INTRO
THE
BOTTOM
LINE
# 7
SEPTEMBER 2016
COVER STORY

MAKE MONEY
WITH DATA

BY LEE GODFREY, KNEIP & DIANA MACKAY, FUND BUYER FOCUS

PRIIPs:
CHALLENGING
DATA ANALYTICS
BLOCKCHAIN:
LESSONS FROM HISTORY,
CLUES TO OUR FUTURE
ROBOTS:
ENCOURAGING BLUE
SKY THINKING
REGULATORY REPORTING:
TIME TO CHANGE
PERSPECTIVE

CONTENTS

I

EDITORIAL

The digital revolution is already behind us. We now find ourselves immersed in the world of data. Companies who will be able to leverage the benefits of their data lakes will be the ones who find ways to provide meaningful data to stakeholders. They will propose new business models that monetise their data. They will add value to every bit of information available to them.

With human knowledge doubling every 8 years, data collection is a field that we know. The greatest challenges that now face us revolve around harnessing the staggering amounts of data, creating value from it, and making it easily consumable. The fields of robotics and artificial intelligence lay the pathway to connecting these dots and forming meaning behind the seemingly abstract.

Technologies such as shared ledgers will enable massive increases in transparency, and enable regulators and information providers to move beyond chasing data and simply tap into openly-available blockchains.

Obviously, providing innovative solutions to our clients will only be sustainable if digital security is ensured.

As you peruse this issue, you’ll be able to read about the above concepts and more. Welcome to the data world. We wish you an insightful read.

JEAN-LUC BRACH
Chief Information Officer
Member of the Executive Board
KNEIP
II

DATA & REPORTING

BLURRING
THE LINES

THE LINES BETWEEN DATA AND REPORTING ARE BLURRING
AS MARKET DEMANDS AND REGULATION PUT MORE
PRESSURE ON ASSET MANAGERS TO DEMATERIALISE
THE DATA FOUND IN TRADITIONAL REPORTS

author
by Gary Janaway
Professional Advisor

Many national regulators still rely on physical reports submitted to them in PDF format. A good example of this is the UCITS KIID. In contrast, the AIFMD requires managers to submit extensive reports regularly disclosing details about the investment portfolios they manage in set electronic formats.

This has addressed some of the problems faced by regulators who could not apply automated programs to control and interrogate the data provided in traditional reports. Think of them as gilded cages. However, to handle new electronic reports and data extracts, regulators have had to develop the capability to store and manipulate large amounts of data. Regulators are modernising deploying technology to manage larger amounts of data, engaging analyst skilled to interrogate and interpret the content.

In May 2016, Ignites Europe reported that IOSCO was planning to publish recommendations to help national watchdogs

fill data gaps in their oversight of the asset management industry, IOSCO commented that “higher quality and better data is needed to facilitate effective risk monitoring”.

This is undoubtedly an initiative designed to help prevent another Madoff scandal going undetected, or to avert another credit crisis caused by sub-prime mortgages packaged as higher quality debt securities. Rather than traditional reporting formats, regulators—not to mention end investors—are increasingly demanding better information with access to underlying data. Previously, it was nigh on impossible for regulators to spot emerging trends, or to raise red flags on potential data anomalies on a comprehensive scale, due to the fact that they had to parse through finished reports to identify significant issues.

However, if reporting is delivered as streams of data, it opens a plethora of new possibilities. Regulators would be able to select specific data fields to spot future potential red flags, and to perform much more advanced controls, even on things like language and terminology. Online services would be able to provide much more value-added insight to investors. And asset managers would reap the benefits of more efficient reporting.

Investors too are pushing this blurring of the lines. A recent survey, conducted by Osney Media and BackBay Communications interviewed 113 firms across the asset management spectrum and cited a ‘data glass ceiling’ as senior management continue to remain unaware of the opportunities offered by big data.

