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Audit trails: the road to success

The global financial crisis precipitated six tough years for the sector. In its wake, fierce criticism prompted industry bodies around the world to introduce stringent regulations requiring in-depth auditing. With such vast amounts of information needing to be accounted for, data management systems that ensure complete corporate accountability have increasingly seen as the only logical way of achieving this.


Prior to 2008, financial services firms had already started investing in systems to improve the organisation and accessibility of their internal information. But an inevitable period of cost-cutting though, forced many companies to scale back their investment or postpone planned projects. Now that IT funding is again on the rise, research directors are revisiting the idea of integrating wide-scale data management systems into their organisations.

The goals for many buy-side firms have become about streamlining the research process, making improvements in the shareability of data and compliance with the latest financial regulations, aimed at forcing the buy-side to become more transparent in its operations.

In 2008, only 22% of firms had a strategic Research Management Solution (RMS) in place (Cutter Associates Member Survey 2008). Since then, there has been an increasing necessity to justify all decisions to colleagues and investors. In order to show that practices are robust and compliant, asset managers need to prove they are taking advantage of the complete range of information at their disposal, comprising analyst insights, recent market and transaction data and strong sell-side recommendations.

In just six years, the number of major investment companies that have now invested in RMS is more than half (57%). They have replaced legacy data storage and analytics solutions to provide employees with facilities to search, store, audit and analyse internal and external data in one location and in a clear and concise way.

As transparency rules focused on imposing greater accountability are introduced, companies increasingly need the ability to study their operations in granular detail. This shouldn’t be seen as an inconvenience, but as an opportunity to refresh all aspects of IT infrastructure. The introduction of modern solutions will allow companies to identify best practices and standardise operations to ensure the intellectual capital already present within the company is being fully utilised.

In its most recent member survey, Cutter Associates found that the most common challenges facing professionals managing investment research were: collaboration among research staff, sorting through the vast amount of research information received, managing disparate data sources, ensuring consistency across teams and allowing the integration of third-party data with in-house research.

Hosted RMS software addresses these major challenges, streamlining the process of gathering data, improving analysts’ ability to search archived data and reducing time-zone related latency. This ensures consistency across teams and allows for the integration of third-party data with in-house research.

For example, an employee in Japan can upload notes within minutes of leaving a meeting in Tokyo and immediately relay this data to experts in London and around the world. By combining these notes with archived records, proprietary data, published information and current price statistics, the company’s portfolio managers can make much more informed decisions.

Crucially, RMS doesn’t just collate recent information, but offers detailed audit trails of where this information originated from. This gives companies the ability to illustrate their past performance in certain markets and in specific divisions. When provided to potential clients and for fund mandates, the ability to provide contextual details allows companies to differentiate themselves from the competition.

The industry is in a state of flux and some large financial institutions still have a long way to go to get their house in order. Many are only able to provide a complete audit trail for decisions by searching through data stored across a number of servers in several sites around the world. Having investment-critical data spread out and completely unstructured makes tracking the reasoning behind a decision extremely difficult and sometimes impossible. RMS alleviates this pain point and helps firms explain why a particular investment decision was made and proves the choice was based on the best information available at the time. And this is critical at a time when the industry is still rebuilding trust with all key stakeholders.



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