SimCorp: Trillions of assets on outdated systems
29 May 2015 Copenhagen
Image: Shutterstock
Industry experts are showing the investment management industry’s continued over reliance on technology that is not fit for purpose, according to SimCorp’s new report, ‘Legacy Systems: The elephant in the room. Why investment management firms need to tackle the issue head-on’.
The report shows many firms’ existing systems are struggling to adapt to new demands and that asset managers are putting their investments at risk. It also puts the industry’s reputation on the line with trillions of US dollars assets being managed by outdated systems.
The volume of trading data is growing quickly, increasing by an average of 60 percent every year.
In the report it states that regulators are imposing more stringent requirements and there is an increased client demand for transparency and more trading in esoteric asset classes and geographic markets. It also suggested that asset managers are under pressure to cut costs while delivering higher profits to shareholders.
Klaus Holse, CEO at SimCorp, said: “The frenetic pace of change in the industry is not conducive to continued usage of legacy systems.”
“Firms run the risk of discovering that their IT infrastructure becomes a Gordian knot that becomes too difficult to untangle. Legacy systems were built for simpler processes and simpler times.”
According to the report, asset managers are not investing new systems because the project length surpasses the typical term. Brand new systems can also be seen as a threat to job security, however legacy systems are the primary driver of manual processes, which increase operational risk, increase processing times and delay business growth.
The report concludes that legacy systems not only result in a higher degree of manual processes but they also create the need to build interfaces and additional system layers to fill in the gaps.
It also suggests that creating new workarounds and spreadsheet-based solutions have potentially negative consequences such as a greater chance of trade failures and related errors.
Holse added: "With regulators in the US and the UK issuing huge fines last year which can be directly linked to what they describe as inadequate IT systems, the financial consequences of failing to invest in new technology are all too clear."
The report shows many firms’ existing systems are struggling to adapt to new demands and that asset managers are putting their investments at risk. It also puts the industry’s reputation on the line with trillions of US dollars assets being managed by outdated systems.
The volume of trading data is growing quickly, increasing by an average of 60 percent every year.
In the report it states that regulators are imposing more stringent requirements and there is an increased client demand for transparency and more trading in esoteric asset classes and geographic markets. It also suggested that asset managers are under pressure to cut costs while delivering higher profits to shareholders.
Klaus Holse, CEO at SimCorp, said: “The frenetic pace of change in the industry is not conducive to continued usage of legacy systems.”
“Firms run the risk of discovering that their IT infrastructure becomes a Gordian knot that becomes too difficult to untangle. Legacy systems were built for simpler processes and simpler times.”
According to the report, asset managers are not investing new systems because the project length surpasses the typical term. Brand new systems can also be seen as a threat to job security, however legacy systems are the primary driver of manual processes, which increase operational risk, increase processing times and delay business growth.
The report concludes that legacy systems not only result in a higher degree of manual processes but they also create the need to build interfaces and additional system layers to fill in the gaps.
It also suggests that creating new workarounds and spreadsheet-based solutions have potentially negative consequences such as a greater chance of trade failures and related errors.
Holse added: "With regulators in the US and the UK issuing huge fines last year which can be directly linked to what they describe as inadequate IT systems, the financial consequences of failing to invest in new technology are all too clear."
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