And this will be a manual analysis, there’s no tool today that brings it together as directly as that. Marian Azer: It’s layered. I’ll give you an example, particularly in the multimanager space, we do investment operational reviews, and that covers people, processes, systems. It covers disaster recovery programs. And it also includes counterparty risk. For example, looking at a multimanager’s funds managers and saying, who’s on the broker panel? How have you assessed their risk, and what is your exposure? How much have you put through them? The transition managers panel too. So it’s very layered. If you can imagine a multimanager, it could have 20 or 30 managers and then those managers have their own set of risks. We’re finding a lot more clients are not only now interested in the front office capability, the alpha generation. They’re interested in the risks associated with the back office and the decisions made there.

So I get my multimanagers to actually go in and assess each of their clients. And it is a very manual process, and you are relying on a lot of expertise. But it’s catching up and people are just recognising that, gee, not only do I have the risk of having these fund managers managing my money, I have the risk of the entities they’ve contracted with as well. And I need to understand that. Michael Bailey: It seems such a hard thing to get to the bottom of. Part of what’s prolonging the crisis is that everyone’s paranoid, there are all these credit default swaps sitting out there and nobody knows exactly who’s liable.

In terms of doing a manual assessment, how confident can you ever be? Drew Vaughan: I think that’s part of the manual process. Clients are starting by asking their custodian to sit down and give them a list of counterparty transactions and the structures in the portfolio. I looked at a client recently, not a particularly large fund, about $3 billion. The COO asked his custodian to go through and assemble a list of counterparties.

The interesting thing out of this was that when you assessed the counterparties for the forward foreign exchange contracts they had, they had a phenomenal exposure to an individual counterparty through those that wasn’t really anticipated. That sort of is going to come to light and people will do it by manual examination; by asking the custodian; by sitting down and thinking about it more. So the focus is really there, and it’s a good thing. Bryan Gray: Access to data is really the key isn’t it, Drew? If funds can get their hands on the data, it doesn’t have to be real time – though as close to real time as they can get it – at least you’ve got information to make decisions, and then you can take action.

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