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LATEST THINKING


THE ALGEBRA


OF OVERSIGHT


Outsourcing for


Asset Managers

OVERVIEW

At the same time that outsourcing could help asset managers move certain operational responsibilities off their plates, it can also create an entirely new obligation for oversight. Finding that sweet spot between trusting your service providers too much and not enough is challenging, but critical.

The latest paper in our InsideOps series outlines a formula that could help asset managers think through justifying the investment required for an effective oversight program. Three key factors should be estimated:

1

The value of avoiding errors

2

The benefits of achieving and maintaining service-level quality

3

The probability of success

Some managers may attach a higher value to avoiding errors, while others may be willing to accept a higher level of risk—both affect the level of resources allocated to oversight. The purpose of the formula is not to arrive at a single answer, but rather to facilitate a thought process that highlights the trade-offs. Ultimately, the oversight model you choose needs to make sense for you.

InsideOps | The Algebra of Oversight: Outsourcing for Asset Managers

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Now that the question of ‘when’ has been answered by the regulators, all operations leaders should consider the question—is my firm prepared to transition to a shortened settlement cycle? The inputs into the formula may be interpreted and defined differently. It’s the act of working through the thought exercise that provides value.

 

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