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HOW TECHNOLOGY IS POSITIVELY IMPACTING COMPLIANCE AND HOW IT IS HELPING TO STREAMLINE PROCESSING TIME AND COST FOR FIRMS

By Joe Woodbury, Director – Investment Management Solutions at Lawson Conner (part of IQ-EQ)

 

Private Equity & Real Estate fund managers are weathering turbulent times. Recent Equity market fluctuations are in a direct correlation that maps to the Covid19 pandemic outbreak peaks and troughs and continued market adaptation is anticipated. To date, financial markets are broadly seen to be taking a cautiously optimistic view of the major government fiscal injections and QE in support of global and domestic markets during the current crises. These government backed interventions are also playing out beyond equities to a renewed and ostensibly invigorated interest towards M&A.

The key during this period of market volatility for fund managers is to take a focused look as to what levers they can pull to maximise their respective strategies in the near and longer term and what may present itself as a springboard to increased profitability and efficiency.

One predominant force multiplier is to look at what automation might deliver in respect of accelerating market capture, driving down fund costs of entry and reducing ongoing fund operational costs and liabilities.

Exploring automation and technology should be a significant focus area for financial equity and real estate fund market managers that are seeking to deliver increased positive impact. That market disrupter – is here right now – RegTech.

Joe Woodbury

These are predominantly software tools, services, processes and outputs that are able to work collaboratively to produce largely automated, streamlined deliverables around Compliance, Regulatory and Transactional work flows for today’s fund manager. Such solutions alleviate much of what could be termed as ‘generic practices’ associated with fund management and thereby allowing resources to be focused on core business activity that generates real growth over and above day to day ‘housekeeping’.

Regulatory and Compliance for Equity markets combines to be both an imperative and a headache for Fund managers and Institutions in maintaining comprehensive and consistent disciplines. The consequences of failure may result in fines, curtailment, suspension or worst case, dissolution. As mentioned earlier, this represents a huge onerous burden in terms of continuous and ongoing maintenance with regards to the constantly evolving and changing mandatory legislation, governance and best practice guidance covering aspects such as geographic disparate regionalisation and financial regionalisation. No small undertaking.

In addition, the constantly evolving steady upward trajectory of rising costs for maintaining adherence to Compliance and Regulatory obligations appears relentless. By embracing and adopting an automated approach, RegTech can introduce and facilitate cost optimisation, simultaneously improving broader governance whilst reciprocally driving up the potential release of time for increased customer engagement and better, more effective utilisation of highly skilled staffing resources.

Realising the benefits of a joined up, largely automated approach, today’s visionary businesses and Fund manager leaders can leverage this game changer, one that will undoubtably permit them to steal a substantial differentiated offering and not merely track leaders.

 

Fund managers are caught between several competing objectives –

  • Increasing client engagement, personalising interaction and delivering value
  • Adequate time to develop the macro business and fund strategy
  • Fast, effective and minimised risk of on-boarding new clients
  • Ease and speed of new fund creation and market entrance
  • On-going regular compliance and regulatory practices accountability
  • Continued maintenance of existing liabilities and risk reduction in the continued servicing of their current client base and fund portfolio
  • Mandatory industry reporting and submission cadence
  • How to scale flexibly, timely and on-demand

Essentially, automation may alleviate up to three quarters of operational practice overheads that are traditionally performed across most low and mid cap funds. Achieving a result of substantially less day to day interaction of what may broadly be termed as ‘generic’ practices, processes and reporting. The question to Fund managers is what might be achieved through automation that allows key resources to engage and focus on the more important strategic business drivers?

Moreover, recent increased scrutiny and safeguards particularly around AML and KYC necessitate the capability of having a robust audit trail and it is here that the automated approach can provide significant benefits that remove much of the continuous operational overhead, both from a staff resources perspective and the broader operational cost implications. Equally, by definition, supporting external audits becomes potentially more efficient and simpler, whilst having the ability to scale on demand.