Some 15% of those surveyed responsible for client reporting said that their client reports were not well tailored to the needs of the client. It’s all well and good calling for improved transparency but regulators have to start using more effectively the huge volumes of data being filed. Simply put, this means moving away from traditional physical reporting. Evidence of this evolution was witnessed recently, when the Commission de Surveillance du Secteur Financier (CSSF) announced it was implementing a new monthly reporting requirement. Whereas previously the O1.1 report could be filed in Excel, the newly introduced U1 .1 report needs to be filed in XML.

That shift from Excel to XML is just one example of where that report is now being handled by the CSSF as structured data, rather than a hard copy report. This is a more sophisticated approach to receiving underlying data that can be deconstructed and recompiled in range of formats to help regulators like the CSSF address gaps in their understanding. It is an evolution that is freeing data from the previously gilded PDF/Excel cage, arming regulators with the raw data that can be directly manipulated. Soon, regardless of which entity is requesting the data—be it the regulator, supervisory

authority or end investor—they will increasingly expect to receive raw underlying data with less dependence on formatted, finished documents. The primary driver here, unsurprisingly, is improved technology. As internal systems become more robust and better able to handle structured data it becomes more efficient not only to process data received, but more importantly to analyse and interpret the content. Ultimately, this will put more responsibility on the data owners, the asset managers, to manage their data more wisely. A heightened sense of ownership will be needed. Think about it. The regulatory trend of the last five or six years is a train without an end destination. It is unlikely that the demand for more data will stop.

The trend is fueled by the constant introduction of new regulation. As a consequence, it will be incumbent upon asset managers to cast off the ‘ad hoc’ approach to managing data in order to meet future demands. In short this means managing fund data (i.e. tax, performance, transaction, portfolio, etc.) from a reliable source from which computations can be made and extracts produced to fulfill multiple regulatory and investor needs.

THE
BOTTOM LINE

The more technology that regulatory authorities avail of, and the more tailored information investors expect, the more the lines between data and reporting will blur.

III

MAKE MONEY
WITH DATA

KNEIP DEPUTY CEO LEE GODFREY
AND FUND BUYER FOCUS DIRECTOR DIANA MACKAY SAY:
ENSURING THE ACCURACY AND TIMELINESS OF
DATA IS CRITICAL NOT ONLY TO ASSET MANAGER’S
COMPLIANCE CAPABILITIES BUT
TO ITS BUSINESS DEVELOPMENT.

by LEE GODFREY
Deputy CEO, KNEIP
and DIANA MACKAY
Director, Fund Buyer Focus

FOR EVERY PIECE OF DATA, AN OWNER

According to recent research published by the Berlin-based distributor research firm Fund Buyer Focus, information provision and reporting is the third most important factor when European fund buyers are selecting fund managers. Understandably, they base their decisions on the availability and accuracy of information, but it doesn’t stop there. Once funds buyers have made an investment decision, they also need timely ongoing reporting. It’s not enough for an asset manager to have a central data depositary, it has to be actively managed on a continuous basis. And in a world of information overload, correct targeting of reports is business critical. Otherwise its value quickly diminishes and the manager may end up with 6 different versions of the same data at different locations. It’s also costly in terms of administrative effort, and potentially in terms of brand image too. Managing data is not an easy task, and central to it is the idea that every piece of data needs an owner. Centralising data in a single depositary is important, but without an owner from the outset, it is difficult to maintain its integrity.

Diana Mackay, Director, Fund Buyer Focus

SHOW ME THE DATA!

If data is well managed and its origin is trustworthy, regulatory reporting becomes much easier and more manageable, while reducing the risk of non-compliance. That’s especially true for funds registered in more than one country, since regulators all have different requirements for essentially the same data points. Rather than assigning personnel to tackle specific requirements as some firms do, it’s much easier to use a system that will generate the appropriate reporting automatically, on demand.

It also facilitates adapting to future changes in regulation.

