A recent study highlights that investment companies are limited by their current data management capabilities:
A recent study titled ‘Data Management Challenges in The Investment and Asset Management Sector: How Investment Firms Can Improve TCO and ROI with Managed Data Service Partnerships’ suggests that investment firms must address some common challenges related to data governance and architecture and they are found to be still limited by their current data management capabilities. The report, prepared by Worldwide Business Research (WBR) Insights and Rimes, a firm that provides transformative data management and investment intelligence solutions to the world’s leading investors and asset managers, found that investments firms are also engaged in partnerships that do not provide them with the benefits they need to reduce TCO and improve ROI.
The research covered 100 respondents from finance organizations across the U.S. and Canada and the respondents represented a variety of institutional wealth management organizations, including asset management firms (22%), hedge funds (19%) and insurance organizations (19%).
Among the key findings of the study are:
- Only 25% of organizations can source and manage all their data inputs effectively.
- Most can leverage data for research (78%), portfolio management (70%), risk measurement (67%), DataOps (65%) and performance management (52%) with their current data tools.
- Their 2 most significant challenges to leveraging data in 2021 were regulatory compliance (39%) and reducing time to business value (37%).
- 79% are currently realizing risk reduction and 73% are realizing agility thanks to their data solutions, managed data services and internal data resources.
- 26% say risk reduction and 21% say scalability are benefits that align with their primary data objectives over the next 12 months.
- 55% claim their organizations currently used managed data services, but 56% of these respondents are only somewhat satisfied with those services.
- 49% who aren’t currently using managed data services are considering them in the next 12 months.
- 26% believe managed data services would reduce time to onboard new data sets, while 25% believe they would reduce downstream risk.
- Most claim their organizations either sometimes struggle (39%) or frequently struggle (14%) to add new data sets and meet the demands of downstream data consumers in a timely way.
- 35% claim their organizations struggle to properly control entitlements and permissioning – potentially putting them at risk during a vendor audit.
- Most will outsource either the same amount (49%) or more (44%) of their data management in 2022
EFFECTIVE USE OF DATA
The study found that most of the respondents can already leverage their data for a range of capabilities thanks to their current tools, solutions and data services. “A majority of respondents can leverage their data for research (78%), portfolio management (70%), risk measurement (67%), DataOps (65%), and performance management (52%),” it added.
However, most of the respondents have opportunities to leverage their data for capabilities that could be beneficial to clients, such as client reporting and fund accounting. Other Capabilities that most of the respondents aren’t currently capable of could significantly impact the bottom line.
“For example, compliance automation can reduce compliance costs, which can have a significant impact on ROI in the financial industry. Firms must be able to identify inefficiencies quickly and streamline their compliance operations. This will unlock new opportunities to use data while reducing risk in the process,” says the study.
STRUGGLING TO GET BENEFITS
The study maintains that despite many realized benefits, many of the respondents are still struggling to draw as much value from their data operations as they could. Almost half of the respondents are currently not able to obtain the visibility they need to reduce vendor costs (45%) and add users and domains without increasing infrastructure (48%). Half of the respondents struggle with resource alignment and most of the respondents (53%) are unable to utilize multiple support centers from partners and vendors around the world,” it says.
The study adds that realizing these benefits may require a re-evaluation of the Organization’s data solutions and external services. For example, companies may wish to partner with managed service providers who provide global support if they intend to scale operations to different regions or sectors, it says.
NEED FOR ROBUST SOLUTIONS
The study highlights that investors and investment management firms need robust data solutions to reduce risk, improve compliance and draw more value from their data. Not only are data management operations becoming more complex, but many financial organizations are increasingly reliant upon third-party services to ensure they can manage data in a way that reduces the costs of their assets and improves ROI, both for the company and clients.
“Managed services providers now play an important role for investors, investment firms, and other types of financial organizations, handling a significant amount of their data capability. As such, the right choice in managed service providers can mean the difference between improving returns and remaining stagnant,” says the study.
The study concludes that investment firms have made significant progress in their data operations over the past several years, but there are still some significant gaps in their capabilities. More pressing is perhaps their inability to draw data from all their inputs. Without the ability to at least access the data from the full extent of their assets, firms may suffer a lack of visibility that impacts their ability to make decisions and deliver value downstream.
“Several respondents indicate that their current data management capabilities aren’t providing them with the value they need, either. For example, most of the respondents can’t currently obtain global support for their operations. A majority are also unable to leverage actionable data for client reporting, fund accounting, compliance, digital transformation, and vendor management with their existing data tools, solutions, and services. Nonetheless, the results also suggest that firms that are using managed data services are realizing significant benefits by doing so. They are reducing the total cost of ownership of their assets while improving ROI for both themselves and their downstream customers. They are also leveraging their partnerships to realize new capabilities, such as enhanced agility and a reduction in compliance risks,” says the study.
In the coming months, it concludes, investment firms and other types of financial organizations must manage change to support these new capabilities and reduce their risk exposure. Managed data service providers will play an important role in their future decisions, but only data partners with innovative solutions and robust infrastructure will provide the necessary services to help these companies achieve their goals.