All asset management firms use some form of third-party vendor services. Bloomberg provides market data. A proprietary software designer sells a risk control module. Trading platforms interact with banks and custodians. All of these components are critical needs, but they also must be accountable for the strict regulation requirements that a firm needs for today’s compliance, risk control, and trading execution.
Third-party services can increase risk
When an organization thinks of its risk control, it cannot stop at its own doors. Any third-party platform, any outside data flow, and any outside security measures must be seen as the firm’s own because they are. When regulators come knocking, the company doesn’t get to blame anyone else for failures in any aspect of its asset management process.
Every firm uses some kind of third-party service. For some, it is a cost issue. They cannot afford to hire and build their own system. For others, they might not have the required expertise inhouse to produce what they need on a short or long-term basis. Still others are interested in a proprietary system module that does something great, so that particular wheel does not need to be invented. Data is another third-party service. Firms need live feeds of stock pricing and indices.
Vendors add risk
All vendor services are required to follow regulatory and security needs for their products. However, the downside for the company is they do not control that process. The risk control for the vendor might not be the same or as high as the firm’s needs. Security measures such as data integrity and client data security all have to be maintained. Every time an organization interacts outside its own internal systems, the possibility for risk exposure increases.
Technology can minimize exposure
With the right kind of tools, you can minimize your exposure to operational risk. Cloud-based technology brings proven advances in task, project and workflow management in a single solution. No more spreadsheets, emails or Outlook are needed to manage your business operations.
Operational risk is mitigated by a compliance control, operations and oversight platform that enhances communication, offers full transparency, and makes everyone accountable. It’s easy to get started, easy to operate and cost effective.
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