It may seem like Covid-19 has been with us for years, but it has only been months and the buyside is already priming for the next global market event such as the need to stress-test the resilience of a firm’s operating model beyond traditional scenarios, according to a new report from Simcorp, a provider of investment management solutions and consultancy Clear Path Analysis. This means not only looking at remote working capabilities but also digitalisation and cloud infrastructure as well as asset diversification
The report – The new operating environment: People, Processes, and Technology – is based on perspectives from senior European executives across asset management, pensions, insurance and banking.
“This pandemic has shown everyone the need for a strong work from home technology environment, which probably had varied across the industry prior to it happening,” said Dean Chisholm, Regional Head of Operations, Asia Pacific at Invesco Asset Management. “This does have the implication of whether we need physical BCP (busines continuity plans) centres anymore, which has always been the traditional response. But now people are wondering just how useful they really are.”
He added that the pandemic reinforced the focus on clients and their requirements. “We realised that some things we had been doing weren’t really that important, so we asked why we were continuing to do them,” he said. “This type of questioning will continue quite heavily in the future, because we need to prioritise the client and what they want.”
The report also underscored the importance for buyside firms to review risk management models, to include new and emerging investment factors, such as rate of infections. In addition, they should should ensure that they have access to high quality, timely and granular, multi-asset data to navigate markets.
As Molly Shannon, Member of the Executive Committee and Product Innovation Committee at Wellington Management (North America) pointed out, “Data scientists tell us that 95% of the world’s data has been created in the past five years. And so, we have essentially begun to restructure our workforce to harness all that data and help inform our investment decisions. Increased trade volumes and lack of liquidity in a market crisis mean that, without technology and the right tools, there is a heightened risk that errors will be made, and client objectives will not be met.”.
The report also noted buyside firms should be flexible in the way they deliver transparent and frequent client and regulatory reporting and to be holistic in the way they treat environmental, social and governance funds which have grown in popularity since the pandemic. Instead of having standalone strategies, ESG products and portfolios should be combined into a core data set.
In general, “the themes that emerged from the report point to the need for a simplified operating model, designed with the agility required to respond to any crisis,” said Marc Schröter, Head of Global Product Management at SimCorp.
He added, “Best of breed solutions that proliferate data silos, simply cannot support the speed and agility required for rapid asset diversification, liquidity management, timely exposure calculations, and other key investment functions across multiple asset classes. Additionally, digitalisation has to be high on the resilience agenda, not just for front-to-back processing, but also very importantly for proactive client communications.”