Investment Policy Compliance:An Untapped Resource

Bradley ShrumAccount Manager, Investment Management

Agenda

• Challenges in Investment Compliance Monitoring (ICM)

• Current processes and associated risks

• Industry Best Practices

• Optimizing ICM

Meet Clarissa

Clarissa’s Challenges

• Limited resources

• Data integrity and consistency

• Need to monitor regulatory requirements

• Audit requirements

0% utilize ICM system to monitor increasing Regulatory requirements

53% don’t maintain data dictionary to match ICM system to other sources

21% have never done an assessment

58% performed at least 1 data quality assessment but not regularly

53% don’t feel the organization effectively manages potential data divergences

55% don’t think organization is sufficiently staffed to meet ICM requirements

Clarissa is not alone

Data from: Deloitte 2016 Global Investment Compliance Monitoring (ICM) Survey of 20 organizations

Clarissa is not alone

55% don’t think organization is sufficiently staffed to meet ICM requirements

53% don’t feel the organization effectively manages potential data divergences

58% performed at least 1 data quality assessment but not regularly

21% have never done an assessment

53% don’t maintain data dictionary to match ICM system to other sources

0% utilize ICM system to monitor increasing regulatory requirements

Clarissa’s Current Processes

• Manual Processes

» Time consuming = monthly or quarterly

» High risk for error

» Lack of process control

» Workarounds (i.e. macros, etc.) can break

» Key-personnel risk

• Legacy Systems

» Initial coding issues flow downstream

» Audit concerns over independent results

• Multiple External Systems

» Differing results

» Built for compliance monitoring

Industry Best Practices

Best Practices - Automation

» More scalable

» Lower error potential

» More frequent and timely testing/reporting

Best Practices – Data Integrity

• Centralize data in single system

• Regular assessment

Best Practices – Daily Monitoring

• Quickly identify issues

• Proactive approach

• Hard to support manually

Best Practices – Independence

• Additional checks

• Avoid conflicts of interest

• Identify Rule discrepancies

Best Practices - Agility

• Respond quickly to changes

• Reduce programming/system dependence

• Audit trails

Best Practices – Controls/Audit Reporting

• Automated systems = quick response

• Permission controls

• Reporting on changes/notes

Technology = Solutions

Technology Can….

• Automate monitoring

» Reconciles daily transactions and positions from clients and custody

» Aggregate data across all portfolios

» Utilize client provided data and custom fields

Technology Can….

• Provide piece of mind on data

» Regularly assess data quality and challenge inconsistencies

» Independent third-party data

Technology Can….

• Give you accurate and up-to-date compliance status

» Run rules against portfolios daily

» Warning limits can be set

» Provide email notification on violations

Technology Can….

• Provide power to the user

» Investigate violations down to the individual security

» Allows clients/users to update limits

• Limited permissions

» Input notes and resolutions

Technology Can….

• Provide full audit support

» Track full change history

» History by date and rule

» Single source/process

Technology Can….

• Meet regulatory requirements

» Rule-based monitoring

What to Take Away

• Challenges» Resources, Data, Regulation, Audit

• Potential Issues

» Manual processes, legacy systems, multiple systems

• Best Practices

» Automate daily, maintain data and independence, mind controls/audit

• Technology = Solutions

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Reminders