Operational challenges increase as regulation rise

A BNP Paribas report reveals efficient administration and custody of assets could be a source of competitive advantage for Australian asset owners and managers, with rising regulation and the need for cost reduction and more data and analytics continuing.

An increased focus on management reporting and analytics is being driven by external pressures such as increasing regulatory scrutiny, new regulations and the need to improve risk management, the report stated.

Australian financial institutions have reported an increasing emphasis by their management on analytics, with immediacy of access to information, interactivity and ability to act on that information being critical, said head of BNP Paribas securities services Australia and New Zealand, Peter Baker.

He said management teams were looking for more detailed data breakdowns and better risk analytics in terms of investing to improve their risk-reward profiles in investment decision-making.

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The BNP Paribas survey also found almost all respondents were planning to increase spending on risk and performance analytics as they sought to improve their capabilities in this area.

The maintenance of large volumes of data has placed tremendous pressure on information technology infrastructure, while contributing to spiralling maintenance costs. Managing this data is one of the more difficult challenges, according to the report, as investment strategies, associated indicators and benchmarks become more complex.

"Most respondents also reported an increased need for custom reporting, largely due to the different consumers of information they are beholden to — ie, both internal (investment teams, operations, CEO, etc) and external (regulators) parties," said Baker.