Richard Fleischman & Associates, a provider of outsourced technology and IT services to alternative asset firms, outlined the eight standards of business sustainability at a recent event for hedge fund advisers and prime brokers.
Richard Fleischman, along with Omnium, a provider of administration and middle-office services for hedge funds and financial institutions, held the event at The Yale Club in New York City.
With a recent study by the Tabb Group indicating that nearly half of hedge funds believe operational controls are a top concern of investors, Donald Previti, director of business development at Richard Fleischman, said that fundamental shifts in the market demand a strong technology and operational foundation, both of which add direct value to business and help attract and retain investor capital.
To ensure that firms maintain a sound operational process and sustainable business model that preserves corporate reputation and investor trust, Previti outlined the “big eight standards of business sustainability”.
The standards are:
1. Creating a risk mandate that ties directly into a firm’s corporate code of conduct
2. Establishing the need for business neutral compliance and risk officer that does not report to the investment team
3. Creating a cross functional compliance team that includes executives, business process owners, IT and administrative personnel
4. Mentoring new employees to ensure complicity and adherence to the firms’ written code of conduct
5. Testing and validating all processes and procedures internally and with any relevant third parties including prime brokers, consultants or other custodians
6. Engaging an outside specialist to augment the internal expertise of C-level executives
7. Documenting a mission statement that clearly articulates the company’s culture of compliance
8. Ensuring that the culture of compliance be a determined, coordinated and cohesive approach across all departments that is strongly sanctioned and supported by the highest levels of the firm
Ann Marie Davis, head of global operations at Omnium, said companies must have requirements for comprehensive and integrated framework to manage trading and business operations, as well as the appropriate checks and balances and system integration from front to back.
The third speaker at the event, Dr. Paul Michael Viollis of Risk Control Strategies, pointed out that investors are more concerned than ever about protecting their shared electronic information.
“They’ve incorporated investigative due diligence into their decision-making to guard against fraud and potential terrorist connections,” he said.
All three speakers stressed the proactive and vital involvement of all employees in adapting true business continuity procedures, adding that employees should be professionally trained on their responsibilities.
“There is much greater demand for accountability across all business lines and there must be a greater awareness of how all the operational processes of a firm work together in a cohesive, systematic and repeatable way to preserve performance and protect a firms corporate reputation and investor trust,” said Previti. “When people, processes and technology are working in a systematic way, an enduring operating model emerges.”