It is difficult not to under-estimate the number of areas where fund managers can develop increased efficiencies and improved operational engagement achieved through increased automation:

 

  • Facilitating increased time to focus on client personalisation and engagement
  • Proven long term cost savings
  • Improved audit trails and minimised accounting errors
  • Adaptive compliance across changing geographical and financial regionalisation
  • Managed regulatory practices relating to AML and KYC directives
  • Maintaining policy updates
  • Robust and measured audit trails
  • Supports risk reduction strategies
  • Seeks to reduce human error

By embracing increased automation, fund managers can make choices towards a fully integrated solution or may elect to take a more granular approach towards implementation of solution components best suited to their business ambitions. Either way, RegTech represents a scalable solution that Fund managers both need and should – explore.

 

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Business

WHY AUTOMATING CAN FUTURE PROOF YOUR BUSINESS

By Ryan Demaray, Managing Director SMB EMEA at SAP Concur

 

Every business has administration duties that can be considered mundane and time consuming  but are a necessary core function of operations. Whether it’s paying suppliers on time or processing expense requests, tasks such as these are necessary for the day-to-day running of a business – however it’s safe to say that these tasks are never ranked as the most engaging or rewarding by your employees.

With a UK recession on the horizon, finance teams are under pressure to not only control costs but provide guidance to the business on where savings can be made. This will only happen if your employees are able to focus on tasks that not just keep a business running but allow them to add further strategic value.

Automating the invoice function is just one step towards giving your finance team back valuable time, not only creating a more efficient and productive workplace, but a positive employee experience that supports growth and stability across your business.

 

The gateway to better efficiency 

From receiving the invoice, inputting data, chasing approvals and moving it down the chain of command, research shows that it can take an average of 17 business days to manually process an invoice. For SMBs with a finance team of approx. eight people, implementing an invoice management solution can save on average 69 hours per week.

By allowing the technology to do the heavy lifting, your finance team can use the time to focus on more strategic elements of the business. This includes providing them a moment to take a step back and holistically look at the spending trends and costs across your business. By doing so, they can often pinpoint spend patterns, but also identify cost reducing opportunities, providing visibility and guidance to help positively impact the bottom line in the short and long-term.

 

Enabling growth and accuracy

As your business grows the number of vendors and suppliers you use often increases in parallel. This growth in external stakeholders can cause challenges and maintaining consistent and timely payment of invoices to suppliers is crucial. The Federation of Small Business estimates that late payments contribute to 50,000 insolvencies annually, costing the UK economy £2.5bn. The UK government recognised this and in 2019 implemented a prompt payment initiative, aimed at helping small suppliers get paid on time by enterprises, with the potentially penalty of not awarding government tenders to those who do not adhere to the prompt payment practice.

In addition to this, inhibiting the lack of cashflow to small business through late or unpaid invoices can have more than just a monetary impact. With poor invoice payment practices, your business reputation is likely to suffer damage, which in turn carries consequences across with future suppliers, as well as customers.

Through invoice automation, you are able to streamline your finance and accounting processing by making sure that payments are processed in time, resulting in avoidance of payment delays, calls from suppliers querying about invoice payment timescales and vital staff time responding to these.

 

Supporting employee engagement

Employees’ experiences affect their work outcomes and carry the benefits of high engagement, increased productivity, and a lower staff turnover. Creating a better employee experience is a challenge faced by many SMBs, but once cracked can provide benefits across your business.

More than just providing a workplace environment and culture, businesses with motivated employees can find recruitment and onboarding costs reducing, with retention rates increasing.

But it’s not only the employee that benefits from a better experience – your customers do as well. With many often on the frontline of customer interaction, it’s difficult to keep customers happy if your staff member is disengaged. By employing tools that allow the automation of mundane and repetitive tasks, employees can focus on aspects of work which they care about most.

