Companies are seeking cost-effective and high quality risk management solutions, a nearshore location, such as Northern Ireland can deliver both, says Robert Magee of Invest Northern Ireland.
As risk management practices evolve to meet changing regulatory requirements, asset managers are now focused on improving bottom-line efficiency, flexibility and maintaining service quality, while managing risk appropriately.
In the recent past many firms have adopted offshore and outsourced risk solutions. However, as regulation becomes more demanding and the focus on risk management increases, hybrid nearshore solutions are likely to be increasingly attractive. Locations offering reduced operating costs compared to traditional centres, enhanced agility and time-to-market compared to further afield offshore locations and being physically and culturally closer to the home market are in demand.
IFI Global’s research department has conducted a major survey on risk management to find out where Europe’s alternative fund industry is on this topic, particularly as it prepares for AIFMD. From February to May 2014, 80 firms involved in risk in the European investment banking and asset management industries were interviewed. One of the findings of the survey was in respect of the likelihood of key risk functions being carried out closer to the firm’s indigenous location.
The survey shows that the greater regulatory scrutiny of risk, as well as the more holistic approach that many managers are adopting, will result in less offshoring of risk monitoring functions in future. More of this will be done in locations that are close to head office rather than on the other side of the world, as is the case now.
Northern Ireland is an ideal location for nearshoring of these key functions. In the last decade several global financial and legal services firms have opened centres in the region to deliver services to established centres in Europe and beyond. These firms cite the region’s high quality and relatively untapped talent pool, a stable competitive cost base, low wage inflation and low staff turnover as the critical success factors enabling them to drive value for their business.
Citi established a technology centre in Belfast in 2005, and has since added middle and back office functions and legal and compliance divisions. Further expansion was announced with a target of 1,500 staff to provide integrated financial services and support to their markets in EMEA and beyond.
Augentius Fund Administration opened its Belfast office in 2012, following Heritage Administration Services which had already established a fund accounting centre of excellence to support its Guernsey-based parent.
Other internationally renowned firms, such as First Derivatives, the Allstate Corp, Liberty Mutual, Mercer and Lloyds Banking Group, have significant operations in Northern Ireland with recent arrivals to the sector including Cowen International and Chicago Mercantile Exchange. These companies are delivering specialist software development operations, legal services, actuarial and risk analytics services to clients globally.
Universities in Northern Ireland have a tradition of working proactively with industry. The region is home to two world class universities, Queen’s University Belfast (QUB) and the University of Ulster, which jointly produce 15,000 graduates per annum.
In 2012, Queen’s university launched the First Derivatives’ Trading Room, featuring Bloomberg terminals, financial information feed and software giving students the experience of trading in real time. The university incorporates bespoke risk management modules into degree courses and also provides a specialist MSc in risk management & financial regulation, which has a part-time option for those in employment.
QUB is also in the preliminary stages of establishing a centre for risk, the centre’s primary objective is to engage in research that furthers academic knowledge and practitioner understanding of issues relating to the quantification and management of risk.
As Northern Ireland’s business development agency, Invest Northern Ireland delivers flexible and tailored support to business. It is connecting industry, government and academia to ensure Northern Ireland continues to offer the right mix of high quality talent and infrastructure in a cost effective and pro-business environment.
Robert Magee is financial services sector specialist at Invest Northern Ireland
©2014 funds europe