New regulations force financial services firms to ramp up investment in outsourcing
Well over half of asset managers at financial services firms (58 per cent) say that recent industry regulations have resulted in their organisation either investing in new technology or bringing in a third party to help meet new data management requirements.
In addition, a third of respondents (33 per cent) noted that reducing the cost of change was a primary factor for buy-side financial services firms to outsource.
These were among the key findings of a recent survey commissioned by Asset Control, a leading solutions provider for financial data management. The study revealed that ‘the ability to absorb and overcome unusual features in the data’ (28 per cent) and ‘regulatory compliance’ (26 per cent) were also key factors in why financial firms would look to outsource data management.
Eddie Grant, Head of Managed Services, Asset Control, says: “It is little surprise that cutting the cost of change comes top of the list of sought-for outsourcing objectives. The costs involved in building an internal data management solution might initially seem attractive. However, when you factor in the effort to keep the solution up to date given rapid change they quickly mount up. Tweaking systems to keep pace with new regulatory and business requirements is costly and unpredictable.”
The survey shows that few financial services organisations try to go it completely alone with data. According to the research, less than a quarter of firms (22 per cent) organise data management solely in-house, with more than a third (35 per cent) choosing to outsource all their data management. The study revealed that the biggest challenges organisations encounter when building a solution in-house is delivering on time (28 per cent), followed by delivering within budget (25 per cent) and scope change (also 25 per cent).
One specific functional challenge is that of data lineage. Given that the largest category of respondents uses a hybrid model of outsourced services and in-house capabilities, the last-mile integration, data access options and metrics provided by solution providers are especially critical to provide reliable handover points. According to Grant: “when you dig into the detail it is revealing that well under half the survey sample claim to be very confident in tracking their data using in-house systems. The need to pinpoint the origins of data, what happens to it and where it moves to over time has become increasingly important in financial services to meet frameworks, comply with regulations and more generally in enhancing data quality and sharpening competitive edge.”