Outsourcing: A Solution for Complex Operating Environments

August 6, 2014

global growth 2

Global asset managers are facing an exciting opportunity as the industry is poised for significant growth.  A recent PwC paper titled “Asset Management 2020: A Brave New World” predicts assets under management will exceed $100 trillion USD by 2020, but warns that “technology will have become mission-critical to drive customer engagement, data mining for information on clients and potential clients, operational efficiency, and regulatory and tax reporting,” and the current low-tech infrastructure of the industry is insufficient.

In response to the global financial crisis of 2007-2008, international regulatory environments are changing and creating increasingly complex operating challenges.  Globalization will be a valuable strategy to take advantage of the coming growth in emerging markets and recovering established economies.  However, in Ernst & Young’s recent global survey on asset management investment operations, “Managing Complexity and Change in a New Landscape,” they note that for 82% of surveyed asset managers cited compliance with regulatory requirements as a top operational challenge over the next twelve months.  Asset managers must adapt to the variation between the regulations in each country in which they operate, but this can be costly.  It requires firms to dedicate resources to meet changing global requirements while taking on greater risk and compliance responsibilities, and global location strategy that provides support for clients in all time zones requires 24-hour business process and technology development.  E&Y notes that for 44% of global asset management firms, “the cost of compliance represents between 11-25% of their operations budget.”

Operating models must adapt in order to accommodate the changing demands of the industry. Operational activities include accounting for reconcilements, corporate actions, and client activity throughout the day to ensure that the business is operating on timely and accurate data while fulfilling its duties to minimize risk.  Many firms do not have the capabilities to automate these complex data flows within the changing demands of the growing industry, adding unnecessary risk and inefficiencies as the staff must be manually involved in the process.

Application hosting provides some additional security and management, but it is not sufficient to best position asset management operations for the coming growth.  E&Y posits that “with the exception of a minority of firms, the question is no longer whether to outsource; instead, firms are considering which functions can be outsourced.”  An outsourcing service can examine each firm’s unique operational processes to gain an understanding of your business requirements.  The provider can then determine which processes can be automated and monitored by experts to ensure that your operations run seamlessly.  An outsourcing provider is in the business of remaining ahead of the changing regulatory environment, so you can be sure that your operations will always be in compliance with industry requirements.  Automation reduces operational risk, improves efficiency, and allows clients to focus on their core mission, and an outsourcer who specializes in global operational efficiency will best position your firm to compete effectively for the coming opportunities.

To learn more about the benefits of outsourcing, download SS&C’s latest position paper titled “SS&C Outsourcing Services: Beyond Hosting.”

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