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New tool for operational risk

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Under the AIFMD, European fund managers must focus more intently on operational risk. Earlier this summer, the Central Bank of Ireland produced an AIF rulebook highlighting 16 requirements to which an AIFM should adhere in order to establish best practices around operational risk.

“What transpired from this was a feeling among AIFMs of an increased burden on compliance and a huge cost associated with adhering to the CBI’s guidance,” says Colin Keane, Ireland Country Head at SS&C GlobeOp. The CBI listened to managers’ feedback, issuing a further consultation paper. There will likely be further guidance if not at the end of 2014 then in early 2015 on how the ManCo and board of directors should align their operational risk and organisational framework, says Keane.
What is generally needed by AIFMs is a framework in accordance with the business plan originally submitted to the CBI that enables them to act on and evidence the policies and procedures needed for AIFMD compliance.
“As a broad-based service provider and administrator, we are well placed to provide such a capability. Managers can leverage our experience around operational risk to demonstrate their own oversight and governance,” states Tom Kirkpatrick (pictured), European COO at SS&C GlobeOp. “We’ve developed technology that allows us to control our operational risk and then apply that to support our clients.
“We do a lot more than just fund administration and NAV calculations. We provide a range of middle office services; operational support for derivatives lifecycle processing and EMIR reporting; risk reporting – a broad range of activities. We control that through our internal technology infrastructure.”
As Kirkpatrick confirms, when AIFMD appeared on the horizon the logical question to ask was ‘How can we leverage our experience and technology to provide our clients and related parties with the same tools that we use for our own operational risk oversight capabilities?’
SS&C GlobeOp monitors its operational risk using an in-house system called GoCheck™. It is now in the early stages of expanding this capability as a broader service to its clients.
“It’s something that is particularly interesting to emerging AIFMD platforms which will potentially support large numbers of managers,” says Keane. “What we are talking about here is not only regulatory filings such as Annex IV but the granular detail of NAV reporting, investment policy monitoring, risk monitoring, liquidity management, as well as supervision of delegates. AIFMs can delegate responsibilities. However, they need to clearly evidence that they have oversight and governance of those delegates.”
In GoCheck™, SS&C GlobeOp has developed an infrastructure tool that will allow managers to prove they are adhering fully to the fund’s policies in an auditable manner.
As the dust settles around AIFMD the regulators are going to start paying visits to managers to ensure that they have operational oversight and are properly managing their operational risk.
“It’s all about being able to have a complete record of all organisational activities and demonstrating proper control of those activities. GoCheck™ is an online task management tool that allows managers to define their procedural structure, their controls and to retain evidence of all the controls and reports that are required,” says Kirkpatrick.
“We expect GoCheck™ to become a key feature for managers next year to help them meet their AIFMD operational risk oversight requirements.” 

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