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Takeaways from 2019-2020 Regulatory Challenges and Safeguarding for the Future

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On the 26th September at One Aldwych Hotel, we hosted “2019-2020 Regulatory Challenges and Safeguarding for the Future”. This half-day event was packed with in-depth panels, expert analysis and insights on leadership and team performance. A special highlight of the event was the engaging pre-match analysis provided by former international rugby player Gordon D’Arcy and internationally acclaimed comedian and podcast host, Jarlath Regan.

Our excellent speakers were Simone Vroegop and Adrian Whelan, both from Brown Brothers Harriman, Alex Viall from Behavox, Johnny Mattimore, Norman and Sons, Jennifer Murphy, Maples Group, Declan O’Sullivan, Dechert, Colin Ware, BNY Mellon, Chaim Hack, Enfusion and Sarah Underwood, A-Team Group. 

The event was attended by Chief Risk Officers and Chief Compliance Officers from Europe’s largest asset management firms and asset service providers.  The overall theme emerging from the event is that regulated firms are at an inflection point after a decade of regulatory reform. It is now time to think about the practical implementation of emerging technologies, the key considerations in critical outsourcing and the focus for firms in preparing for 2020 emerging regulations.

Here are our top takeaways from the event.

  1. There is ambition within the asset management community to adopt emerging technologies. However, significant change is often only discussed in theory, with little practical application of emerging technologies. 
  2. While Artificial Intelligence (AI) has existed since 1956, the focus to date in financial services has been on research and development rather than delivery and implementation. AI and neural networks are not yet prolific in asset management. Machine learning is being adopted in larger asset manager firms, particularly for rules optimisation and risk detection.
  3. Investing in AI gives firms access to insights and offers potential outcomes that do not typically come from a standardised ruleset. It is important that any such outcomes are transparent, explainable and understood by both the firm and the regulator.
  4. In terms of emerging regulations, Money Market Reform (MMF) is placing additional requirements for stress testing and reporting, with recent guidelines being issued by ESMA (European Securities and Markets Authority).
  5. The complexities in obtaining and warehousing the data to meet the MMF obligations is impacting firms from a data licensing and procurement perspective. 
  6. Whilst there are some synergies across the regulations (AIFMD and MMF), there is a greater onus on the manager in MMF reform to complete the reporting requirements, due to the depth and the scale of the information required.
  7. The EBA (European Banking Authority) guidelines on outsourcing arrangements have provided a clear definition of outsourcing and specify the criteria to assess whether or not an outsourced activity is critical or important. The Guidelines aim at establishing a harmonised framework for outsourcing arrangements of all financial institutions and have been referenced by several NCA’s (National Competent Authorities) throughout 2019.
  8. When it comes to outsourcing, it is important for firms to have a strategic solution and to start addressing the tactical solutions adopted over the last 10 years of regulatory reform. 
  9. Firms must consider data as an asset. Let the technology firms acting as service providers provide best practice and tools to maximise this asset. 
  10. The industry continues to be challenged by a multi-layered siloed approach to outsourcing, which is preventing firms from seeing the full picture. The current focus on optimisation is seeking to resolve this through interoperability between outsourced service providers.

If you have any further questions on the topics raised at the event please feel free to contact us at marketing@aqmetrics.com

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