This piece is a follow-up to my most recent blog posting on the results of our recent “data management and regulation” survey. I think the survey gave us a good chance to get a snapshot of what people are concerned about in terms of upcoming regulation and how it will impact their business processes.
The last posting was getting very long so I only posted some of the results. I finished up talking about the regulations that people were most concerned about in North America. The third question in our survey concerned European regulation and the topical issues there.
The question was: “in Europe, which of the following regulatory discussions concerns your organization most: RDR in the UK, UCITS IV & KIID for cross border funds, AIFM for hedge funds, the rise of Newcits, the upcoming UCITS V directive or the changeover from CESR to ESMA?”
Not surprisingly nearly two-thirds of all respondents indicated the big discussion point in their firm was UCITS IV and KIID – if anything the surprise is that it did not have a higher response. Maybe this is because many firms have focussed so heavily on preparation that they are very confident they are well placed to deal with the upcoming requirements that UCITS IV brings as well as the ability and readiness to initiate publication of KIID documents.
Nearly 30% of respondents indicated the AIFM directive, and an additional 17% indicated Newcits were items of discussion and concern in their firm – a clear indication that alternative strategies and the hedge fund industry are key industry focus points in the years ahead.
Somewhat surprising though is the fact that UCITS V is already a discussion point for 17% of respondents – the belief here is that the depositary structures that facilitated Madoff and manager remuneration are going to be addressed – these topics will ensure this is a hot topic of conversation for years to come.
Finally 17% of respondents indicated Solvency II was a key discussion point – this will become a key topic of conversation for any asset manager that has mandates emanating from the Life and Pension sectors – the demands on risk control, asset liability, ability to be transparent and report accordingly are all hot topics in the Sol 2 world.
Next up was the question: “How prepared is your organization for dealing with upcoming changes in regulation - are you totally prepared, somewhat prepared or not at all prepared?”
Thankfully the vast majority of respondents are at least somewhat prepared, but surprisingly only 15% or so indicated they believed their firms were totally prepared.
So it seems like the adage – a lot done, but more to do – seems prevalent here. Most firms are aware of what needs to be done, they have plans in place, but in some cases these plans have not been fully executed.
More reassuringly, we see that only 3% of respondents indicated that their firm is not prepared at all for the changes in regulation that are coming down the tracks. Overall, the responses to this question indicate that firms are struggling to prepare for the enforcement of regulatory reform, particularly in terms of their product data.
The next question in the survey was: “Do you think that new regulatory reporting requirements will change your organization’s attitude towards data management?”
The responses to this question were most interesting…… 
Nearly one-quarter (23%) of all respondents indicated that recent regulatory changes will force their firm to totally change their processes for getting their product data into the market, while only 12% of the respondents indicated that their existing processes were fully supportable, automated and left a full statement of record to facilitate audit.
The greatest number of respondents (56%) indicated that their firms only needed to make some amendments to the existing processes in their firm, for the management of product data.
The response to this question aligns with previous responses – where it would appear that in most cases firms know what they need to do, but have not fully executed their plans.
Overall, the responses to the survey questions indicate that firms are struggling to prepare for the enforcement of regulatory reform, particularly in terms of their product data.
The final question in the survey was: “What are the biggest challenges in getting your product data to market – are they manual processes, timeliness, cost, accuracy or something else?”
The big shock here is that just over half (53%) of respondents indicated that the biggest obstacle to getting their product data to market is manual processes, with a similar number indicating that timeliness was an impediment. It is not surprising that 40% indicated cost was a problem – this most likely results from having issues with manual processes.
Of most concern though should be the more than one-third of respondents that indicated accuracy was a problem for them. This is worrying indeed when you consider the considerable focus that has been placed on data management in recent years and the vast amount of IT dollars that have been spent trying to address the problem.
Finally the 6% other – commented that ability to maintain a statement of record or auditable trail of ownership was their greatest challenge – which is interesting – the inference we derive here is that these firms have automated processes and reasonable levels of accuracy, but proving this and showing a demonstrable audit trail to auditors and regulators alike is a particular concern.
So that’s it on our survey results – I thought they were worth sharing with a wider audience and it might give you an insight into how people are preparing for upcoming regulation.
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Posted by Ronan Brennan 
