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Three imperatives for reserve managers in uncertain times

Today, reserve managers are at an inflection point supporting central banks’ mandates amidst another round of volatile market conditions. How decisive your monetary policy is to maintain credibility in managing inflation in the months ahead will be critical. Also, how you adapt your investment strategies to rising rates and the shifting macro-economic environment will be key to fulfill those mandates.

Alan Copping 

Senior Market Strategist, SimCorp

Take swift actions in both open market operations and reserve management to maintain your central bank’s reputation and safeguard its independence

What if you could have one unified platform supporting full functional and technical coverage for both monetary operations and reserve management based on the same source of data?  

The consolidation of all workflows on a single source of truth can provide much-needed data governance and investment transparency to help you make the most informed decisions and act swiftly in times of turbulence. It also reduces operational risks and improves scalability—critical for a future-proof operating model that can effectively respond to any crisis. 

Empower your teams with absolute and relative risk and return, short and long-term liquidity risks at their fingertips for effective reserve management

The increased diversity in market activity, investment complexity and large balance sheets are pushing execution, risk management and processing capabilities to new levels. This demands an investment management platform providing integrated compliance, performance, risk and global accounting standards. Only with a streamlined and automated end to end processes via STP front to back workflows plus comprehensive risk analytics can you make better investment decisions.

Key to the most efficient workflows and transparency is the consolidation of all data (from internally as well as externally managed sources) into one core investment data set. It must then be robustly managed and governed, and optimally processed across the entire investment value chain with sophisticated compliance, performance and risk management. Only then can you gain a complete and timely overview of all portfolio positions, exposures, cash, liquidity management (real-time cash, gold, SDR and securities inventory) and liquidity forecasting (cash/security ladder).  

In addition, support for a wide range of financial instruments (fixed income, FX, cash, allocated/unallocated gold and derivatives), ESG considerations and adherence to global accounting standards (IFRS / ESCB framework) is key. Importantly, real-time reporting and timely warnings about illiquidity through key ratios, benchmarks, market stress tests and simulations are crucial for reserve managers to make swift decisions and support central banks’ mandates.

Leverage global best practices from a technology partner’s experience with a growing community of central bank clients. 

A technology partner working for years with a large asset owners’ community across the world including central banks on the four continents, ensures international best practice sharing, adherence to global accounting standards and a high level of operational efficiency. By proactively harvesting insights from working with a growing community of central banks, the partner can greatly enable the reduction of operational costs and time to value for reserve managers. 

The partner’s stability in terms of ownership, transparency of strategy/vision and consistent R&D commitments is also a critical consideration for the future. Equally important is choosing a partner that provides continuous engagement and support with experienced teams ensuring the upskilling of end users through training and secondments for effective system adoption and open access to the latest innovative technologies. 

Lastly, it is critical to select a partner that meets the institution's security and jurisdictional concerns, whether that’s delivering the solution in the cloud or with an on-premise installation. Seamless upgrade processes and flexibility to have local data centres are simply a must.  

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