Corporate culture is the bedrock upon which successful organizations are built. It's the synergy of behavior and interaction that defines the essence of a company. In today's dynamic investment operations landscape, firms must adapt to technological advancements and operational shifts to stay competitive. However, it's crucial to understand that these changes can significantly impact corporate culture.
Let's delve into how firms can navigate these changes while fostering a positive cultural environment.
Technological Conversions
Investment operation technologies tend to have far-reaching implications that can be transformative for an asset management firm. In other words, when an asset manager decides to adopt a new operational tool or software, this change isn’t always about upgrading technology; it is often about transforming critical functions like portfolio accounting, performance analytics, and data management.
In addition, there are a myriad of tools and vendors in the marketplace which reflect an industry need for differentiated products and specialization. Selecting the right tool involves considering factors like team collaboration, skill compatibility, vendor support and partnership. The introduction of new software can reshape interaction and communication within the firm, emphasizing the importance of alignment with its core values and behaviors.
Outsourcing Operations
Another common change in the industry is the outsourcing of particular investment operation functions. This strategic decision is intended to bring specialized expertise, scalability, reduction of Tech debt, focus on core (front-office), and potential long-term cost reductions . However, it requires alignment between the firm and its outsourcing partner. Both entities must synchronize procedures and values to ensure seamless collaboration. When outsourcing goes wrong, asset managers must absorb the ramifications since outsourcing of a function does not absolve the firm of its responsibility for that function. That responsibility requires significant and meaningful oversight efforts.
Outsourcing has many positive benefits and (when managed well) may introduce new behavioral norms and foster relationship-building within the organization, contributing to a more dynamic culture.
Compliance with Industry Standards
Global asset managers are often venturing into new markets and challenged with compliance to new local regulatory authorities. Compliance is required by jurisdiction and the ability to align to strict instruction while capably adjusting to mandated changes is a necessity. Attaining and maintaining compliance requires a disciplined yet flexible workforce culture. Regulatory bodies such as the Securities & Exchange Commission (SEC) in the US, the Ontario Securities Commission (OSC) in Canada, and the Financial Conduct Authority (FCA) in the UK demand significant attention from global asset managers to operate competitively and ensure fairness.
In the case of Global Investment Performance Standards (GIPS), a voluntary firm-wide standard that governs the marketing of performance data to provide comparability and credibility of performance returns in the marketplace, applying the GIPS standards will alter firm behavior as it requires an organization to conform through a collaborative and disciplined set of processes and procedures. To achieve compliance, many firms employ GIPS Steering Committees to foster consistent communication amongst portfolio management, sales and product teams, as well as performance measurement. The GIPS standards will require operational discipline and rigor while reinforcing a firm’s compliance behavior.
Cultural shifts resulting from these changes are neither inherently good nor bad. However, they can be disruptive if not managed effectively. Firms should anticipate potential impacts and leverage these events of change to steer corporate culture towards desired outcomes. By proactively addressing cultural change, organizations can mitigate shock and ensure a smoother transition.
As the investment industry evolves, so must corporate cultures. By embracing technological advancements and operational changes with careful consideration of their cultural implications, firms can cultivate a thriving environment conducive to success. After all, a strong corporate culture isn't just a reflection of where a company has been, but a guiding force shaping where it's headed.
