How asset managers can survive today without forgetting tomorrow
15 April 2020
It goes without saying that the last few weeks have been unprecedented - both on a personal level, and a business level.
I have spoken to many clients over the period. We’re helping people to manage the current challenges, supporting firms in their resilience plans, their people needs and to continue to deliver ‘business as usual’ to the extent that it is possible. On the whole, I’ve been hugely impressed as firms have managed to maintain adequate financial resources and fund liquidity, while supporting customers who are more vulnerable through call centres, all in highly volatile market conditions.
But as always, there is tomorrow to think about. While firms have been frantically dealing with today’s challenges, it’s important to remember that tomorrow will come round all too soon.
The FCA, PRA and Bank of England have simultaneously tried to ease the burden on firms, while becoming far more involved. A number of my clients are reporting to regulators daily on market conditions, liquidity and outflows. This is labour intensive in non-stress times, but has created more work for firms.
To help counter this, the FCA has deferred certain existing regulatory initiatives. Firms shouldn’t mistake deferral for a lack of focus. For example the joint work by the Bank and FCA on fund liquidity may have been delayed, but liquidity is quite obviously still the order of the day and a major supervisory focus; the FCA’s next guidance consultation on vulnerable customers has been deferred to later this year, while at the same time FCA supervisors are (rightly) particularly focused on vulnerable customers - whether that is access to call centres, scams or proactive communications.
But what about those initiatives that haven’t been delayed - or indeed which should now be ‘business as usual’ for firms? Anyone reporting under the new value assessment rules with a fund year end of March (or who have selected a March year end for composite reporting) faces some difficult analysis and must still publish their reports by the end of September, although if possible by the end of July. If your funds are ethically orientated, are you sure that the current environment has allowed you to maintain that focus? Did your operational resilience plans work - and if not, what lessons can be learned? Did your Senior Manager accountabilities work as planned in this live stress-scenario? Does your control environment continue to operate effectively with people working remotely?
While for some, thinking about ‘BAU’ may feel premature, the reality is that with ships broadly stabilised, staff working remotely and markets a little calmer, it is important to focus on the core job at hand. My experience as a regulator post the financial crisis was that the (then) FSA was keen to assess post mortem how firms coped. We can expect the same focus this time too.
Over the next few weeks I will be publishing a number of blogs looking at key risks which firms need to remain on top of in the coming months. Of course the FCA’s business plan will provide some clarity of its focus, but the ‘BAU’ agenda should remain front and centre of mind. In helping my clients, I will have one eye on the ‘today’, but my other eye very firmly on tomorrow.