Balancing innovation and automation

The following is an excerpt from our recent WBR Research Report, Navigating Investment Operations in 2023 and Beyond: How the Buy-Side is Responding to Data, Reconciliation, and Technology Challenges. Download it here
Striking the right balance between meeting a firm’s business goals of reducing costs, doing more with less, and dealing with historically high data volumes and employee turnover can be difficult to reconcile with the shiny new goals of innovating and modernising processes, driving more value, and increasing efficiency throughout the business. 

Despite some uniquely challenging times, investment operations leaders are making substantial progress in their digital transformation and data-centric processes. However, more progress is needed in several key areas for operations to effectively solve for significant industry and regulatory initiatives going forward. 

Future-proofing operations 

Our survey revealed that about 48% of buy-side operations leaders listed their top challenges as - reducing and controlling costs and relying too heavily on IT. Provoked by volume, accentuated by talent shortages, and made real in the negative impact to the bottom line – these challenges are not going away any time soon. 

The sheer amount of duplication in the industry is compelling operations leaders to find new ways to loosen team constraints and promote increased data sharing. Scaling to volume growth and eliminating time-to-market bottlenecks as the industry moves towards T+1 and intraday processes will be crucial to driving better investment outcomes. 

Drowning in data 

How well operations curate data is tied to the organisation’s overall health. It is also the conduit for enabling firms to move from process-centric to data-centric technology. However, Know Your Data (KYD) initiatives will be the biggest challenge going forward. With much of the data sourced manually, the acquisition, consolidation, normalisation, transformation, and enrichment of data will become increasingly crucial.  

Leveraging high-quality and rapidly available data sets speeds up decision-making and ensures portfolio managers trust the systems they use and the information they receive. That’s why it was shocking to see that nearly half of our survey respondents rated their data quality as either ‘fair’ or ‘poor’ – even though more than two-thirds have an internal team dedicated to collecting and normalising data. Perhaps the situation is even more dire than I had first imagined! 

Automating vs. innovating 

Anything that is not automated means more people and more costs. But automation does not always equal innovation. Legacy processes may continue to slow you down, and manual tasks are “soul-destroying” (as one speaker described it at InvestOps Europe 2022). T+1 will shine a light on broken, slow, batch processes and only exacerbate many of the problems. 

In our survey, far too many respondents use the terms “at the moment” – but there is nothing “at the moment” about the challenges investment operations leaders face. The challenges are chronic and they show no signs of going away, as long as the buy-side back-office fails to invest strategically and intelligently. That’s why operations teams must think and act with innovation, not just automation, in mind. 

Upscaling the operations workforce 

Employee job satisfaction has never been so high on a firm’s agenda (we’ve all read about the Great Resignation, Quiet Quitting and the Great Reshuffle). Upscaling the workforce is more vital than ever for innovation and oversight. If your operations team has lost sight of what is important - what is unique to your firm and what gives differentiation - then answering the question “Why do we do the things we do?” with conviction is impossible.  

If operations cannot answer that question, then sadly, the ops workforce will fail to deliver enduring success. 

How do you successfully balance innovation with automation? 

Be willing to try new technologies, processes, and outsourcing options. Fight any fear of failure. Instead, worry about the competitors who are innovating and evolving faster than you – and start doing something about it now rather than later, when it may already be too late. 

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Download our recent WBR Research Report, Navigating Investment Operations in 2023 and Beyond: How the Buy-Side is Responding to Data, Reconciliation and Technology Challenges.  


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