Mar 27, 2023

The following blog post is one in a series of Cutter 2023 Trends that provide insights into industry challenges and considerations for our clients and member firms in 2023 and beyond.

We started 2022 hopeful that operations teams would enjoy the benefits of expanding budgets by tackling overdue wish list and process efficiency initiatives. Unfortunately, with today’s volatile market conditions, inflation, staff shortages, and competing pressures in the front office, many firms have dialed back those hopes.

While some operations teams may continue to make improvements in key areas such as cash management and corporate actions, most teams now focus their energy on their mandatory regulatory-driven initiatives. In addition to regulatory reporting pressures, especially those unfolding for ESG, firms face several other critical regulatory pressures. Asset managers continue to work on their uncleared OTC derivatives and collateral handling to comply with the Uncleared Margin Rule (UMR), enacted in response to the financial crisis of 2008 but now in the final phases and impacting more firms.

Cutter members also remain focused on squaring up the matching and settlement processes. The Central Securities Depository Regulation (CSDR) settlement rules, although still with pending deadlines, have spurred continued emphasis to better manage fails and support shorter settlement cycles. With greater scrutiny of alternative investments and valuations expected, such as those outlined by the Alternative Investment Fund Managers Directive (AIFMD), operations teams have also mobilized their alternatives administration support process improvements.

We know this is not new territory, as operations teams have long balanced their investments in human capital, technology solutions, and service options with their strategic plans to meet upcoming regulations. Nevertheless, we see regulatory pressures and their impact on operations as a significant trend for 2023 and beyond.

To speak with a Cutter analyst or consultant about this trend, contact us at [email protected]. To read more 2023 Trends, see our whitepaper, Trends in Asset Management: 2023 and Beyond.