A single, centralised database where investment information is maintained not only leads to a reduction in operational risk, but also to an increase in operational efficiency. Removing the requirement to reconcile data across various fronts reduces the burden on human capital, and improves the synergy across the organisation’s infrastructure. While traders may not pay much attention to what is happening in the back office, a system that allows for straight-throughprocessing can drastically reduce the burden on those who do need to pay attention to superficial performance and risk as well as underlying monitoring and compliance.

When choosing investments themselves, each investment manager has its own criteria, and may be mandated to follow certain investment guidelines based on a prospectus, or investment goal. Due to the array of investment styles, investor risk tolerance and regulations, accounting for investment activity can vary greatly between different firms.

Technology, allowing for customisation for a fund type or investment objective, can make following investment guidelines, and reporting to the aforementioned parties, easier, more efficient and more reliable. As was the case after the series of high-profile failures in the ‘80s, government regulation and investor scrutiny resulted in a plethora of new rules and regulations intended to prevent risk adverse behaviour. Undoubtedly, new regulations and renewed scrutiny will emerge from the current credit crisis, dictating more transparency and visibility into investment managers’ investments and books.

Having a solution that can quickly adapt to meet newly crafted monitoring and reporting requirements will thus become even more important. In a changing regulatory environment, an adaptable and robust investment operations system becomes more attractive, as it can meet new guidelines faster than point solutions, which each have to individually be upgraded and configured to meet new requirements.

One of the lasting results of the current subprime fallout and credit crunch will be increased scrutiny and a heightened requirement for awareness of investment activity and risk from regulators, investors and corporate stakeholders. Investors, whether institutional or individual, will be putting more credence to risk, whether it is systematic or operational, and the riskiness of an investment will likely play a greater role in investment decisions.

At some point we will emerge from the current downturn, and institutions will once again infuse cash into new investments. But this time, proper investment standing and valuation will be both an internal as well as external requirement. Data that can be quickly, efficiently, and accurately maintained will increasingly become a requirement and not just a luxury.