Lee Godfrey, Deputy CEO, KNEIP

DATA IN DEMAND

Data is an increasingly important element of the sales and marketing toolbox of fund businesses, especially but not exclusively those with international ambitions. Take a London-based asset manager distributing products in 16 countries across Europe and Asia. Such a firm must manage local reporting requirements, make sure their data is on services such as Bloomberg or Morningstar, supply data for their own website and client reporting, and provide data and documents to distribution platforms. This can all be done in-house, but the task is a massive distraction from the firm’s core business and requires a full team to navigate between a myriad of constantly changing requirements and relationships.

Even a Paris-based boutique asset manager focused solely on the domestic market must supply data to providers such as Bloomberg, Lipper and Morningstar as well as local financial information sites such as Boursorama, Europerformance and La Côte Bleue, not to mention distribution channels such as independent financial advisors and French regulator AMF.

GETTING TO MARKET

Managing data effectively is also critical to expanding a firm’s business. Having accurate data available to the market is critical to new product launches, and to turning buyer interest into sales. One Boston asset manager says that putting in place proactive data management together with KNEIP has boosted their sales efficiency by 5%.

At the end of the day, from operational efficiencies to freeing resources to concentrate on revenue generation and nurturing clients, to regulatory compliance, to maintaining one’s competitive edge, good data management is no longer a second-tier project, but a top-level priority for any asset manager wanting to stay ahead of the game.

THE
BOTTOM LINE

Establishing ownership of data from the outset and managing it proactively is
the key to greater revenues and reliable compliance.

IV

BLOCKCHAIN

LESSONS FROM HISTORY,
CLUES TO OUR FUTURE

AT NWA WE WORK WITH GLOBAL
BRANDS TO DELIVER DIGITAL
SOLUTIONS DESIGNED TO
FUTURE-PROOF THEIR
BUSINESSES AND SNAP TO
TECHNOLOGIES THAT
SCALE BOTH TODAY AND
INTO TOMORROW

author
by NEIL WARD
CEO and Founder, NWA & Associates Ltd

Blockchain makes me smile every time we are consulted on the topic as the enquiry usually comes with a necessity to recommend that it is merely technology for its own sake and not to invest time and money in the “vision” of Blockchain (take Bitcoin’s rough beginnings) or to advocate the opposite theory that distributed ledger technology is the foundational pillar upon which all businesses and institutions will depend and operate without exception for decades to come. There are unprecedented levels of investment in the start-up arena by financial institutions. And examples of private Blockchain deployments between major banks like JP Morgan and its rivals and partners are already under way. As acceptance of the technology increases, the classic business conundrum should surface in every boardroom, regulatory institution and between independent stakeholders in many markets. Is this a reality we need to embrace, or a distraction with unproven benefits, lack of regulation and with low investability?

I HAVE WORKED WITH DISRUPTIVE
TECHNOLOGIES ALL MY LIFE

Beginning as an undergraduate in the FMCG space in the early 90s at ASDA in the UK, where electronic point of sale technologies enabled real time stock replenishment and daily deliveries to replace inefficient and costly in-store warehousing. It was controversial, however, the huge benefits in efficiency, security, scalability and customer delight fueled a revolution in consumer goods pricing that left the sceptics of the day behind—and many out of business.

Fast forward to 1995. HBOS were early adopters of affinity marketing data and campaign advertising technology coupled with predictive dialer telesales technology enabled personal loan and credit card applications to take place over the phone on a previously impossible scale. This was also seen as a huge risk at the time, yet the “pioneers” understood that the user experience enabled by technology was a

Neil Ward, CEO and Founder, NWA & Associates Ltd

differentiator, leaving competition to play catch up to the opportunity. With the advent of Internet banking and the app generation on mobile devices, more than ever knowing when to get in the game and get out again is the key to user growth and profit.

I spent 10 years in the telecommunications space working with Virgin, British Telecom and Skype. Cable revolutionised and disrupted network and bundled entertainment, telephony, and broadband, and disrupted the incumbents to the benefit of millions in many countries. BT led the way in fibre optic technology investment, only to find that the smart money was in cloud-based technologies. Skype took VoIP (voice over Internet protocol) technology to the world and disrupted telcos by offering free peer-to-peer video and voice calls, rendering landlines and minute-based calling plans obsolete. According to Ovum, telcos lost over $1 trillion of revenues globally to new technologies, replaced by the “freemium pricing” model we now expect as the Internet generation.

