Operational Health and the Case for Periodic Strategic Assessments

 I hear it all the time from those that know my foibles and phobias, “You need to go to the dentist and get a check-up!” I have nothing against the dental profession, mind you, quite the contrary. It’s pain that’s my Achilles’ heel, or at least the perception and anticipation of it. Generally, I finally make that dreaded appointment when it hurts too much to chew, which I acknowledge is not the right way to keep up on my dental health. I know I’m not alone, as I see the same kind of procrastination everywhere, especially in my work. For asset managers, a strategic assessment is perceived as a painful disruption, something to be performed only in response to a problem. But by that time, a figurative root canal, or even a crown, may be the only solution.

On our projects, we encourage managers not only to perform regular internal reviews of policies and procedures—much akin to preventative flossing—but also to consider performing a strategic assessment on a periodic basis. In our experience, performing an assessment shouldn’t be a response to a comment from an SEC review, or when a client receives an incorrect statement, or after taking a financial hit due to trade or reconciliation errors. An assessment should be thought of as preventative, rather than reactive, healthcare. 

I think it’s safe to say that it’s “settled science” that preventative measures deliver many benefits. A strategic review of investment operations and technology may simply result in a clean bill of health. On the other hand, uncovering a potential problem early can pay off. Over time, sound practices can be subject to complacency: controls can be bypassed, reconciliation steps can be assumed rather than executed, and regular training can lapse. In the interest of margins, many managers look to curb their IT and operations budgets first—a tactical approach which may eventually harm the patient. 

A strategic assessment offers the opportunity to plan, be proactive, better understand how your current environment is situated for growth, and gain greater insight into the details of your operations and technology spend. An assessment can provide a roadmap for what you need to consider when you grow, inform you of technologies in the market, and meanwhile develop a relationship with a consulting partner, who (like your family dentist) will do his or her best to make sure your operations sparkle. 

Money managers face a multitude of external pressures, well outside of the markets within which they play and claim their expertise. An ever-changing regulatory construct, technological advances adopted by competitors to gain an edge, plus investor pressures for customization, decreased risk, and greater transparency, all continually buffet investment managers, distracting them from their primary task of making profits. Periodic strategic assessments will provide the insight and perspective necessary for managers to plan and execute from a position of strength—a healthy alternative to simply treating the symptoms.