The pace and depth of the transformation which swept through our industry during the last 12 months has been nothing short of extraordinary. Having acclimatised to remote working and embraced new digital channels in their operations, Swiss asset managers – together with asset servicers – are now trying to ascertain what operational changes and resiliency measures are likely to remain permanent post-pandemic.
The industry shifts to digital
COVID-19 ushered in unprecedented levels of digitalisation across financial services, including in the funds ecosystem. Activities such as investor reporting and client onboarding – which historically have been manual intensive – were automated in the space of weeks.
Here at Calastone we received a significant uptick in requests for automation from market participants across the world. By digitalising and automating antiquated back office operational activities such as funds processing, operational resiliency has been dramatically enhanced for a number of new and existing clients in Switzerland and across the globe.
However if the funds industry is to move forward, I believe that it needs to ensure that the digital advances it achieved during COVID-19 are not jettisoned when the crisis ends. The signs so far appear promising with a number of asset managers retaining the technologies which sustained them during the pandemic. Others are going further and looking to leverage disruptive technologies as they attempt to future proof their businesses and enhance their operational processes.
Automation is still incomplete
While advances have been made, it is clear that more work still needs to be done on a global basis. We recently surveyed 50 European asset managers and fund distributors and found that 59% identified manual processing as their biggest risk in cash settlement processing, followed by reconciliation of payments to trades (53%) and early or late payments (41%).
Similar issues were found with asset transfers, with a shocking 70% of respondents still not using any automation when sending transfers. Only 7% of respondents have managed to automate the vast majority of their transfer flows. Operational inefficiency is particularly problematic for cross-border transfers, with all respondents in Italy identifying cost, transparency and speed challenges. Meanwhile, a quarter of respondents in Luxembourg said they still relied on manual processes.
Getting the structure right
According to a recent Swiss Asset Managers Survey , one in three domestic investment firms anticipates their revenues and margins will increase in the near future. Facilitating interoperability and developing common industry-wide standards for operational resiliency and business continuity planning will be critical in ensuring the Swiss market is able to continue on its positive growth trajectory.
Increasingly, investors of all persuasions are demanding asset managers have in place robust systems to mitigate the risk of business-wide disruption. A failure to prepare adequately for black swan events such as COVID-19 opens managers up to the risk of disinvestment and missed mandates. The pandemic has served as a much-needed wake-up call for managers that they need to have in place systems and procedures to handle all types of crises.