Since the explosion of the Internet in the last fifteen years, the disintermediation of traditional partner models will only continue to increase as mobile penetration and emerging market network connectivity improves. And with the growing prevalence of the Internet of Everything, connected cars, delivery and data drones, cloud data storage and robotics replacing humans will continue to become a mainstream reality.

THIS THROWS UP A REAL CHALLENGE
IN GLOBAL DATA MANAGEMENT
AND CYBER SECURITY

Increased global traffic online and greater real-time user demands in all sectors (including education, healthcare and asset management) will require robust, intelligent, de-centralised solutions to manage more transactions than ever before. Blockchain is emerging at precisely the right time, if it continues to deliver the robust, tamper proof, trusted transactions it promises. The sweet spot in adopting Blockchain is that from its birth, it has embraced the latest cyber security technology. Inversely, in utilising Blockchain’s approach as a design principle moves its devotees and early adopters ahead of the pack.

Blockchain has the capability to disrupt any market where peers and transactions happen, and where cost, security, integrity and reputation, are of utmost importance. So it is clear that any “future proofing” of a business must include a rudimentary understanding and assessment of Blockchain’s suitability.

The CIO is typically best placed to deliver an infrastructure strategy and test the Blockchain viability, however, all members of the management team must consider the user experience of the future, the opportunity for growth in the face of competition and the enablement of de-centralised solutions to take advantage of CaaS (Certainty as a Service) and consider the case for automation, robotics and data rich solutions which Blockchain understands and can process to an unprecedented level of sophistication.

“Imagine how much Blockchain can speed up reporting for financial institutions? By collecting data that is already validated and trustworthy it could cut out so many steps,” commented Mazhar Wani, Global Compliance and Reporting at EY”. I believe this is just the starting point, and that all markets will eventually adopt the technology vision of today and make it reality. The question is as it always has been: when should my business act, and should I lead or follow? History tells me that more often than not, it’s the leaders who win.

THE
BOTTOM LINE

The pace of change in technology is ferocious. Can you ignore Blockchain when your stakeholders and customers embrace it?

V

NEURAL
ADVISORY
IN 3 EQUATIONS

FROM EVANGELIZATION TO CONCRETE APPLICATION IN BUSINESS,
OUR MESSAGE IS SIMPLE: ROBO & NEURAL ADVISORY
CONTRIBUTE TO THE CREATION OF NEW BUSINESS.
THE THREE EQUATIONS THAT FOLLOW
ILLUSTRATE THIS POINT.

by LUCA BRUNI
Senior Business Development Manager, Fund Channel
and MAURO DONNINI
P.E. Portfolio Manager, Selectra Management Company

FINANCE & TECHNOLOGY = FRIENDS

In the light of the numerous discussions we have had over the past 12 months across Europe, and the wide and heterogeneous feedback we’ve received, we believe that finance and technology are intertwined, and can indeed be friends. Technology is a tool: a means that allows finance to fill existing gaps within the banking and asset management universes. More particularly, with a focus on the way financial products and services are offered and distributed to the market. In one of our publications, we look at the synergy that neural techniques and finance can create together (Donnini, Bruni, “Neural Advisory: The New Frontier of Robo Advisory - Chapter One”, Linkedin, 2016).

This is not a visionary idea based on science-fiction, nor is it the intuition of a geek hidden somewhere in a university. It is reality, it is today, it is now! Machine learning technology—and more specifically neural advisory, to remain in the financial context—is already here. Think of it as sort of a talent upgrade to the robo-advisory model. Intimidated? There’s no need to be.

Neural advisory is driven by a simple key consideration: while machine learning makes suggestions, final decisions are made by the manager, who takes that advice into consideration. As such, the last word stays with the manager (humans).

