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Stripping the Labels: Panelists Talk Operational Change

By Nicsa Admin posted 11-02-2020 01:40 PM

  

Investment management companies have had clearly-defined front, middle, and back offices for ages — but over the years, corporate culture has begun to change. Nicsa members explored how firms are breaking down the walls from an operational perspective during the second day of GMM 2020, held virtually on October 8.

 

“Asset managers, services providers: these groups aren’t going away any time soon,” said Gary Casagrande, VP of Global Market Strategy at Confluence, who moderated the session. “What is changing is how investment firms need to manage their data across their enterprises. That means that the way these groups interact with each other needs to change.”

 

Casagrande said the boundaries between the front, middle, and back office have resulted in several organizational realities. For instance, he said firms, systems, and processes have been designed over the years to meet one specific group’s needs, rather than the company’s overall operational requirements.

 

“Now, as operating models evolve, several factors have combined to make the old, territorial approach to enterprise data management less viable every day,” Casagrande said. “New strategies are more attractive and achievable.”

 

Janelle Prevost, Head of Strategy and Digital Asset Servicing, shared the perspective of BNY Mellon’s clients.

 

“Fundamentally, clients are looking to their providers to enable better investment decision-making, better services for their end investors, and more flexible and efficient back office capabilities,” Prevost said. “In almost all cases, achieving these goals means better data and better orchestration of solutions across the investment process. Data is the connective tissue, end to end, of that process. And being able to access this data in real time is blurring the lines between front, middle, and back offices.”

 

CHANGE AMID THE BACKDROP OF A PANDEMIC

 

Jay Nusblatt, Managing Director, Global Investment Companies at DFIN, said that embracing and supporting the distributed workplace is crucial in the context of COVID-19.

 

“We’re now seeing that the risk groups and compliance teams are weighing in on these processes, taking a different decision path — away from pure cost and toward risk aversion, resiliency, and supporting the distributed work model,” Nusblatt said. “COVID-19 necessitates the distributed work model, and the legacy platforms and bespoke processes that funds and investment managers were dependent on are limiting our effectiveness.”

Whitfield Athey, Chief Executive Officer at Delta Data, agreed that using technology to enable a remote workforce is essential. He said that the coronavirus has made it painfully obvious which processes are in dire need of digital transformation.


“For the past decade, we’ve been hearing the phrase ‘digital-first,’” he said. “COVID-19 separated those who actually got it done and those who have some work to do. This has accelerated the realization that regardless of the scale you can attain through a digital straight-through processing environment, the coordination of dislocated employees is as crucial a capability as the scalability that type of automated execution provides.”

 

Athey said the time for action is now.

 

“What used to be a cost-based decision has now turned into a risk-based decision: Can we afford to manually execute this process in the current environment? Quite frankly, these opportunities for change don’t come around frequently in this industry,” he said. “We are encouraging a move to a digital environment that is enabled through better sharing of quality data.”

 

Prevost also touched on how the pandemic has catalyzed organizational change.

 

“COVID-19 has been very much an accelerator for clients who have been weighing an outsourcing decision,” she said. “Naturally, it is driving clients who have been slow or reluctant to invest in digital or in automating manual processes to jump on the bandwagon.”

 

In this new environment, Prevost said the distinction between front, middle, and back offices is less important than the one between physical and virtual offices.

 

“Firms are seeing that a strong virtual office is critical, both internally and externally,” she said. “It’s about having the right providers, the right connectivity, and the right data in the right hands.


Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.

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