Asset Managers face numerous business challenges in today’s environment of increased competitiveness, desire for greater transparency and need for regulatory vigilance. One of the areas of the business most impacted by all of this is the Middle Office – indeed, it seems that increasingly firms are having to face up to what might be termed the challenge of the “Data Crunch” whereby numerous stakeholders, both internal and external, are demanding access to ever more granular information, presented in highly personalised formats.
The Middle Office has to quickly face up to this challenge. Clients are demanding ever more transparency – there is a growing need for consolidated data not just for internal purposes as increasingly managers must be able to demonstrate ‘investor due diligence’. Investor due diligence has evolved since the recent crisis and asset managers are required to demonstrate they are fully aware of all risks relevant not just to the investment process but also the business itself. A focused consolidation of portfolio and business critical data, such as finance information and risk allow the asset manager to present a co-ordinated, controlled and coherent story to satisfy the investor.
Post Global Financial Crisis, there has obviously been a swathe of regulatory interventions across the world that will have an impact on business. The added problem for the Middle Office is that not only are these new regulations often complex but in many cases, relatively ambiguous, so that meeting the regulators’ demands will not be straightforward and the full implications of the regulations will only emerge over time.
Within this context the role of the Middle Office has become even more important that before:
- The typical asset manager often does not take full advantage of the data and capabilities they have available. A multitude of data feeds, systems and services has created a wealth of information yet key stakeholders across the organisation often still cannot put their hands on the information they require and that they have invested so heavily in.
- The regulatory demands are placing increased pressure on the Middle Office Analytics, Compliance and Operations teams. In many cases, this increased workload has not been met with increased investment and resources, rather these tasks have to be absorbed by the existing resources. This only increases the need for collaboration across the risk, performance, ops and compliance teams – from a resource, system and data perspective.
In order to future proof for the unknown challenges and regulations to come, asset managers must consider the data and analytics infrastructure carefully. One thing is certain, things will get more difficult before they get easier and tackling these challenges on a tactical basis will result in higher cost and lower efficiency. There is an urgent need to construct a strategic approach to these issues to formulate an answer which is both scalable and sustainable.