FINANCE & TECHNOLOGY =
GENERATING BUSINESS & REVENUE

We’ve discussed with many market players sitting in different countries and with different areas of expertise. Through these discussions, our attention has been drawn to another simple, yet key factor: the right technology applied to the right business model generates revenue. Indeed, new technologies taking advantage of learning algorithms (see Donnini, Bruni, “Ants, Neural Networks and the New Frontiers of Finance”, Linkedin, 2016) support the development of institutional clients, financial advisors as well as private banking networks. One such algorithm called “Ant Colony Optimization” (ACO) was inspired by the organization of a group of ants to solve very complex problems. The basic idea of this algorithm which is employed in neural advisory, is based on a positive feedback mechanism as a kind of “virtual pheromone”, to strengthen those parts of the solution that contribute to the resolution of a given problem. There is indeed empirical evidence that shows the kinds of performance that neural advisors can deliver. There is much more to be said on that beyond this article’s space constraints, but it suffices to say that in this context, technology can actually become an asset rather than a cost centre, an investment today that tomorrow will generate concrete revenues.

FINANCE & TECHNOLOGY = DYNAMIC
ADAPTABILITY

Neural advisory promises exciting, real solutions to traditional banks and asset managers, but believe it or not, to a large extent, advisory companies as well.

Of course each of those players have varying needs, motivations, internal constraints and budgets, and thus require different solutions. And new learning algorithms can efficiently adapt to the needs of each and every market player. In a nutshell, there’s no “one-fits-all” solution but rather a tailored approach that can maximize returns: dynamic adaptability at its finest.

THE
BOTTOM LINE

Flexible, adaptable, tailored, concrete, results-driven and empirically tested.
The future is now, size it. Ride the new frontiers of neural advisory.

VI

ENCOURAGING BLUE SKY
THINKING WITH

ROBOTS

ROBOTIC PROCESS AUTOMATION (RPA)
HAS THE POTENTIAL TO REVOLUTIONISE
THE WAY ASSET MANAGEMENT GROUPS
RUN THEIR BUSINESSES: FROM CASH
RECONCILIATION, TO FUND ACCOUNTING,
TO KYC AND OTHER DUE DILIGENCE
TASKS. THE SKY’S THE LIMIT!

author
by Antonello Argenziano
Transformation Manager, KNEIP

THREE STAGES OF AUTOMATION

While there are different views on the stages of automation, we consider three stages here. Stage one involves companies identifying parameters, and based on those parameters, achieving a specific result; think the Excel macro. Stage two, RPA, where the greatest potential lies for most firms today, extends that automation outside of these fixed parameters. Here, robots are trained on a given task, learn how to do it (even using the same user interfaces that a human would), and then repeat it.

The Googles, IBMs and Facebooks of this world are currently exploiting stage three of automation aka: artificial intelligence. This is where the robot makes discretionary decisions, behaving as a human would, to the point where the distinction between human and computer behaviour/output fades.

Some asset managers are looking at artificial intelligence and cognitive computing, and how those technologies could boost (or disrupt) their business. However, those projects are typically more costly, and provide tangible results in the long term. RPA projects, however, can provide benefits with relatively small investments, and within weeks of implementation.

AGILE BUSINESS

RPA enables business agility. Large companies often have difficulties adapting main systems as fast as regulation and market conditions require in order to stay competitive. RPA bridges this gap by connecting legacy systems and allowing more flexible use of existing applications. This is key, in the context of financial services, when one considers the impact that regulation has had. An article by The Economist in May 2015 “Under the Bonnet” found that productivity in finance and insurance had fallen 10% between 2009 and 2015.

Antonello Argenziano, Transformation Manager, KNEIP
Antonello Argenziano, Transformation Manager, KNEIP

TAKE THE ROBOT OUT OF THE HUMAN

Two professors at the London School of Economics, Mary Lacity and Leslie Willcocks, have written about ‘taking the robot out of the human’ in the service industry.

Apply this to the financial industry, and how increased regulation and market demand has led to asset managers handling huge volumes of data. Indeed, since the 2008 financial crash, a talented mind has inadvertently become ensnared in a spider’s web of compliance tasks. One could argue that using RPA for more manual, repetitive tasks has the distinct potential to enable skilled workers to get back to doing more of what they were hired to do.

