Read the article and learn about:
- Why regulations require increasing data transparency at all levels
- Why data transparency starts from within the organization
- How meeting transparency demands can generate business benefits
- Why taking a long-term strategic approach to regulatory IT solutions is necessary to reap business benefits
- The benefits of an IBOR-based integrated solution
Head of Regulatory Center of Excellence, SimCorp
Product Manager for Regulatory Solutions, SimCorp
About the authors
Carsten has headed up Legal Practices, the nucleus of the Regulatory Center of Excellence, since 2008. Since then the team has designed, built, and coordinated the deployment of regulatory-driven solutions to clients across SimCorp’s Market Units. Before joining SimCorp in 2005, Carsten consulted leading German financial institutions. Carsten holds a degree in Economics from the University of Mannheim in Germany.
Gernot Schmidt, Product Manager for Regulatory Solutions, SimCorp
Gernot Schmidt has 14 years’ experience working in SimCorp. He gained broad product and client knowledge from presales roles in Germany, UK, and North America before becoming a product manager for Regulatory Solutions.
The global financial industry has faced a large amount of new regulations during the last 10 years and will continue to do so. These regulations will continue to put new requirements on investment management firms’ IT solutions. Tight deadlines and several updates to the regulations seen so far have caused many firms to opt for short-term tactical IT solutions to meet compliance deadlines. However, tactical solutions tend to live longer than initially planned and to be costly as neither operational efficiency nor upgradability were prioritized when chosen. If you instead take a long-term strategic approach to regulatory compliance, this can translate into additional business value and competitive advantage.
Data transparency starts from within
We hear the word ‘transparency’ regularly. Investors are demanding transparency into their investments and the fees charged. Regulators are demanding increasing transparency in the market, as demonstrated by Solvency II and MiFID II. However, what is often overlooked is the equal importance of creating operational transparency within an investment management firm.
With a raft of regulatory changes taking effect in 2018, from the inclusion of FX into the BCBS-IOSCO Variation Margin Rules, to the recent introduction of the landmark privacy law, GDPR, operational transparency may just be the antidote needed to counteract a continually complex investment management landscape. If we put regulation aside, increasing data volumes, multi-asset class strategies, and the trend of insourcing are all keeping investment managers on their toes just to keep up with the increasing complexity. At the same time, they must adapt their business to operate in a low interest rate, low margin world. But what do these challenges mean in operational terms?
With a raft of regulatory changes taking effect in 2018 … operational transparency may just be the antidote needed to counteract this continually complex investment management landscape.
One approach to tackling the current situation is to operate on a ‘golden master’ or single source of data (truth), which provides full operational transparency in real time to all operational processes. Over the past three years, the market has settled on the term ‘investment book of record’ (IBOR) for this kind of consolidated data architecture underlying investment managers’ operating model. It is no new phenomena; a consolidated investment management system based on an IBOR as the operating model has already been adopted by many investment managers globally. It is, however, taking up, and with good reason as we constantly see demonstrated at our clients.
Regulations have individual transparency goals and requirements
Turning the focus back on regulations, EMIR, MiFID II, SFTR, and Solvency II all aim to increase transparency into how markets work and how risk is allocated between the various financial industry players. However, as each regulation has a unique scope and specific requirements, it’s worth looking at the similarities and differences between them.