Tech-driven finance upgrades for asset managers

Asset management and banking CFOs cited regulatory compliance as their top concern in a recent Grant Thornton survey, and it’s easy to see why.

The SEC’s new private fund regulations are scheduled to take effect soon, and the SEC’s new climate disclosure rules will drive changes in the reporting of firms that are subject to the SEC’s compliance requirements.

“As you embrace a new regulation and its requirements, think more broadly about the different processes you can address related to that regulatory compliance activity,” Patanella said. “There are likely to be opportunities to do more than comply with the rule, and to improve associated processes and get more value out of the changes you’re making.”

Of course, modernization efforts in the finance function represent just a portion of the overall work that risk, compliance and internal audit leaders need to do to drive regulatory compliance efforts throughout the organization. But in finance, compliance efforts can be aided by tools that:

• Identify gaps in internal controls.
• Continuously monitor changes in regulatory requirements.
• Analyze the reporting of competitors and other organizations to determine best practices for reporting.
• Scour enforcement actions by regulators for commonalities that indicate compliance risks.

Meanwhile, firms that outsource risk management activities may be able to take advantage of third parties’ use of AI tools. For example, Grant Thornton professionals use CompliAI™, a tool with generative AI functionality that the firm developed using Microsoft technology, to streamline clients’ control design and assessment processes.

Asset management leaders sometimes have difficulty producing custom reporting because their back-office functions have been outsourced to third parties with inflexible reporting procedures and structures. In other cases, their software provider’s general ledger or ERP system doesn’t support the way they manage their business, so they feel like they are trying to fit a square peg into a round hole.

In either case, this need for customization can result in team members spending a lot of time pulling customized reports that are manual and repetitive. The good news is that this, too, is a process that firms can address through RPA. Private equity funds, meanwhile, are using tools such as RPA to transform the data they receive from fund administrators into the format they desire.

Managing disparate data sources, integrating systems after mergers and acquisitions, and navigating outsourcing or vendor relationships are all common challenges for asset management firm finance functions. Grant Thornton has assisted clients in overcoming these obstacles by adopting a strategic approach to data governance, prioritizing system interoperability, and working with vendors and partners to establish data standardization and timeliness.

“Addressing these challenges requires a robust strategy that includes streamlining vendor relations to ensure uniform data delivery and investing in technology solutions that can integrate and cleanse data, paving the way for a seamless and efficient finance modernization journey,” said Grant Thornton CFO Advisory Senior Manager George Alexander.

After M&A, meanwhile, firms need a focused effort on system integration to achieve a unified, efficient operational framework that enables seamless data consolidation, reporting and month-end close.

As organizations prepare to embark on their finance transformation journey, the active and visible support of executive leadership, led by the CFO, is one of the key drivers for the success of any finance modernization program. It’s critical that the CFO and the executive letingadership team start by developing a clear, uniform vision and set the tone at the top with the aim of empowering those who deliver the improvements, which will then trickle down to all affected end-users.

“Based on the long-term growth goals established within their enterprise, CFOs must be intimately involved in defining their overall organizational vision, key success criteria, and program objectives to be achieved throughout any transformation effort to drive strategic direction and maximize sustained value,” said Grant Thornton CFO Advisory Managing Director Patrick Boruta.

At the same time, it’s important for CFOs to build support throughout the organization surrounding the financial modernization effort. Since finance processes are intertwined throughout the organization, CFOs need to clearly articulate the drivers and rationale fueling the change in addition to the upstream and downstream impacts that the transformation may have on other departments. The expected benefits and return on investment should also be communicated throughout the organization.

“CFOs need to obtain approval and buy-in so the organization will realize maximum value from these improvements,” Patanella said.

It’s critical for CFOs to enlist organizational change management personnel and processes from the very start of the finance modernization work. Larger asset management firms are likely to have dedicated change management functions to assess stakeholder impacts and craft internal and external program communications tailored to the appropriate stakeholder groups. Change management will ensure that proper impact assessments, user readiness and training methods are used to facilitate a seamless transition and enhanced user preparedness and adoption of their newly defined target operating model.

At smaller asset management firms, CFOs may have to take the lead in the change management process, enlisting the help of human resources and perhaps other functions to manage the transition. Smaller firms that contract with a third party for finance modernization services may also use the contractor’s dedicated change management services to assist with the effort.

Finally, once transformative change has been executed, it’s important for firms to establish a governing body or process to ensure long-term value is sustained and that there is an organizational commitment to maintain incremental performance improvement into the future. Many organizations use third parties to assist with managing continuous improvement, but an in-house dedicated team is recommended to keep the effort focused and ensure there is follow -through.

Asset management firms that undertake finance modernization may vary greatly on the maturity curve when they start this process. Regardless of where they begin, though, it’s possible to drive continuous improvement — whether it’s from nascent to baseline or from advanced to optimized.

Firms with less mature finance functions will need to launch their modernization efforts by getting the basics in place, including effective processes for booking transactions, seamlessly working with vendors and customers, consolidating data, and developing the necessary internal and external reports. Finance organizations that already have the appropriate foundation in place will have more flexibility in determining which improvements are most desirable.

“Regardless of the maturity of your finance function or the improvement opportunities that you choose to pursue, you still need to perform a prioritization assessment, which links each identified enhancement to a clear ROI,” Boruta said.

Many asset management finance leaders are working with disparate processes and systems that are increasingly difficult to manage through manual workarounds. A current-state assessment can highlight key reporting needs, identify broken processes and inadequate data, and help firms prioritize their standardization, centralization and automation efforts.

An assessment can help finance leaders align with technological advancements and provide a structured pathway for improving operational efficiency and data integrity to enable the successful adoption of AI. Implementation of AI also requires the development of policies and procedures that align with organizational principles and the board’s oversight.

The most elementary and basic strategy, though, is to get started. The most competitive companies in the market are developing technology applications that organizations in all industries will use to make improvements that asset management and finance functions will need to achieve efficiencies and accelerate growth as well.

Your competitors may be using these tools soon — or they may already be using them. Modernizing your own finance processes and enabling technologies can help you keep pace, and hopefully drive the necessary differentiation to keep you ahead of your competition.