Your questions on Governance and Compliance answered

Date: November 15, 2011

Dario Cintioli, Product Director at StatPro talks to FTfm about governance and compliance in the recent economy, migration into the cloud and how this has changed over the years.

Q: In terms of risk management which aspects of UCITS III and UCITS IV does it include?

A: Within UCITS III we specialize in global exposure computation, particularly rules concerning VaR and relative VaR. We are active in VaR testing, back testing and counter party risk. To increase the productivity of a risk manager we have created a new dashboard for managing the back testing of hundreds of portfolios in one view. In UCITS IV we have introduced the synthetic risk award indicator computation and generalized commitment approach. We are also improving our back testing capabilities which will be able to handle hundreds of funds all in one place.

Q: How does the workflow process work in practice?

A: There is an implementation process with our clients, especially when it comes to risk, which requires less hassle for the client, because we outsource all the management of data giving them a ready-to-use application with short implementation time.

Q: The solution is hosted – are fund management firms happy to outsource these functions or do they generally prefer to build them in-house?

A: In the risk management world, banks are not happy to outsource the data management to third parties but in money management this is quite normal. Asset managers want to maintain the ownership of the compliance rules as it gives them the freedom of defining these rules for the clients – that’s what they do with StatPro. It is very flexible in this aspect and you do not need to be an expert to write those rules, users can configure even very complicated rules and load them into our system and run them.

Q: How has the environment changed over the years since the financial crisis and new rules being enforced? Have compliance issues changed the way fund managers are structured or do business?

A: The regulation clients are trying to be more efficient, they are already paying for the regulation so they are trying to make the most of it. We have seen an increase in risk because the institutional investors are asking more about it, and what our UCITS clients have done is extend VaR computation and regulation computation.
Three years ago our clients were focusing on the functionality and the relationship they have with us, wanting to know the latest updates and changes that were happening. Now clients are focusing on making internal workflows sleek and cost efficient. Another big factor in this change was migration to the cloud, where reports are shared on the web making it simple, easy and less costly. And StatPro is doing just that, investing in simplifying life for our clients and moving everything into the cloud – with our latest product called StatPro Revolution.

Q: In the investment management industry are some companies behind or ahead in regards to moving into the cloud?

A: It depends on the culture of the company whether they are open to outsourcing and sharing in the cloud. Europe has been more invasive than US, who are moving in this direction but at a slower pace. Smaller companies are more inclined to outsourcing and moving into the cloud because of their strong need to be efficient, so they jump on a lot of opportunities that simplify their lives. Big firms on the other hand are more conservative and are slower at migrating because they need the input and approval from different departments within the firm.

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