Asset managers seeking to become more efficient by outsourcing to software-as-a-service (SaaS) providers should be mindful of the increased operational risk and regulatory risk exposure they face in doing so, say data management experts.
“If you outsource, your operational risk is being removed from you,” said Derek Ramage, head of network management at Fortis Investment, at the ‘Technology solutions for asset management’ event earlier this month. “How do you control that? Asset managers have historically managed their operational risk well. There seems to be an assumption the service providers will provide what they say they will.”
The desire to save costs by reducing middle- and back-office systems has created a growing market for IT software vendors offering SaaS products and cloud computing vendors providing similar services to reduce costs for data storage.
“One of the main drivers [of outsourcing], aside from saving on costs, should be looking to improve your operational risk profile,” said Paul Roberts, managing director for Europe at Milestone Group, a technology vendor, speaking at the same event. “If you think about operational risk profile, it is ultimately affected by three things: cost, quality and timeliness.”
“Most outsourcing vendors – though they would not want you to think this at the start – will have been flexible with at least some of those elements in finding the right solution for you. Your operational risk profile is controllable by you, for the right price and level of quality,” he said.
It was also suggested there should be an element of education within successful outsourcing – with the client learning from the firm it relies on to manage its risk, and the vendor providing the necessary transparency to allow that to happen.
“If you outsource to somebody who is capable of doing something better than you, that person should educate you to some level how they are doing things better,” said Peter van Kleef, president and chief executive of Lakeview Capital Market Services, a risk management and investment software vendor. “It is also important that the firm is transparent, rather than just telling the client it can manage its risks without saying how.”
Source:http://www.risk.net/operational-risk-and-regulation/news/1597734/saas-poses-operational-regulatory-risks-asset-managers

