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Regulatory reporting still a top IT priority, says Confluence survey

Chris Hamblin, Editor, London, 27 September 2016

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American asset managers are continuing to concentrate their efforts on the management of regulatory reporting, according to the 2016 Asset Management Industry Trends Survey released this week by Confluence, the regulatory reporting software firm.

According to the survey, 47% of asset management respondents said that the simultaneous management of progressively burdensome regulatory reporting requirements was their second most important goal for the next two years. Most of them (61%) said that the automation of back-office processes was the most important and the job of centralising fund data (44%) was the third most important.

Nearly all respondents reported being concerned about manual processes and spreadsheets affecting their ability to control errors (91%) and costs (81%). However, they also reported that manual processes persist throughout their back offices. The report says: "Across six core back-office regulatory and investor reporting functions, the majority of respondents reported that at least a portion of the process was being managed manually."

This year's survey also revealed that the industry is increasingly focused on centralizing fund data. Nearly three-quarters of respondents (71%) said that it is important to consolidate fund data into a common database, up from 50 percent in 2008, when we first asked the question. Over two-thirds (69%) of respondents this year said their firm had begun to centralize fund data into one database, up from 50 percent in 2008. Respondents said data consolidation is extremely important in helping to meet increased regulatory reporting demands (31%), minimize reporting errors (42%) and improve data accuracy and consistency (43%).

Nearly three-quarters (74%) of respondents this year said that they still depend on many disparate back-office systems. Nearly half (48%) of them said that a consolidation of third-party software would benefit them, while 57% said that consolidation would help to streamline their regulatory and investor reporting processes.

Confluence adds: "Relying on multiple single-point solutions is especially problematic when it comes to regulatory reporting. It is inefficient, introduces the risk of error and makes process automation more challenging. As regulatory reporting pressures increase, data consolidation and process automation will become more important. It is imperative that the industry collectively begins to take more significant steps in realizing their goal of automation now."

A total of 192 online interviews were conducted with asset managers and third-party service providers for the survey.

Compliance Matters asked Todd Moyer, the vice president in charge of business development at Confluence, about the trends he had seen in regulatory reporting over the years that show a difference between the approaches/needs of European and North American asset managers. He thought, in general, that asset managers the world over were facing the same challenges when it came to regulatory reporting. He added: "In fact, one in four asset managers told us that pressure to comply with multiple regulatory regimes was their firm’s top challenge. That’s more than double the percentage we saw in 2014, when 13% of respondents said the same. That said, this was a bigger concern in Europe, where 35% of respondents listed complying with multiple regulatory regimes as their top challenge, than it was in the US, where 21% listed it as their top challenge. That’s not terribly surprising given that the European market region is comprised of multiple nations, each with its own regulatory regime."

Some readers might be wondering why multiple single-point IT programmes are still dominating regulatory reporting, after years of causing problems. Moyer explained: "The active regulatory environment of the last several years has led to a flood of new data and technology solutions for asset managers as they have had to adopt and manage new requirements for the business. That influx of new, single-function technology has led to a fragmentation of the back office, which increases operational complexity and risk. It also diminishes the value that each solution provides to the user. Asset managers have begun to push back on single-solutions providers. They’ve become less willing to work with vendors that don't offer a more comprehensive solution. This is especially relevant in the regulatory reporting area.

"Managing the tremendous growth in regulatory reporting requirements has become an agent of change in the industry. In fact, nearly half of the survey respondents said it was their firms' top priority over the next two years. I think the industry sees this as a data challenge, not just as a regulatory or a compliance challenge. Frankly, it’s a challenge that goes beyond most in terms of scale."

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