Risk and compliance video series: 5 key focus areas for asset managers in 2019

Tunde Fasoyiro

Welcome to our series of videos on risk of compliance. I'm here today with Christian Blackwell, who will talk about the five key areas of focus for asset managers today. Christian, what do you think is top of mind for risk and compliance for asset managers today?

Christian Blackwell

There are a few key macro-economic trends that are coming together for asset managers. So, the ageing population, persistent low interest rates and increasing costs of care for the elderly. Now, these three things together are increasing the conduct risks dramatically. Asset managers need to be proactive in tackling these. For example, the increase in the age in population can lead to an asset manager moving from accumulation products to decumulation oriented products. And it's vital, therefore, that conduct risks are built into new product design and product governance throughout the life cycle.

Tunde Fasoyiro

And how should asset managers be tackling SMCR?

Christian Blackwell

It's interesting, SMCR, everyone's talking about, it has to be implemented this year. But I think the important thing is to focus on the way that that is implemented, and not just seeing it as another regulatory change exercise. The more that asset managers can focus on the spirit, as well as the letter, of that regulation, the better the outcomes for them as a company. They will get the benefits culturally and organisationally.

Tunde Fasoyiro

And how about traditional practices, such as policies, procedures and standards?

Christian Blackwell

It's really important not to forget the basic fundamentals of your risk and compliance framework, understanding the risk drivers that are coming from the commercial strategy, ensuring robust risk assessments are undertaken, and providing as a compliance function true second-line independence. All of those things still hold true today, and you should focus on that. Also, policies and procedures, it's a good time to – you know, there are a lot of regulatory changes been going on, policies and procedures have been updated, but are they usable for the end users? It's worth challenging whether, instead of them just ticking the regulatory boxes, are they usable, practical by the people that need to access them on a daily basis? And I think that's something that's really important, it's something that regulators are focusing more on.

Tunde Fasoyiro

And how do you see data as an area of focus?

Christian Blackwell

Another area where regulators are really, really focused, and we've done a number of the mandated reviews on behalf of companies, and they are asking us now to look specifically at data and data governance, and it is is vital, I mean, you can have, just to give you an example, you can have a very effectively designed control but if the data feeds into that control are not providing quality data, the control will be ineffective. So, it's really important to focus on that proactively.

Tunde Fasoyiro

Cyber security seems to be high on the agenda. Are asset managers doing enough in this area?

Christian Blackwell

If this is not top, or near the top, of the agenda in terms of risk for asset managers, then quite frankly it should be. It's costing the industry trillions, the average time it takes to uncover a breach is now three months, and in three months, a lot can happen. You know, data and information about clients, products and business services is very sensitive, and the impact that they can have, a hack can have on the clients and the markets is quite profound. So, it's really important that asset managers proactively think about this and build the risk thinking into everything that they do.