IBSi Blogs

The concept of cloud is now firmly established among corporate decision-makers. But, rewind ten years, and the mere mention of cloud would have been met with a furrowed brow. Times have changed, and for many, the adoption process went from never, to maybe, to we need it now.

This main catalyst is that today’s world needs a new approach. For companies trading in complex markets like commodities, price fluctuations, increasing regulation and geopolitical uncertainty are the new normal. Add in increasing operational intricacy and an explosion in structured and unstructured data volumes, and it’s clear that a technology that enables precise risk management, scalability and data-enriched transparency is a must.

For firms exposed to these markets, the possibility of cloud has largely been dictated by the availability – or, until now, the unavailability – of solutions that offer the rich functionality they need.

Now, a truly enterprise-level trading, treasury and risk management cloud solution exists. Breaking down the siloes between these functions will profoundly transform the way companies respond to customers, manage risks and run their business.

Robust, secure and flexible

A cloud solution means less hardware to manage, freedom for IT teams to focus on value-added projects and the ability to match operating costs with business demands in a much more agile way. It means a platform that’s built to address today’s security challenges, with cloud operations typically offering much more robust, expert security than on-premise installations.

But the transformation goes much deeper. With a cloud solution that combines exceptionally rich functionality with vast, almost unlimited, computing power and extreme flexibility, traders and risk management departments are empowered. For the first time, the infrastructure can scale to meet peak demand, and scale back again. Firms have the resources to complete analysis of and report on, previously unimaginable volumes of data, faster, to understand current VaR or P&L, without relying on an overnight run based on yesterday’s positions. They’re able to manage volatility in real-time. And they’re able to act on accurate real-time views of risk and take full advantage of the opportunities presented. Actions that were simply a pipe dream until recently.

A deeper transformation, not a pipe dream

From a finance perspective, cloud provides the springboard to shape how the business operates, by providing accurate data to the board to influence decision-making – data that has for too long been largely unavailable. This enables firms to develop strategies and carve out competitive advantages without being constrained by long lead times, or the costs and bureaucracy required to scale up their infrastructure and support capabilities. For the first time, chief financial officers (CFOs) can rely on the data they receive to get an accurate picture of cash flows and liquidity when it’s needed. Treasurers can shift their focus towards the annual capital allocation process, earnings and capital at risk. All of this makes it a far more strategic function.

Ultimately, the need for agility, scalability, security and flexibility will only be met through cloud deployments. In the near future, on-premise alternatives will struggle to deliver what a modern firm needs, and in a very short time, companies will have to search far and wide for reasons not to move to the Cloud.

By John E. O’Malley, CEO, Openlink, in conversation with Marco Scherer, Head of IT, Uniper

As we digitise our lives and businesses pell-mell, we are going to have to find answers to some awkward philosophical questions that don’t bother many of us at the moment. Such as – who will the final central bank be – an actual banker or a government bureaucrat? Can do without counterfeiters? And why can’t I choose to make that $120,000 car purchase in good-old soiled bank notes taken from my lifetime’s savings under my mattress?

A friend of mine inherited a small house from his uncle. He sold it and immediately his bank – with which he had had an otherwise happy 30-year relationship – froze his account and demanded to know where the large sum of money in his account was from. He refused to tell them on privacy grounds. They hounded him so much he took all of his funds (and his company’s money) out of this High Street bank and opened an account with Coutts, bankers to HRH. They assured him they would never ask where he got his money from – that would be a vulgar impertinence. #

Born in the USA

It was the USA which started downsizing the face values of dollars in the 1970s as it waged its first war on drugs. Every subsequent war on anything from drugs to Furbies is presaged with a warning on the need to stamp out money laundering and the denominations on our notes get smaller and smaller.

Even though the US Federal Reserve has devalued the dollar over 80% since 1969, it still will not issue notes larger than $100 – in a country which once boasted a $10,000 note. This makes it very difficult to use cash for large transactions, which forces people to use electronic payment methods. And that is its purpose – to track all of our transactions and allow Google and Facebook to make wads of cash selling our data.

But it is not the mighty USA which is winning the mad dash towards a cashless society – it is a little Nordic country called Sweden. Sweden is now famous for more than alcoholic CEOs* and Abba.

Sweden’s supply of physical currency has dropped over 50% in six years. Many Swedish banks no longer carry cash. Virtually all Swedes pay for newspapers, sweets, and coffee electronically. Homeless street vendors use mobile card readers.

And this is where it gets interesting. An increasing number of government restrictions are making sure that the Swedes are happy to be cashless. The excuses from the bureaucrats are familiar… fighting terrorism, money laundering, making criminal transactions more difficult, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

Renting the vaults that make you poor

The other sting in the tail is negative interest rates – where the user of the bank has to pay for the privilege of depositing money in the bank – surely the most perverse upending of the movement of market forces by technology. With cash, you can decide to leave your stash under the mattress. As Denmark, Sweden and Switzerland all have negative interest rates and are all in the advance guard in the use of digital currencies that should worry us.

If there is a Nordic push towards stimulating spending by making it punitive to save, then I’m worried even more. I want the choice to do with my money what I want, and I don’t want every penny I spend being logged and making money for the Google’s of the world as tiny bites in the big data picture.

Full digitisation of currency would put the counterfeiters out of business but only on the surface. It would mean that only the hugely rich and the hugely powerful can create or take away our money.  Or print it.

* Ingvar Feodor Kamprad ex-CEO of IKEA and self-confessed alcoholic. Stood down as CEO in 2013.

From both a business and a vendors’ perspective, the term ‘client reporting’ is increasingly inappropriate and lacks the necessary ambition to be effective in today’s investment management world. This situation is partially as a result of the terminology that the function uses and the perceived lack of added value within the client reporting process.

Essentially, many of the reporting solutions on the market today are largely designed to solve existing problems, such as the automation, control and governance of the current client reporting and sales information. For almost every firm within investment management though, be they institutional asset managers, retail asset managers, wealth managers and even private banks, the focus should no longer be about client reporting; the emphasis has shifted to improving the client experience: ‘going digital’, using technology to improve the business model and enhance the client interactions with the investment manager.

Client reporting is one facet of an ever-evolving requirement and firms need to stretch their vision and ambition accordingly. In the current operational structure within most investment management firms, one of the areas of the business that is closest to client needs and demands is the Client Reporting team.

Artificial constraints

Due to the fact that this area of the business calls itself ‘Client Reporting’, however, I believe it has become bound by the artificial constraints and limitations associated with the label. In fact, the reporting function is well positioned to expand its role and even place itself at the middle of this process of managing the entire client experience.

In recent times the client reporting label has often been replaced by ‘client communications’, but this is equally problematic since it is not really clear what this term entails – it is so broad as to be meaningless. The reality is that many of the existing vendors and business areas are still providing the same data sets in a relatively uninspiring and restrictive manner. To some extent this is due to the fact that their user community is focused on the production of the current reporting requirements, and managers of Client Reporting departments are rarely focused on future needs and market changes. It is clear to me though that the winds of change are starting to turn.