Transfer agencies looking for balance, says Bravura’s Neil Richards

Neil Richards, product manager for GTAS at technology services firm Bravura, says there is a balancing act required of fund administrators balancing operational risk versus efficiencies.

Post 2008, an avalanche of new regulations hit the industry. Hiatus is now being reached as the majority of preparations for major initiatives such as the Retail Distribution Review (RDR) and Foreign Account Tax Compliance Act (Fatca) are coming to fruition. Transfer agency (TA) participants are now starting to lift their heads above the parapet and away from their total immersion in regulatory concerns. This much-needed breathing space has been hard won. For forward-thinking organisations, the smart path is to use this moment to start focusing more closely on streamlining operational risk and realising potential cost savings.

Less is more

Recently, one of the biggest trends in the TA space is a move towards increasing the number of control points within end-to-end processes. It is common for several people to monitor different aspects of each transaction. These changes were designed to reduce operational, financial and reputational risk. However, administrators need to balance due care with wrapping too many people around a transaction. By applying over-rigorous controls, organisations run the risk of causing a drag on the back-office, impeding their ability to bring new products to market and, ironically, introducing additional risks. The priority has to be achieving a balance between making the processes work smoothly and having adequate controls in place.

Imagine the scenario in a restaurant, where the head chef, sous chef and waiter all share the same aim – to serve perfect food to their customers. The sous chef makes a dish, and believing it to be seasoned correctly, presents it to the head chef who carefully checks the food before it leaves the pass. As the waiter picks up the plate, he notices that the food has toppled slightly and so returns it to the head chef, who quickly readjusts it to perfection. The well flavoured, beautifully presented dish is then served to the customer. By now the meal is cold.

A light touch

Rather like the restaurant scenario, operations can be slowed down by a similarly time-consuming, people-heavy review processes. The aim must always be to reduce operational, financial and reputational risk of course. However, this needs to take place against a backdrop of balancing operational risk against operational efficiencies. Similar to the restaurant which needs to serve hot food, TA must strike a balance between achieving the goal and not impacting the overall operation.

This is the same across SMEs and larger companies. They are all working towards shared goals in this respect. Everyone has different views on how to solve a problem but generically the automatic reaction has been to just throw extra people at it to make sure it doesn’t happen again. The danger is that all too commonly, this approach develops into a more permanent solution. Often within these organisations, no one can remember why a particular process in in place; by that time, it has become an accepted norm.

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