If recent global events have taught us anything, it is that some things cannot be anticipated and that we have much less control on what’s happening in the world than we thought we do, but in the investment industry, that’s a given fact and a constant risk factor.
Asset owners and managers are focusing efforts on risk management, but it might just be the focus should be on data management as an underlying solution that helps keep investment and operation teams prepared and equipped to tackle any circumstances.
Eventually, circumstances will fall into 1 out of 3 types of scenarios, each will impose a different risk level and face data teams with different challenges. Let’s take a closer look at these types of scenarios to better understand how efficient data management and better data control will help you be prepared for them.
The scenarios that WILL happen
You know them well: the financial statements and end of year reporting, the portfolio disclosures, investment committee reports, the quarterly board reports, and the likes. All of these reporting scenarios happen regularly and always at the same time. Still, they always seem to be catching you off guard sending your investment and operational teams into a spiral of manual chase for data and validation in a stressful effort to provide accurate reporting to both internal and external stakeholders.
Increasing investor demands and regulatory scrutiny along with the constant thrive for enhanced transparency have made these reporting challenges all too familiar and way too common.
We see companies trying to tackle that issue by focusing efforts on front end functionalities to improve the client’s experience, but as we like to say, if you have a strong data foundation, tackling issues around this becomes more cosmetic than significant projects.
In other words, the real solution lays within operational processes and data management; getting faster access to consolidated, accurate and reliable data means getting it quicker and easier to your stakeholders.
The scenarios that MIGHT happen
Those can be relatively “simple” scenarios like moving to higher frequency reporting or more complex ones such as changing custodian, implementing new analytics platforms or other big data migration projects.
While these scenarios may not be repetitive, it’s safe to say that most organisations will encounter them at least once every couple of years, given the nature of the industry in which they operate and it’s constant effort to enhance transparency and improve data quality and data worth.
It’s not just the data teams that are bound to feel the strain under such scenarios; asset owners and managers alike are sure to take a major hit to their operational alpha if data shifts are done without a proper data management system in place.
While teams will fight the (manual) data battle of trying to adjust the new custodian reports and files to fit the look and feel of their existing reporting structure, the room for manual errors and inaccurate reporting will increase and so does the overall operational inefficiency.
The scenarios you CANNOT Predict
(BUT WILL MOST LIKELY HAPPEN)
Unexpected situations are risky for any business, but in the investment industry, the existing risk dramatically inflates when the curve ball of unanticipated scenarios gets thrown into the field.
Covid-19 was (and still is) a hell of a curve ball. Urgent regulatory changes that were put in place in order to help and protect investors led to a significant increase in early redemptions (of up to 20k) which threw super-funds teams into an operational roller-coaster of meeting the 5-day payment deadline. Couple this with simultaneously managing the volatile markets and having members moving their investments into cash, only to then reverse this back once markets had stabilised. That is, of course, on top of the obvious investment challenges this pandemic brought along.
But unexpected situations should, to a degree, be expected.
Covid-19 is not the first VUCA situation the market has experienced and will most probably not be the last, and while no one can actually predict when the next one will occur, asset owners and their data teams are expected to be prepared and well equipped to effectively handle and quickly respond to different situations of market Volatility / Uncertainty / Complexity / Ambiguity / or all of the above.
Experience tells us that most funds face scenarios that fall into at least 2 of the above categories on a yearly basis. As with any scenario analysis – preparation and planning are both key.
The silver lining solution
Both asset owners and managers are looking to enhance their data capabilities through proven tools and services as a means to improve their data control and ultimately their members’ and clients’ experiences. Some are choosing to outsource this function, but it became clearer in recent years that while they can outsource the data capabilities, they cannot outsource the data liability especially with the growing complexity of regulatory demands.
Therefore, more and more companies across the globe are now looking for an in-house enhancer in the form of cost-efficient and scaleable investment data management systems (or EDM – Enterprise Data Management).
Apart from allowing ongoing scalability by automating the operational model, these 3rd party systems also support better investment decisions, that were once crippled due to operational constrains, by delivering a constant feed of aggregated reliable and accurate data that can be easily accessed and acted upon at any point in time.
By gaining better data control and enhanced in-house data capabilities, investment and operation teams would be able to be more pro-active and lead a predictive vs. reactive strategy in both foreseen and unexpected situations.
Looking to enhance your in-house data capabilities?