Governance and security measures remain undervalued for fund operators in today’s workplace – and it’s critical to business success that all involved stakeholders know where they stand on the topic.
This view comes from Matt Gould, Head of Fund Administration at Federated Hermes.
Gould was speaking in a recent Clear Path Analysis report, written in collaboration with Arcesium, which included several industry leaders in the operations sphere – including representatives from Seilern Asset Management, Northern Trust Asset Management, and Rothschild & Co. Asset Management. The analysis presented individual views on the major trends in data management, including key areas for further observation and development going forward.
Are governance and securitisation really top priorities?
“Licensing is difficult. You need to make sure that everyone knows where they stand so that people aren’t sending out data they aren’t supposed to.”
Key topics of discusison included data securitisation, with Gould stressing the subject's importance – especially when it came to potential opportunities and solutions. “The governance and security around data is incredibly important,” he said. “Licensing is difficult, because you might have it for yourself but not be allowed to give it to someone else. But you need to make sure that everyone knows where they stand so that people aren’t sending out data they aren’t supposed to.”
A 2020 paper from Accenture echoed Gould’s point and stressed that good governance was an important way to keep costs down. “Disjointed and disorganised data puts you at risk of breaching regulations and overspending on storing and managing duplicate data,” said James Petitto, Senior Manager – Asset Management, in the paper. “Inaccurate data means you can’t be sure you are making the right decisions for your business.”
Gould said that these issues around data ownership remained relevant whether the factors being discussed included issues such as the General Data Protection Regulation (GDPR) or other frameworks. “It is about making sure that the data is well protected,” he said. “We have seen in the industry many cases where not only is this reputationally very important, but there are some big fines, too, and cases where data has been sent to the wrong place or left out in bin bags, ends up costing you a lot.”
Some of these fines can be especially detrimental from a financial point of view – as well as resulting in reputational risks. In the US, for example, the Office of the Comptroller of the Currency fined Morgan Stanley $60 million for the investment bank’s failure to properly oversee the decommissioning of several data centres, dating from 2016. This failure, it said, put customer data at risk of breach and undue exposure.
“Everyone assumes data management is easy, but in fact there is a massive skills shortage in the market and many of our clients are struggling to find the right people,”
Gould noted that it is equally important to ensure that the data going out to stakeholders is actually the correct data, in order to prevent future issues. “A lot of the time you have client and sales teams who are not experts in the actual data – what it is and what it should look like, [and] providing it. This means that they need to have the trust and the understanding of the security and governance around it, so they aren’t left in the lurch,” he added.
This issue of staff training and preparedness in dealing with data is not new. “Everyone assumes data management is easy, but in fact there is a massive skills shortage in the market and many of our clients are struggling to find the right people,” Emma-Jayne Wood, Data Management Sales Specialist, at SimCorp told Fund Operator in 2022. “They are having to go to the middle-office, take those personnel and get them onto data management tasks.”
A saturated provider landscape
“[It’s] not being pigeonholed but having more of an a la carte option or structured data option, where you can specify your service rather than having to pay for things you don’t need.”
Gould was asked what he thought was the most important factor for investment firms when it came to navigating a saturated provider environment. This, he said in response, was being able to seamlessly access data and achieve interoperability between systems and datasets.
“[It’s] not being pigeonholed," he continued. "Often, you have to buy all of the data – but having more of an a la carte option or structured data option, where you can specify your service rather than having to pay for things you don’t need, would be most important. A structured menu of solutions would be better for the business.”
To see more of this interview, and read the report in full, please click here.
Fund Operator - news round-up 21/4/23
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