Last Friday, Citisoft COO Tom Secaur joined Lori Schneider of K&L Gates to discuss COVID-19 impacts on the asset management community in a webcast hosted by Ignites. During this time of unprecedented volatility and uncertainty, the preparedness of asset managers to deal with crisis is being put to the test. Companies and their boards need to take both a short and long-term view to ensure their operations and risk management practices are positioned to meet the unique challenges of the COVID-19 pandemic.
For those that were unable to attend, we’ve compiled four key takeaways from the webcast. A recording of the webcast is available to Ignites readers here.
1. Past events have prepared asset managers for worst case, but this is unprecedented.
Both 9/11 and Hurricane Sandy prompted asset management to hone their Business Continuity Plans and consider their operational readiness for disaster. The COVID-19 international pandemic rises to a scale that we have not yet seen, but these events have prepared asset managers for swift response. Most firms have been able to quickly implement these plans as they pertain to the events that have unfolded over the past several weeks. In the case of large global firms, internal pandemic response teams have helped minimize business disruption. It is worth noting, however, that the scale and timeline of this crisis may push the bounds of what firms’ current plans are designed to address. We must consider the possibility of operational impact a year from now—something that many companies may not have envisioned.
2. Cybersecurity continues to be a concern but firms have the right tools in place to mitigate risk.
While operations teams increasingly shift to a remote environment, information technology preparedness is being tested. To the industry’s benefit, asset managers have long had tight controls for how their employees connect to networks and disseminate information. Right now, ensuring that all touchpoints in the firm are adhering to the same guidelines is critical so IT teams can monitor security threats. Firms will need to be more vigilant than ever as their operations move to a remote environment at scale and opportunists look to take advantage of this.
3. Service providers are prepared but firms may increasingly consider light shadow accounting/operations.
Over the past several years, asset managers have shifted to outsourcing more of their business—some going as far as to outsource front-to-back operations. This trend seemed to be heating up over the past 18 months but poses the question of whether centralizing so much of the business with one service provider is risky during a time of crisis. As part of the search and selection process, asset managers should have reviewed their service provider’s BCP plans in depth and verified that their partner has robust documentation of their ability to deliver in a variety of crisis situations. Having an understanding of how outsourcers will maintain business operations in a pandemic worst-case scenario is a bare minimum. Highly prepared firms will consider and document shadow accounting or shadow operations contingencies.
4. Communications is critical for oversight, continuity, and confidence.
The timescale of the news cycle has accelerated exponentially as the pandemic’s impact deepens. With new information emerging with heightened frequency, firms need to in turn keep their partners, boards, sub-advisors, and other stakeholders informed on how their policies and responses are evolving. As we navigate this uncharted territory, it is better to over-communicate than to wait-and-see before reaching out.
As this crisis unfolds and we learn more about timescale, market volatility, and business impact, there will no doubt be new contingencies and concerns we must be prepared to address. If you have additional questions unanswered here or in the webcast, please reach out in the comments below or by contacting us here.