A large percentage of asset managers outside of North America are flying blind when it comes to determining exception management’s effect on their firms earnings, according to a newly published report by industry research firm Tabb Group.
“I think that 42% of buy-side firms not knowing the impact of trade delays and manual processes on their business is a bit disturbing,” said Dayle Scher, a senior analyst at Tabb Group and author of the study.
Scher does not equate the level of transparency to an organization’s size.
“It was across firms of all sizes and pretty equally dispersed,” she said.
Of the 58% of surveyed asset managers, the picture only slightly improves.
A sizable number of the respondents (13%) estimate that exception management, manual processes, and delayed trades represent an opportunity cost of more than 15% of their annual revenue. Although a solid plurality (31%) estimated their respective opportunity costs as less than 5% of their annual revenue.
Scher attributes system integration and other technology issues as a primary driver of opportunity costs.
“There shouldn’t be any difference between any systems that asset managers use to calculate trades, as well as performance, attribution, and risk metrics,” she said. “The fact is that there are differences. And asset managers will need to troubleshoot, identify, and remediate those differences.”
Nearly 60% of the study’s participants stated that their firms spend less than an hour manually handling errors while it took 19% of their peers more than an hour to accomplish similar tasks.
The remaining 20% asset managers claimed that their firms lacked manual processes (10%) or did not know how long it took their organizations to process errors (10%).
“A lot of asset managers appear to accept these costs as the price of doing business,” said Scher. “I would argue that they do not have to be and that they should not be the price of doing business.”
