Taking a safer and secure SaaS-native path to becoming future-ready
Steve Collie, Co-Head of Client Delivery and Co-Founder, FINBOURNE Technology
Balancing cost optimisation while delivering clients with value-added solutions is one of the biggest challenges to hit Capital Markets. In recent years, both buy and sell-side firms have endured painstaking, manual and people-heavy workflows to deliver clients the data they need at their fingertips, often during heightened conditions.
The reality is, while the mainframe has served global capital markets for over a century, we need to understand it was only ever intended to answer specific questions at a specific point in time. As markets and client needs have evolved, this infrastructure has become quickly outdated, leaving a gap between what the business needs and what technology can offer.
In its wake, it’s left a legacy of duplicitous systems, interfaces, fragmented best of breed solutions and intensive workarounds, now handicapping firms as they struggle to respond to a world in which ESG and private assets have become the norm. In fact, 58% of Buy Side and Sell-Side respondents in our recently commissioned industry report rate the trust in their data (25%) or the timeliness of it (33%) as less than good. With the added threat of broader regulations, net zero targets and continued fee scrutiny, capital markets firms are finding themselves in an unsustainable situation.
Making multi-asset investment, market and reference data and the processes surrounding it, low-touch, translatable and scalable, is now an urgent need. From our global market engagement it is clear that firms must take action now to replace the sticking plasters, manual re-mapping of data and spaghetti workflows, with a trusted data foundation that can secure valuable insights, boost performance and add value to clients.
The question is; if the traditional change constructs are no longer fit-for purpose, how can firms approach operational change in the present day?
Common barriers to operational change
To date, the choice capital markets firms have had has been limited to best of breed solutions, outsourcing, or costly, front-to-back, multi-year transformations. Rather than deliver long-term value, this cycle has led to severe infrastructure complexity and often a single vendor dependency that is now inhibiting competitive growth and innovation.
It’s no surprise then, that when we asked leading asset managers and asset owners in a recent industry workshop what the biggest barriers affecting buy-in to operational change were, cost vs value perception was indeed noted as the third most experienced barrier.
Investment data is a central business asset. Owning and controlling your organisational data is the first and most vital step to unlocking value from the data you hold today. So it was interesting to see that firms stated higher priorities elsewhere (56%) and lack of a business sponsor (44%).
Here, we can infer that these firms have not yet have identified data as the root of business-wide challenges. And yet, we know that firms are spending far too much time, in some cases 50% or more of their day, on manual reconciliation, locating data at source, or attempting to figure out positions and exposure from siloed data – across the investment chain.
Additionally, what capital markets firms don’t always recognise, especially those reliant on single platforms, is that the data models mandated by the vendor of their choice often compound the issues they face around data. As a result, poor quality data and inefficient processes are now impacting a number of workflows; from performance, attribution and exposure calculation, to accounting and reporting.
Leveraging clean interoperable data is a clear business priority. To address data-led change and to make the transition from cost centre to value generation, firms must start asking the uncomfortable questions around the costs they bear and the capabilities they are missing, not at the operational level, but at the business level, in order to trigger senior leadership buy-in. Questions like: What is the opportunity cost being missed today?; or: Are the data and operations ‘good enough’ to survive today and deliver resiliency tomorrow?
A safer SaaS-native path to operational change
Tackling the fundamental problem of understanding, accessing and controlling the data is something the industry needs now, not in five years’ time. This starts with acknowledging the industry’s appetite for risk. In our recent workshop, when asked about risk appetite for change, only 12% of firms cited a high-risk appetite, with the majority leaning to low-medium risk.
De-risking the process of change, through Software as a Service (SaaS) investment data management technology, empowers firms to focus on the core of their business rather than the distraction of a multi-year transformation. Ultimately, a SaaS-native approach enables you to start small with mission critical areas, realise the value quickly and build the business case for further change.
For too long, the industry has focused on hoarding and consolidating data, and is only now realising the ability to integrate disparate data sets and derive meaning is missing. Challenging traditional constructs and leveraging a host of SaaS capabilities, we have designed another way; a Modern Financial Data Stack. It’s a trusted data fabric that reduces operational complexity and lowers the risk of change, by opening up existing ‘closed’ systems and helping firms understand and derive value from their data.
Delivering safer, better and faster data at the core, the Modern Financial Data Stack forms a data hub that can adapt and evolve towards the future state desired. It bridges the gaps in a firm’s existing infrastructure, including connecting to external innovation via open APIs, to augment investment data processes and outsource non-differentiating activities.
Taking this evolutionary approach and understanding the industry’s risk appetite means that capital market firms are empowered with the flexibility to innovate on their own terms. It definitively enables them to migrate between data models, do business the way they want, and to bring on new systems easily. Addressing data at the foundational level, is what we believe will achieve the transparency, trust and control firms need, to win back productivity and operating margins.
