How Has Pandemic Changed Business Operations For The Asset Management Industry

In a globally competitive environment, businesses worldwide are enduring the uncertainties wreaked by the Covid-19 pandemic. The assets management industry specializes in identifying and managing risks that a business may face; it has had a year and a half to take in the new ways of conducting its affairs. When conducting equity research, an asset management company will look for innovative ways to create, acquire, operate, maintain, upgrade, or dispose of an asset.  

And in this blog, we highlight the two most essential aspects for the assets management companies of today.

Risk Aversion Dominates

Risk is inherent to a business operation. But a three trillion (US Dollars) lower global GDP in 2020 as compared to 2019 has shifted the focus on economies. Many economies of the world are on the brink of collapse, and understandably, businesses have become more averse to risks than before.

Equal focus on evaluating financial and non-financial risks: Financial risks involve understanding and defining the financial losses a company is likely to face due to asset acquisition. Non-financial risks will include the resilience of the supply chain and contingency plans to protect key people. While financial risks always had the spotlight, the pandemic has forced non-financial risks to get more attention.

Innovative investment options with minimum risks: Utilizing generate alpha and other tools to identify options, especially in emerging markets. With many global economies continuing to face the brunt of the pandemic, it has become vital for asset management companies to discard traditional options and create newer ways to identify risks, conduct equity research, and asset acquisition.

Address the threats of cybercrime and cyber frauds: Cyberthreats have been around for decades. But, the increased dependency on the digital world has forced companies to ensure the safety of their databases. Breaches can lead to loss of reputation, and a domino effect can cause loss of clients and business. Digitalization of processes and regular reviewing of business continuity plans instead of periodic reviews are the way forward.  

Operating Models Overview

Crisis seems to have a direct impact on operating models of assets management. The US Subprime mortgage crisis of 2007-2008 and now the Covid-19 pandemic have shifted the focus on operations and operating models of an organization.

Need to Establish Strong Databases: According to research conducted by Acuity KP, only 30% of respondents can meet their reporting deadlines. The biggest problem is data management, as the lack of a centralized database causes challenges in data integration. The pandemic has accelerated the need to create databases and provide clean data to reporting managers.Focus On Addressing Gaps In Skill Sets: Businesses require strong governance and resources to balance future needs to drive scalability and utilize emerging technologies effectively. The pandemic has smoothened the way for remote working, giving companies access to talent not available in their backyard, and that too at competitive pricing.Providing Integrated Solutions Across Asset Classes and Functions: For companies with operations across different time zones and timelines, the challenge was always massive. An asset management company can help create direct, transparent, and secure transaction models to ensure integrated solutions despite further setbacks in the future.  

While vaccination drives have helped economies trudge back to normalcy, the recurring outbreaks in different cities are still a cause of concern. Survival for an asset management company depends on its ability to combine in-depth capital market expertise with strong research to focus on risk management and operating models.