Transaction reporting can be a difficult process, particularly as regulatory complexity, data management practices and market conditions continue to evolve at pace.
Asset managers face a number of challenges when it comes to transaction reporting, the top 5 are:
1. Regulatory Compliance and Reporting Standards
The challenge: Asset managers must comply with various regulations across different jurisdictions, such as EMIR, MiFID II (soon to be MiFID III) and SFTR, ASIC and MAS. Each regulation has its own unique reporting requirements, formats and timelines, making it difficult to manage compliance efficiently.
The impact: Non-compliance can result in several problems, such as significant fines, reputational damage and operational disruptions.
2. Technology and System Integration
The challenge: It’s fairly common for asset managers to rely on legacy systems that were built before many of the complexities of modern reporting requirements were developed. If an asset manager is dependent on comparatively old technologies, integrating new reporting solutions can be technically challenging and costly.
The impact: Inadequate technologies can lead to inefficiencies, an increase in manual processing and delays in reporting, all of which can hinder an asset manager's ability to meet regulatory deadlines and compliance.
3. Cost Management
The challenge: Compliance with transaction reporting requirements can incur significant costs, such as investments in technology, hiring dedicated teams and ongoing operational expenses. Smaller asset managers, in particular, may struggle to absorb these costs but regulations state that all firms require legitimate reporting and data assurance solutions.
The impact: High costs can squeeze margins, particularly in a low-fee environment and may lead to increased pressure to automate and streamline operations.
4. Data Management and Quality
The challenge: Transaction reporting is dependent on high-quality, accurate and timely data. That said, asset managers often struggle with data siloes, incomplete datasets and discrepancies in data formats, which can lead to errors in reporting. When you also factor in the various systems asset managers use, such as order management systems (OMS), execution management systems (EMS) and portfolio management systems (PMS), ensuring data quality can be difficult.
The impact: Poor data quality can result in inaccurate reports, regulatory scrutiny and increased operational costs due to the need for data reconciliation and correction.
5. Operational Complexities
The challenge: Asset managers face numerous operational complexities in transaction reporting, particularly when managing the accuracy and timeliness of large volumes of transactional data across diverse asset classes and regulatory environments. Disparate systems and manual processes increase the risk of data inconsistencies and subsequent non-compliance.
The impact: Managing these complexities requires significant operational resources and expertise. Failure to do so effectively can lead to reporting errors, missed deadlines and potential regulatory penalties.
6. Conclusion
The solution: For asset managers to overcome the various regulatory reporting challenges they face, a multi-faceted approach is needed. Investment in robust data management practices, advanced technologies and efficient operational processes will ensure compliance across the various reporting requirements and regimes throughout the world.
Working with a technology partner with deep routed regulatory expertise like Control Now can help transform your transaction reporting, if you're an asset manager in need of support, speak to us.