5 Things About Implementing Operations Automation Every Investment Manager Should Know



Operational efficiency is named as the #1 area of focus for investment managers to apply technology and innovation, according to the EY — 2017 Global Hedge Fund and Investor Survey. In fact, of all investment managers interviewed, nearly 60% said their organization is investing in or plans to invest in innovative technology solutions to drive operational efficiency. There is little doubt that more investment managers are looking for innovative ways to improve operational efficiency in order to maximize alpha.

As investment management firms look to automate manual tasks in the middle and back office, the fund’s Chief Operating Officer should consider the following five best practices in order to ensure that their efforts to utilize technology and automation are producing optimal results.

Define Specific, Measurable Goals

Before an investment management firm starts automating manual tasks, they should have a specific goal in mind. The COO should define what they are trying to achieve and have a way to measure the results in real dollar terms.

It is tempting to start incorporating automation without understanding how the manual process works or analyzing whether the task is a good candidate for automation. Spending time on analysis and defining specific goals might seem like unnecessary work, but in the long term, having a specific goal in mind, making sure that all stakeholders are on the same page with it, and having clearly defined acceptable results will lead to less headache later.

A clearly defined implementation process could show that a certain project when implemented, will save the investment management firm money over time, even if the upfront costs seem initially overwhelming. This makes it essential to budget technology implementations with anticipated goals in mind, and more importantly, the ability to measure these results.

Having key performance indicators (KPIs) that can preferably be measured in real dollar value, will provide the clearest picture of whether the automation effort is worth the investment. This also makes it easy for the investment manager to justify the investment.

Involve All Stakeholders

It is important for you to identify all the key stakeholders who will be affected by the changes of the specific operational automation. How do you identify the stakeholders? There are two main types of stakeholders. The first ones are the obvious ones. These are the team members most directly impacted by the operational issue. These are typically the team members that are performing the manual tasks, and the ones who are depending on the output of the manual tasks.

The second group of stakeholders is the ones in charge of mitigating the pain point. Having all of these stakeholders in all the meetings is important, as they have much to contribute to the decision-making process, and their involvement can dramatically improve the success of the project.

These stakeholders will also help you decide the most viable option, and brainstorm what ideas might work, and which ones might not work for various reasons. In most cases, they will also be the ones testing your automation implementation and providing feedback.

Think Big, Start Small

During the planning phase, you should think big. Start with your wishlist, then move beyond that to identify emerging technology trends and how they might help make your investment management firm operations more efficient.

From a planning perspective, it is important to have yearly and quarterly goals that you would like to achieve within your investment management firm operations. It is also important to discuss these goals with higher-ups, investment managers, the middle-back office team, and all other stakeholders that might be affected by the enhancement or the re-engineering you are going to be performing during the fiscal year.

Once you move to the execution phase, however, you should start small. What does that mean? When examining your vision for the year and what projects will add the most value to your investment management firm operations efficiency, you will have to focus on a few major points; (a) the skills available within your team and your investment management firm, and (b) the approval process depending on the hierarchy of your investment management firm.

From a project management perspective, it is imperative that you keep two things in mind; (a) make incremental enhancements or updates, and (b) start with the simple changes that do not directly affect the most critical business functions of your investment management firm. If you keep these two points in mind, you will have a much easier time while making all the operations update on a day-to-day basis.

Training & Documentation

Training and documentation are equally important to all the other items discussed in this article. Properly training all the stakeholders, and documenting the changes and how the new process works, are critical to change management. Your co-workers are more likely to embrace the changes in operations when they are trained properly and have easy-to-understand and complete documentation available to guide them as needed.

Training is a crucial first step when implementing any kind of operations change within your investment management firm. However, each member of your fund will usually have their own pace of learning new things. This is one of the reasons that documentation is essential. Once the initial training is over, or there may not be time for further training, your co-workers can fall back on the documentation to find their way around the new system.

Having happy and satisfied colleagues, even if they are a part of your team or of another internal team, will allow them to be the cheerleaders of your project. It will also make it easier to propose changes in the future, as the employees within your company will be more willing to accept change in their day-to-day tasks and responsibilities if they are assured a smooth transition.

Have a Fallback Plan

Risk management, at all levels and business functions, is a crucial part of running an investment management firm. When implementing operations automation within your investment management firm, having a fallback plan when things don’t go as planned is highly critical in making sure your investment management firm is always able to perform business-critical functions, even when making upgrades or re-engineering the front or middle-back office.

As you probably realize, not having a fallback plan when implementing any change within your fund operations can lead to lost revenue. It is your responsibility to accurately and thoroughly identify any risks while implementing operations automation. In addition, it is vital that you clearly define how you are going to manage identified risks.

The fallback plan should clearly define any and all alternative actions, as well as tasks that will be performed in case your operations enhancements and changes are not working as expected. You should also think about and include delegation of responsibilities as part of your plan B.

Key Takeaways

As more investment management firms move towards achieving operational efficiency through technology and automation, it is important to make sure that you, as an investment manager, keep these five points in mind while implementing middle-back office operations automation.

To summarize:

I hope that this article has provided you with some important pointers to keep in mind while implementing change within your investment management firm.