What to Look for When Selecting an Investment Book of Records (IBOR) Solution

January 29, 2014

Thumbnail IBOR 2In searching for an IBOR, financial institutions need a solution built to address the need to record, process and distribute investment data in the different views required by stakeholders. The IBOR doesn’t have to be the single system used throughout the organization; rather, it needs the capabilities to interact with systems that are already in place so it can be efficiently implemented without disrupting existing systems. This provides each financial institution with the freedom to select and utilize systems that are right for their business strategies.

Since financial institutions vary in their business needs and operational infrastructure, an IBOR solution will not be the same for every organization.  There are three basic forms an IBOR can take:

1. A single book of business

For an asset manager with a simple and streamlined operational model, an IBOR solution can be synonymous with an investment accounting solution. The solution needs to be robust and flexible enough to handle all middle-to-back-office operational processes such as pricing, corporate actions, valuations, performance measurement and reporting, while also providing the front office with the information they need to make accurate and timely investment decisions.

2. Multiple business lines

For a more complex organization with multiple lines of business, a single IBOR may not be feasible. A financial institution that has, for example, a global operation and offers institutional asset management, insurance and wealth management services may have multiple books of records to satisfy distinct business needs. The challenge is that investment information is needed from each of these systems for analysis and reporting.

Some financial institutions in this situation consider using data warehouses to meet their IBOR requirements, but this approach can be problematic. Attempting to aggregate the data from these different platforms into a single repository can be a daunting task. Normalizing data from multiple formats takes time, and requiring an additional system adds overhead and operational complexity. Maintaining data warehouses is costly, time consuming and not necessary to holistically access information.

A more feasible solution is to leverage data aggregation capabilities that combine investment information from multiple books of records and deliver it in a customizable format that addresses the variety of views needed by end users. This provides access to the underlying data from multiple systems without the need to reprocess all the data into a single data repository.

3. Firms that outsource operations

For organizations that are outsourcing middle-to-back-office processes to custodians or other service providers, an IBOR serves an important role as a verification and contingency solution. Most firms that outsource operations to a third party are not able to independently verify valuations, calculate fees and ensure that client data is accurate. This poses a large operational risk, because firms who outsource still have fiduciary responsibilities to clients and are accountable to regulators regarding operational integrity. By having an IBOR serve as a shadow book of records, financial institutions can independently reconcile the accuracy of positions, valuations, pricing and corporate action events, using the data vendors they choose, thereby ensuring the integrity of their data.  In addition, an IBOR provides access to client data should something happen to the outsourcing provider, such as a bank failure, helping address the concerns from regulatory entities like the Financial Conduct Authority and others regarding contingency planning and operational risk mitigation. In this situation, the IBOR acts as part of a disaster recovery plan should there be a severe disruption of service from the outsourcing provider, ensuring that financial institutions are able to protect and continually service clients.

IBOR solutions must be customized to meet the unique needs of each firm’s business, but ideally should be used as part of a broad operational ecosystem that exceeds the expectations of the front office, regulators and clients.  Implementing a reliable and proven product such as SS&C PORTIA as an IBOR solution allows financial institutions to tailor their solution to meet their business needs to ensure the integrity and improve the quality of data through their organizations.

To learn more about what an IBOR is and what to look for in an IBOR solution click here to download a copy of our whitepaper “SS&C PORTIA: Why You Should Consider an IBOR”.

This blog post is the second in a series from SS&C PORTIA on the importance of implementing an IBOR solution. View our recent post titled “What is an IBOR”.

–          Matt Bellias, Head of Strategy and Marketing

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