. For the investment management industry in particular, this year holds a number of opportunities. While the recession’s impact still resonates within the business, reactionary efforts to reexamine and restructure business practices have come to life with an increased focus on product innovation and increased automation for buy-side institutions. In order to promote growth and stability, firms now understand that they must assess their ability to mitigate risk, comply with regulatory reforms and avoid the practices that catapulted the recession.
While 2011 may be bright in comparison to previous years, the industry will still meet some on-going challenges.
Some of the key challenges for 2011:
* Fueling industry growth – The investment management industry is confronted with an evolving atmosphere. Firms must assess their own agility to model new instruments for a quick go-to-market with new products. An additional consideration is growth and value creation strategies that must provision for heightened regulatory reform and increased public scrutiny.
* Maximizing front-to-back office automation – A poll conducted by SimCorp in Q.4 last year found that some of the most important buy-side processes and workflows are still not automated. For example, 50% of poll respondents were using spreadsheets to manage collateral. Ultimately, the lack of automation and inability to work consistent data through the front-to-back office could lead to manual processing error and substantial financial losses.
Despite such challenges, opportunities present themselves.
Opportunities for 2011:
* Product innovation – Innovation is the key to fueling industry growth. Sustained growth in the fund industry is likely to come not only from the sale and retention of holdings in existing products, but also through the introduction of new innovative products and services.
* Increased automation in buy-side institutions – Many investment management companies are evaluating straight-through processing technology as the best way to drive down ongoing costs without increasing operational risk.
It’s pretty evident that the buy-side is confronting these challenges with shifts to brighter opportunities. Now the question resides in how they handle them…