 

Future proofing for tomorrow

Digital transformation is here and for SMBs employing an automated invoice solution, is a positive step in becoming a business that is ready for scale and growth. Not only will it help benefit your bottom line, it will create positive staff experiences and efficiencies, that help truly optimise your business – now and in the future.

 

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Business

COULD GRAPH TECHNOLOGY BE A POWERFUL WEAPON AGAINST CORONAVIRUS FRAUD?

Crisis funds and loans put in place to help support businesses during the health emergency have become a prime target for cybercriminals. Neo4j’s Amy Hodler examines how graph technology could be a powerful weapon against these scams

 

Fraudsters will use any opportunity to siphon off funds illicitly, and the pandemic is proving no exception. With coronavirus moving rapidly across the world and locking down countries in its wake, cybercriminals have been quick to launch sophisticated methods to callously exploit the situation.

Cybercriminals have been fast to impersonate trusted organisations such as the World Health Organisation, which has itself seen a five-fold increase in cyberattacks since the start of the crisis.

The pandemic is opening the doors for fraudsters who are taking advantage of changes in normal business processes, controls and working conditions to carry out fraudulent activities. Security controls, for example, are often not as strong as normal due to the speed aid is required and the fact that many people are teleworking.

Amy Hodler

Cybercriminals are using fake or stolen identities to draw down governmental emergency funds. In France, for example, the Paris Prosecutor’s Office has launched an investigation into massive fraud of the country’s temporary unemployment scheme where fraudsters have drained €1.7 million. It is investigating potential international links to the fraud.

In a statement Paris Prosecutor Remy Heitz said that more than 1,740 fraudulent operations were discovered across the country on behalf of 1,069 different businesses asking for wire transfers to over 170 different bank accounts.

 

Can financial services’ practices help?

Aid departments and organisations should look to the mature practices of the financial services industry for a lead in combating fraud. Here firms repeatedly and meticulously check and compare transactional data to look for suspicious behaviour that may indicate an attack.

Like applications for financial aid for the impact of the coronavirus, malevolent actors look to defraud financial institutions using false identities when creating accounts and putting together loan applications. Personal data such as addresses, telephone numbers and emails are cleverly assembled to model assumed and phony identities.

 

A need for a different approach

One of the main reasons traditional approaches fall short is that most fraud detection systems are based on a relational database model where data is stored in predefined tables and columns. With large, unstructured data sets, relational databases swiftly reach their limits; queries turn out to be far too complex and response times lag. Banks and government authorities need the ability to follow a trail from one account to another, viewing a fraud network as a whole complete entity to work out how activities are linked.

Unlike relational databases, graph database technology not only represents individual items of data such as person, account number, home address, but also their relationships with one another such as how they are related. Any number of qualitative or quantitative properties can be assigned, showing complex relationships in an easy to understand way.

One of the best graph algorithms for fighting coronavirus cybercriminals is ‘PageRank’, which finds important nodes (objects) based on their relationships and interprets them using visualisation tools. For fraud detection in banking, the algorithm identifies important or influential customers who are featured in a large number of financial transactions. Nodes with a high PageRank Score can be illustrated using a visualisation tool so that they appear larger in the view and can be immediately picked up.

Another key algorithm is ‘Weakly Connected Components’, which works to reveal the hidden networks that form a fraud ring based on common identity features such as multiple applicants all residing at the same address. These hidden connections provide invaluable information when hunting down fraud.

 

Uncovering fraud rings with incredible accuracy

 Cybercriminals are continually developing attack methods, sharing infrastructures to maximise their opportunities for success. Graph technology has the capacity to help stop advanced fraud scenarios in real time.

Graph databases can help future proof an organisation’s fraud prevention initiatives by enhancing insight based on data relationships and building connected intelligence.

 

The author is Director, Analytics and AI Program at Neo4j, the world’s leading graph database company, and co-author of Graph Algorithms: Practical Examples in Apache Spark & Neo4j, published by O’Reilly Media

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