2015年-SWIFT环球同业银行金融电讯_Operational_challenges_facing_investment_managers_in_2015_26页_1mb

Operational Challenges Facing Investment Managers in 2015

Core Content

This document outlines the operational challenges faced by investment managers in 2015, based on an independent survey of the industry. It highlights the impact of regulation, the burden of KYC, AML, and sanctions screening, the risks associated with outsourcing, inefficiencies in corporate actions processing, the growing importance of collateral management, and the need for greater standardisation in post-trade operations.

Main Challenges

1. Heavy Impact of Regulation

• Regulation as a Major Burden: Regulatory compliance is identified as the most significant challenge, consuming considerable time and resources.
• Diverse Reporting Templates: Investment managers must comply with multiple regulations (e.g., Dodd Frank Act, MiFID II), which have led to time-consuming duplication of effort.
• Resource Diversion: The complexity and urgency of regulatory obligations have diverted resources from innovation and client-facing developments.
• Data Quality and Consistency: There is a strong emphasis on ensuring high-quality, consistent data for regulatory reporting, with many managers noting that data is often batch-processed or outdated.
• Fines and Penalties: The cost of regulatory mistakes has increased, with significant fines being levied, prompting a heightened focus on compliance.

2. Burden of KYC, AML, and Sanctions Screening

• Due Diligence Requirements: Investment managers must perform KYC and AML checks on clients and counterparties to prevent money laundering and ensure tax compliance (e.g., FATCA).
• Fragmented Data Sources: The data sources for KYC, AML, and sanctions screening are varied and often inefficient, leading to manual processing and increased workload.
• Client Frustration: Repetitive due diligence processes for the same client across different funds can create frustration.
• Interest in Golden Sources: A majority of managers support the idea of a "golden source" of reliable KYC and AML data, as well as industry-wide utility solutions.
• Digital Passports: Some suggest the use of digital "passports" and "identity registrars" to streamline the process and reduce redundancy.

3. Risks from Outsourcing

• Increased Dependency: Outsourcing has become a common practice, increasing reliance on third-party service providers for custody, fund accounting, and transfer agency.
• Risk Mitigation Needs: Investment managers are concerned about the risks of relying on single providers and are developing exit and business continuity plans.
• In-House Systems Limitations: Even with in-house systems, investment managers are not fully insulated from third-party risks, as they lack access to the data and communications exchanged between the provider and counterparties.
• Interest in Back-Up Services: There is growing interest in establishing industry-wide back-up utility services to handle failed outsourcing providers, with data in standardised formats being a key enabler.

4. Inefficiency in Corporate Actions Processing

• Low Automation Levels: Corporate actions are considered the least efficient aspect of post-trade processing, despite efforts to improve automation.
• Lack of Standardisation: Inconsistent use of message standards and variations in how options are ranked and presented by custodians and data vendors create inefficiencies.
• Need for Consistent Terminology: Investment managers call for consistent terms and message formats at the point of issue to reduce processing errors.
• Cost of Inefficiency: Inefficiencies in corporate actions lead to higher operational costs and potential losses due to missed or incorrect instructions.

5. Growing Importance of Collateral Management

• Post-Crisis Regulation: Collateral management has become increasingly important due to post-crisis regulations, prompting investment managers to address the costs and risks associated with managing collateral.
• Third-Party Services: There is a growing use of third-party collateral management and optimisation services.
• Collateral Transformation: The value of collateral transformation services is also noted, as they help in managing and optimising collateral more effectively.

6. Opportunities for Industry Collaboration

• Standardisation as a Solution: There is a strong call for greater standardisation across asset classes and market infrastructures to improve efficiency and reduce risk.
• SWIFT as a Potential Standard: SWIFT is seen as a potential standard for mutual fund distribution, with support for its use in message formats.
• LEIs for Risk Management: Legal Entity Identifiers (LEIs) are considered useful for counterparty risk management.

Key Information

• Survey Scope: The survey included heads of investment operations and fund distribution from six of the ten largest investment management firms and over 30 others.
• SWIFT's Role: SWIFT provides secure messaging services and industry-wide data and utility services to support post-trade processing and automation.
• Data Integration Challenges: The lack of integration between investment managers' systems and those of third-party providers leads to inefficiencies and increased risk.
• Focus on Automation: There is a clear demand for automation in regulatory reporting, KYC, AML, and corporate actions processing.
• Client Expectations: Clients are demanding more transparency and flexibility in reporting and data access, including mobile-friendly solutions.

Conclusion

The document concludes that while the investment management industry is facing significant operational challenges, there is a strong recognition of the need for industry collaboration, standardisation, and the use of shared utility services to address these issues. Investment managers are looking for more efficient, automated, and reliable solutions to reduce costs, improve data quality, and ensure regulatory compliance.