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Achieve operational success with rigorous controls and procedures

by Frank Caccio | June 23, 2020 | Operational Risk Management
Achieve operational success with rigorous controls and procedures.

Every financial management firm is concerned about risk and efficiency. Not only do these issues elevate a firm in the eyes of investors, they also contribute to successful execution and positive strategy outcomes. The tried-and-true approach to succeeding remains internal controls and procedures that are well-defined and rigorous.

With millions of dollars at stake in investment management, caution and clarity must work hand-in-hand with efficiency and flexibility. Rules need to be established that protect the integrity of strategies and, most importantly, managers and investors.

The first step is ensuring that a firm has a hierarchy of responsibility and clearly defined areas of responsibility within that structure. Next, within this context of responsibilities, checks and balances between individuals and teams must exist up and down the operational process to ensure no single entity operates independently without confirmation.

Violations happen. The key to avoiding them is anticipating scenarios in which they may occur. A check and balance can expose fraudulent actions as well as unintentional mistakes. In the meantime, the process should serve to confirm that it is working effectively to avoid these errors.

Each action and decision should have a counter-balancing reaction and review. The intent is to expose inconsistencies in process and bring them to the attention of the right personnel to address. The operations and compliance departments should play a key, often the lead, role in oversight as a complementary component to the portfolio and trading teams. While everyone continues to have ownership of their responsibilities, they can rely on the integrity of the process to assure them they are operating at the highest standards possible while being free to operate within their area of expertise.

Workflow definitions and charting are an integral part of an orderly process. By defining time-lines for a process and who is responsible for each action along the way, operations become more efficient and secure. Information management platforms that integrate these steps in one place are an ideal approach to monitoring this workflow. These platforms typically can be tailored for a firm’s internal processes, tracking access by specific individuals and their actions, send notifications at decision points as well as alert to variations in risk control. Done well, this approach can increase efficiencies that allow staff to focus on building strategy and reducing exceptions while limiting the possibility of fraudulent actions that might
otherwise avoid detection.

No system is perfect, whether manual or automated. For critical operative functions, it benefits the process to have built-in redundancies in the approval process as an extra layer of security and confidence. Management should review their functionality for potential failures and work to address them through improved system efficiency and dedicating additional resources when necessary. Any financial expenditure done early will pay off in the long run by avoiding system and process failures in the ongoing management.

Lastly, review the control systems, and review again. Redundancy in review is just as important as in active operational activities. At all times, staff should know the process, when and by whom a check and balance will occur, and how to positively effect change in the process for the benefit of staff and the firm as well as clients.

How OpsCheck can help?

OpsCheck is an Operations/Compliance Control and Oversight application that mitigates Operational Risk, enhances communication, offers full transparency, and makes
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management software to you in a single tool. No more spreadsheets, emails and
Outlook are needed for managing business operations. It’s easy to get started, easy to
operate and is cost effective. Many reputable firms have already subscribed. Internal
and external stakeholders will appreciate its value. OpsCheck promotes a culture of
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