There has been much debate recently surrounding Ibor, or the investment book of record. Much of it continues without a clear understanding of what the subject entails.
At a simple level, Ibor provides investment managers with a single source of all positions data, ideally in “near time”. The objective for an Ibor system is to provide the investment manager with an improved view of their positions in order to improve the investment management process.
In many firms, the only place that a consolidated position can be viewed is in the accountancy book of records, or Abor. For many areas of the business this situation is limited and untimely, as it is based on end-of-day data.
Advocates of Ibor point out that – in addition to improving investment forecasting, reducing risk and enhancing data governance – it will assist front offices and fund managers. After all, the performance of the fund manager is a key area in which investment management firms will seek to differentiate.
Some asset managers are also considering Ibor as a means of insulating their front and back offices. In this way, if an asset manager wants to make any systems changes in these areas, the impact will be controlled as all business functions will be connected via this consolidation layer.
Furthermore, in the markets where “best of breed” has become the de facto approach to implementing technology, there will be a variety of applications and processes often focused upon asset class. Global firms will also have local and regional requirements. Designing and implementing a new ecosystem to embrace all of these demands, within a realistic budget and timeframe, is a significant challenge.
It is also true that as more firms start to evolve more globally-orientated operating models, the ability to track positions in a more timely and consolidated manner grows in importance. The picture is growing increasingly complex and some firms are looking to provide segregated Ibor layers by asset classes or geography.
While on face value this approach sounds appealing and obvious, the question remains whether firms fully understand the complexities involved before they embark on such complex programmes. The danger is that the initial study and high level recommendations (usually carried out by external consultants) can look very appealing to senior executives and momentum is created.
The issues can start almost immediately as a precise specification is required in order to design the most appropriate solution. This is extremely difficult to achieve if the business benefits have not been identified and agreed, with associated business-based targets set. These projects will always elicit a variety of opinions on the best way to achieve the holy grail of an Ibor. Without pre-defined business benefits, specific goals and a clear timeline, the result is nearly always project confusion, lengthy debate and mission creep.
While a data management project lacks clear definition and while its scope can be interpreted in many ways, it is doomed to failure. The failure of some massive data management projects in the last decade bear testimony to that sad truth.
For many organisations, evolving to a more data orientated operation should bring significant benefits, but these benefits should be defined from an early stage and progress measured in an open and honest manner. Investment management firms need to be looking to rationalise their systems, not adding more kit as a life-support for applications that are no longer viable.
Steve Young is cheif executive at Citisoft
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