Just like electricity was for the second industrial revolution, RPA, when applied to workflow efficiency, will encourage greater innovation. Robots ensure consistency and accuracy. They don’t eat or drink or gossip at the water cooler. They work 24/7 and they can increase productivity on repetitive tasks anywhere from three to six times. Robots, in other words, act as ‘enablers’ for asset managers to improve their business. Robotics also holds several distinct advantages over the trend of outsourcing to low-cost labour centres. It avoids the operational headaches of managing communication, security, different cultures, time zones. It also removes the compliance overhead of working with offshore labour such as obtaining regulatory approval. And as globalisation has enabled working with them, it has also become a catalyst for economic growth in these areas. Olivier Scalabre in a recent TED Talk on robotics pointed out that in the coming years manufacturing costs in China will be at par with the U.S. Ultimately, robotics will enable the creation of more exciting roles within financial services, as people free themselves from the shackles of repetitive tasks and are able to actually leverage the skills that got them the job in the first place: taking the robot out of the human.

ENGAGING THE RIGHT PEOPLE

Robots, therefore, help directly address the issue of keeping staff happy, and morale high. One of the biggest challenges at fund management groups is retaining talent. If people feel disillusioned with their job, they will look elsewhere. A manager who spends their time reviewing and checking the same reports, week after week, is hardly going to feel inspired.

Equally, Millennials—that key demographic who grew up with the Internet—want to feel empowered in their jobs. Using RPA will help the financial industry’s Millennial workforce engage more in high-level tasks such as data analysis, strategic planning, marketing initiatives and ways to diversify revenue streams. In short, companies who embrace this will be viewed as the kind of progressive businesses that Millennials aspire to work for.

RPA holds the potential to transform businesses, assuming the role of advanced assistant to the human. In doing so, it will free up staff to collaborate more closely and engage in Blue Sky thinking. And this is precisely the key to driving business growth.

THE
BOTTOM LINE

Robotic process automation today presents countless concrete applications that can make your business more efficient and better serve your clients. The first step is catching the vision of its potential, and then choosing your first project.

VII

PRIIPs
CHALLENGING
DATA ANALYTICS

by ARMANN gUDMUNDSSON
Product Manager, KNEIP
and LAURENT LOUVRIER
EMEA Business Manager, MSCI

AT THE HEART OF DEBATE

The data analytics challenges introduced by PRIIPs technical requirements have been a heavily debated topic over the past few months with several market bodies pushing back hard, to the point of rejecting the current RTS. In spite of this, the European Commission has adopted the delegated act as advised by European Securities and Markets Authority, European Banking Authority and European Insurance and Occupational Pensions Authority. The object of the heaviest debate (and accompanying push back) from the market is the imposed methodology for the performance scenarios and transaction costs calculations.

NOT JUST A QUESTION OF CALCULATING

Carrying out the required data analytics (including risk calculations, future performance and cost scenarios) requires a high level of expertise, in addition to a whole lot of computing power. It is not realistic for many market players to effectively manage this internally without investing in new hardware, software development, forming new teams, or accepting the high operational burdens that the requirements bring with it. Asset managers have some serious considerations to undertake as they prepare to implement PRIIPs in their organisations.

MAMMOTH NUMBER-CRUNCHING

According to the regulatory technical guidance, each calculated scenario must include 10,000 observations. For the performance indicator alone this means 90.000 observations when you consider the requirement to include a one, three and five-year horizon, covering unfavourable, moderate and favourable market conditions. Add to that market data which is an additional ingredient necessary to carrying out these calculations. This quickly become costly, and adds to the practical challenges of implementing it in the calculations. Altogether, the various PRIIPs calculations call on some mammoth computing power to crunch all the numbers and produce the final figures.

