June 2009

BACK OFFICE VIEW: the right tools for the job

"BPM is a major leap forward in the effort to reduce human error within the transactional chain, thereby improving efficiency and increasing cost effectiveness@, says Paul zur Nieden paul_zur_nieden.jpg2009 is turning out to be no better than 2008 for investment management.

After years of boom, asset management firms are scrambling to quickly and radically adjust to a dramatically changing landscape. The pressure is on to slash operational costs, meet more exacting standards from clients and prepare for potentially tighter government-led regulations than ever before.

But in far too many cases, achieving these goals will be an uphill climb. Integral tasks are still being performed manually in the majority of asset management firms. For example, it is not unusual for accounting reports to be physically printed and reviewed before the day’s account valuation has to be manually finalised. As a result, tasks continue to be resource-intensive at a time when both cost cutting and enriching returns are top priorities. Every pound, euro or dollar spent on operational activity is money lost when returns are slight at best.

Only those asset managers who take steps to improve business processes will emerge from the downturn in a strong position. Automation solutions capable of covering the entire workflow spectrum have a key role to play in the battle to mitigate risk and streamline the full valuation chain.

However, while this is all well and good, I appreciate that now doesn’t seem the obvious time to spend money on ripping out tried-and-tested systems and replacing them with new ones. The experience of some well-known organisations has shown ‘rip and replace’ projects can be hugely costly and vulnerable to degrees of failure. Even when these implementations succeed, it is high-cost and time-intensive.

This is where business process management (BPM) can play a part. BPM is the full automation, control and monitoring of interrelated steps within a structured business process. It can allow asset managers to determine and automate daily business processes, with the ultimate goal of minimising or eliminating resource-consuming manual task management. Critically, it does not involve the upheaval of existing systems. Rather, it is a layer of technology that sits on top of, building and improving on, existing tried-and-tested technology and operational processes. The cost, risk of failure and downtime is therefore kept to a minimum.

But what can BPM really do? For one, it can ensure that a multitude of transactional tasks – from exceptions clearance to activity confirmation – are more robust and cost effective. For example, by using BPM the entire process of producing daily accounting reports can take place electronically. As a single system is used to orchestrate all functions, processes that occur in multiple applications are performed automatically upon manager confirmation and approval. As a result, company resources are fully maximised by this integration of internal processes and systems, which increases throughput while greatly reducing risk.

It would also bring about an extensive reduction of manual and redundant processes. Automating transactional processes, while enhancing compliance capabilities, is especially important for asset servicers pressured by reduced margins and an increasingly tough regulatory environment.

Business activity monitoring (BAM) is an outgrowth of BPM and significantly enhances real-time data analysis capabilities, resulting in greatly improved transparency, including service level agreement (SLA) management. The increasing importance of operational transparency has made monitoring emerge as a vital standalone need. In its most simplistic form, monitoring reveals exceptions and other systemic bottlenecks, allowing management to address such errors in real time. This added layer of protection heightens overall visibility, making communication of status more effective and efficient.

One can not underestimate the extrapolative powers of monitoring: by alerting managers to business patterns that could lead to a breakdown allows them to spot problem areas early and make the necessary adjustments. By presenting a more focused and real-time view of the various components of critical business processes, clients are more likely to catch process dependencies as well as both current and pending trouble spots, without having to wade through a blizzard of data.

Building upon the proven benefits of exceptions management and other automation initiatives, BPM is a major leap forward in the effort to reduce human error within the transactional chain, thereby improving efficiency and increasing cost effectiveness. Moreover, by allowing managers to assess and control work load in real time, the all-in-one BPM platform provides companies with a powerful defence against compliance-threatening errors. It boosts transparency and paves the way for a trusted and credible business model. Those who adapt to radically changing market conditions by having the proper tools in place stand a far greater chance of fighting their way out of this downturn. I have no doubt that BPM will prove itself to be a key weapon in a firm’s armoury.

• Paul zur Nieden is VP product management and strategy at SunGard Asset Arena

©2009 funds europe

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