Proper oversight ensures the best outcome

This guest post was submitted by Citi which sponsored a panel at the 2014 NICSA Strategic Leadership Forum entitled “Best Practices Around Transparency into (the Operations of) Your Mutual Fund Service Provider.”

4419155_HiResIn a world that is becoming increasingly global and complex, asset managers are outsourcing a growing number of critical functions to a select group of service providers. If done right, outsourcing may decrease costs and enable growth, but the devil is in the details.

Firms can ensure the best interest of clients through the proper oversight of service providers. It is particularly critical to gain a high-level of transparency into these four key areas:

  1. Pricing
  2. Distributed Work Environment
  3. Globality
  4. Middle Office Outsourcing

Here are some details to delve into:

  • Valuation oversight and transparency are more important than ever.
  • Using a primary and secondary pricing vendor interchangeably may provide more information, but there are risks.  Daily oversight of changes in pricing vendors is required.
  • The service provider needs to become efficient in understanding emerging issues. It’s also important to get the client’s senior management comfortable that the appropriate controls are in place.
  • Actions should be taken to address “resilience risk.” An understanding of the distributed work environment is critical when addressing this type of risk.
  • Best practices are emerging in the oversight of third party vendors who use “centers of excellence.”
  • Many factors influence how asset managers and service providers collaborate. One example is “next-shoring”—the evolution of outsourcing from being purely focused on cost to considering the proximity to demand and proximity to innovation.

NICSA: 8400 Westpark Drive, 2nd Floor McLean, VA 22102 • Tel: 508.485.1500 • Fax: 508.485.1560