NOT JUST A DROP IN THE BUCKET

Timing is also important to consider. It takes a major amount of computing power to carry out calculations of this nature and scope. Given the time allotted to produce the reports, several factors have an effect on one’s capability to finalise reports and submit them on time. In the draft phase, if every iteration of the document takes time to generate, this slows down validation cycles, which has a knock-on effect on the rest of production downstream. Re-running a production is not just a drop in the bucket, but can very quickly cause project plans to run over. This in turn reduces the flexibility in making needed changes to documents, which can have an impact if the need arises to make last-minute changes before a filing deadline. All in all, managing this process in-house requires a high level of self-discipline to keep within prescribed deadlines.

THE A-TEAM

Considering the complexity of the calculations, it is furthermore essential to have a strong team of experts carrying them out and controlling the quality of the output. As the PRIIPs is a pre-contractual document, if the presented scenarios prove to be wrong or misleading due to badly executed calculations of insufficient quality, serious consequences can ensue.

THE
BOTTOM LINE

A PRIIPs production solution with holistic, robust data analytics will be essential for implementing PRIIPs in your organisation.

VIII

DATA
AT THE HEART
OF DIGITAL

WHAT ARE THE MAIN CONCERNS OF
A CHIEF DIGITAL OFFICER TODAY?

The strategic digital approach that we have defined focuses on three areas:

1) The management of internal and external big data, including the definition of the semantic data model and the associated legal ramifications.

2) Blockchain technology, which we began working on in 2011 with a 2-day Biz Hackathon session to make our employees and external service providers aware of the impact of this new technology on our business. In 2015 we created a lab to develop a pilot market platform for non-listed securities, a result of crowd equity funding through our partnership with SmartAngels. We hope to pursue our approach with trade finance and cash financing. The R3 consortium, involving more than 42 banks, also aims to reflect on technology used by the banking sector.

And 3) initiatives such as Labchain have been launched, expanding the list of participants to universities, for example. This last area focuses on process automation and artificial intelligence. We always keep the concepts of collaboration, user experience, customer service and communication tools in mind. They remain the cornerstones of our business.

PHILIPPE DENIS, CHIEF DIGITAL OFFICER OF BNP PARIBAS SECURITIES SERVICES, EXPLAINS THE ROLE OF DATA MANAGEMENT WITHIN AN INTERNATIONAL BANK.

author
by PHILIPPE DENIS
Chief Digital Officer,
BNP Paribas Securities Services

WHAT ROLE DOES DATA (AND MORE SPECIFICALLY FUND DATA) PLAY IN THE CHIEF DIGITAL OFFICER’S ROLE?

Funds are a very significant part of the data which we manage. It’s a question of providing a cutting-edge service to our clients for fund administration activities, which corresponds to one of BNP Paribas Securities Services’ business lines. This data can be focused on repository management, calculating asset values or inventories.

HOW DO YOU THINK BNP PARIBAS
WILL INTERACT WITH DIGITAL IN THE
YEARS TO COME?

We will focus on big data, one of the three main areas. Our aim is to optimise all our data management to deliver and create new digital services for our clients. Our key concern is with tomorrow’s data. We already manage a considerable amount of data on a transversal basis. For example, at the end of 2015, we held a two-day hackathon called “big data distribution” which allowed us to work with our customers—portfolio managers, managers and distributors—and to think about tomorrow’s services. External speakers specialising in digital matters also participated. Big data, blockchain and artificial intelligence will impact distribution significantly. We are investing our resources to anticipate these changes in a proactive way.

HOW WILL DATA MANAGEMENT FIT
INTO THIS?

It is fundamental. With an increasing amount of data to manage, when you want to present data to clients or to rework it, data costs increase. Data no longer comes out once a day or a week but in real time. The governance of this data, the understanding of it and the time when it is produced and used have compelled us to set up a clear data governance policy. This also helps to create a better understanding of the client. Programmes within BNP Paribas Securities Services ensure that our data management is strategically improved.

THE
BOTTOM LINE

“Tomorrow’s data is our key concern.”

