Linedata: Cyber crime more disruptive than blockchain
29 February 2016 Paris
Image: Shutterstock
Asset managers see cyber crime as a bigger potential disruption than blockchain, but regulatory change still poses the biggest challenge, a Linedata survey suggests.
When Linedata’s 2016 Global Asset Management and Administration Survey asked respondents to identify the three biggest challenges to their firms, 58 percent put ‘adapting to regulatory regimes’ in their top three, bringing this figure above 50 percent for the first time in the last four years.
The challenge of maintaining operational efficiencies and cutting costs was considered an issue by 43 percent, also representing an increase over the last three years. The third most-cited challenge was managing data.
The results also showed a decrease in concern around investor performance.
Looking ahead to what respondents anticipate will be challenging in three years’ time, there was a slight dip in the number of respondents believing regulatory regimes would still pose a challenge.
Challenges around operational efficiencies and cutting costs expected to remain the same, however the survey suggests there will be less concern around data management.
When asked which three regulations would have the biggest impact, the Markets in Financial Instruments Directive (MiFID) II emerged as the clear winner, with 40 percent putting it in their top three.
The second most selected was the Alternative Investment Find Managers Directive (AIFMD), highlighted by 32 percent, while FATCA was selected by 31 percent.
While the Dodd-Frank was chosen as having an impact by 30 percent, it was voted the regulation with the biggest impact among North American respondents, 77 of whom put it in their top three.
The report said: “There are some indications that the emphasis is now less on acting on regulation, as much of that is in place, and towards a better understanding of the long term systemic changes that regulation is having on the asset management industry.”
Surprisingly, when it comes to the greatest potential for disruption and risk in the market, 36 percent said they were most concerned about cyber crime, while 25 percent highlighted a move towards alternatives and another 25 percent selected new intermediation models, such as robo-advisors.
Only 8 percent saw blockchain technology as having the greatest potential for disruption, and 6 percent selected ‘other’.
The report said this “perhaps mirrors the fact that the industry is still exploring the potential of this technology rather than being an absolute measure of its final impact”.
Equally, when asked where the highest proportion of their IT spend was directed, respondents’ top two priorities emerged as ‘improving legacy systems’ and ‘risk and compliance solutions’.
The report points out that: “Although the threat to cyber security is clearly identified as a potentially disruptive force … it ranks no higher than seventh as an IT spend priority.”
According to Linedata, this could show either that banks are confident they have measures in place to address cyber security, or that tackling the issue will require more than just IT spend.
The survey also suggested a lacklustre take-up of cloud technology. A quarter of respondents said they’re either currently running, or planning to run, back-office processes in the cloud, but other areas of business saw less enthusiasm.
Some 20 percent showed an interest in the cloud for customer relationship management, 18 percent said they are considering it for email, and 17 and 14 percent said they will look in to it for middle- and front-office operations, respectively.
Although 10 percent suggested they were either running, or planning to run all processes in the cloud, 20 percent said they are not sure, and 21 percent are not planning to use the cloud for any processes.
The report said: “This may be for security reasons, to retain more control over processes or because existing systems (we have established that maintaining legacy systems is a priority) may not have the option of running in the cloud.”
The report was based on data gathered in Q4 2015. Respondents included asset managers, hedge fund managers and fund administrators, plus representatives from custodians, prime brokers, consultants and advisory firms.
When Linedata’s 2016 Global Asset Management and Administration Survey asked respondents to identify the three biggest challenges to their firms, 58 percent put ‘adapting to regulatory regimes’ in their top three, bringing this figure above 50 percent for the first time in the last four years.
The challenge of maintaining operational efficiencies and cutting costs was considered an issue by 43 percent, also representing an increase over the last three years. The third most-cited challenge was managing data.
The results also showed a decrease in concern around investor performance.
Looking ahead to what respondents anticipate will be challenging in three years’ time, there was a slight dip in the number of respondents believing regulatory regimes would still pose a challenge.
Challenges around operational efficiencies and cutting costs expected to remain the same, however the survey suggests there will be less concern around data management.
When asked which three regulations would have the biggest impact, the Markets in Financial Instruments Directive (MiFID) II emerged as the clear winner, with 40 percent putting it in their top three.
The second most selected was the Alternative Investment Find Managers Directive (AIFMD), highlighted by 32 percent, while FATCA was selected by 31 percent.
While the Dodd-Frank was chosen as having an impact by 30 percent, it was voted the regulation with the biggest impact among North American respondents, 77 of whom put it in their top three.
The report said: “There are some indications that the emphasis is now less on acting on regulation, as much of that is in place, and towards a better understanding of the long term systemic changes that regulation is having on the asset management industry.”
Surprisingly, when it comes to the greatest potential for disruption and risk in the market, 36 percent said they were most concerned about cyber crime, while 25 percent highlighted a move towards alternatives and another 25 percent selected new intermediation models, such as robo-advisors.
Only 8 percent saw blockchain technology as having the greatest potential for disruption, and 6 percent selected ‘other’.
The report said this “perhaps mirrors the fact that the industry is still exploring the potential of this technology rather than being an absolute measure of its final impact”.
Equally, when asked where the highest proportion of their IT spend was directed, respondents’ top two priorities emerged as ‘improving legacy systems’ and ‘risk and compliance solutions’.
The report points out that: “Although the threat to cyber security is clearly identified as a potentially disruptive force … it ranks no higher than seventh as an IT spend priority.”
According to Linedata, this could show either that banks are confident they have measures in place to address cyber security, or that tackling the issue will require more than just IT spend.
The survey also suggested a lacklustre take-up of cloud technology. A quarter of respondents said they’re either currently running, or planning to run, back-office processes in the cloud, but other areas of business saw less enthusiasm.
Some 20 percent showed an interest in the cloud for customer relationship management, 18 percent said they are considering it for email, and 17 and 14 percent said they will look in to it for middle- and front-office operations, respectively.
Although 10 percent suggested they were either running, or planning to run all processes in the cloud, 20 percent said they are not sure, and 21 percent are not planning to use the cloud for any processes.
The report said: “This may be for security reasons, to retain more control over processes or because existing systems (we have established that maintaining legacy systems is a priority) may not have the option of running in the cloud.”
The report was based on data gathered in Q4 2015. Respondents included asset managers, hedge fund managers and fund administrators, plus representatives from custodians, prime brokers, consultants and advisory firms.
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