IX

REGULATORY REPORTING

TIME TO CHANGE
PERSPECTIVE

IN TODAY’S INTERCONNECTED WORLD WHERE SO MUCH
AROUND US IS CONNECTED, ASSET MANAGERS FIND
THEMSELVES IN AN INTERESTING PARADOX.

author
by MARIO MANTRISI
Senior Advisor to the CEO, KNEIP

Most companies still adopt last century’s organisational models, being divided and subdivided in different specialised departments, communicating with each other when necessary, but fundamentally separate. It’s known as the ‘silo organisation’. In looking at how the fund industry has approached the tides of regulations since the financial crisis of 2008, it is clear that the old ways of managing the data and the processes needed to comply with regulation aren’t equipped to handle what is being asked. To be fair, how could they, when one considers the quantity, complexity and especially the pace at which regulation have to be implemented? The go-to way to create a sense of order in an environment where the flow of data is constantly growing, is to put ideas, people and data into separate spatial and mental boxes, and go from there. But where is regulation heading? Policy makers have understood that one of the problem of the crisis of 2008 was tied to the interdependencies and inter-linkages of the financial system as a whole. This is systemic risk. As a consequence, they tend to look at regulation more holistically. Initiatives such as PRIIPs intend to create a level playing field across all financial instruments. And the recent alignment of UCITS V with AIFMD follow this same path of unification.

When dealing with regulation, the time has come to move away from the vertical “silo” approach and instead introduce a way of thinking and acting in a more holistic and lateral manner. Experts in the regulatory reporting space say that the solution to the problem lies in creating standards and data hubs. There is no doubt that standardisation is an inevitable step for a young industry that is on its way to maturing, but we need to look further.

Changing the way we look at the requirements that regulation places on our organisation horizontally instead of virtually requires us to be brave and question our processes. More often than not, when we begin that exercise, we realise that the way that information flows throughout our organisation is far from optimal: the same data points being replicated in various locations, numerous repetitive controls downstream on that data, and more perniciously, a frequent uncertainty of ownership of data. This all contributes to time and resource inefficiencies, and ultimately less reliable information accuracy and compliance risk.

The fund industry faces great pressure on their margins, and is lacking when it comes to time-to-market for new product launches compared to other competing financial vehicles. As such, it can’t afford to provide inaccurate information to its intermediaries and end investors. If the industry wants to continue playing an important role in this universe, then the way we manage data becomes crucial.

Another key element is technology. Computers do not automatically remove silos from organisations. The sheer volume of digital data that now exists in our systems forces us to constantly keep creating new ones to organise and put information into specific buckets. But the beauty of computers is that they are not born with indelible mental biases. They can be programmed to rearrange information in different ways and carry out better ways of organising it. With the data processing power of modern computing systems, it has become faster and easier to rearrange computer bytes than people.

Notwithstanding, the most important point is our mindset. There is more than one valid way to organise our worlds. Even if we cannot completely avoid silos throughout our organisations, we can avoid succumbing to the problems they pose by changing our perspective. We can manage our data horizontally so that when new regulation comes out requiring new data sets in new forms, we’re ready.

Marcel Proust once said: “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes”.

THE
BOTTOM LINE

The time has come to change our perspective and break out of the silo approach to handling regulation, and move to a horizontal, holistic way of organising our fund data.

X

REMEMBERING THE

FUND FORUM &
FEEL BERLIN 2016

With over 1,400 inFLuential
asset managers, investors, and
innovators, this year’s Fund Forum
was a positive transition from
Monaco, rich in forward thinking,
insights, and quality networking.

by KNEIP&NEW TRIBE AGENCY
FEEL BERLIN 2016 - The view from the Venue: Monkey Bar, Bikini Berlin Hotel

KNEIP WAS GLAD TO BE A PART OF IT, SHARING
OUR EXPERTISE AND AN EVENING WITH OUR
FRIENDS AT THE FEEL BERLIN
NETWORKING COCKTAIL

Feel Berlin again

CHECK THE AFTER-PARTY VIDEO

PLAY VIDEO
Fund Forum International

SEE HOW THE ATMOSPHERE WAS THIS YEAR

PLAY VIDEO