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Allianz Global Investors [Fra: Alv]
Using Process Automation to Transform Investment Portfolio Compliance
Andreas Uremovic
Portfolio managers are required to manage
investment portfolios according to the investment
guidelines –the general term for the set of
applicable regulations and contractual agreements
signed with the client. Investment portfolio
compliance teams also play a vital in helping the asset
manager follow these guidelines, but these teams frequently
spend much of their time on administrative tasks to fulfil
regulatory and contractual obligations. Fortunately, new
technology solutions can be applied to these administrative
tasks, giving these compliance teams the bandwidth to add
value in other critical areas.
To be sure, following the investment guidelines is
a key part of the portfolio management process, since
not adhering to them could expose an asset manager to
both reputational risks and financial losses. Apart from
that, regulators have – since the global financial crisis –
put a great deal of emphasis and attention on enhanced
compliance requirements.
This is where an investment portfolio compliance team
comes in – the group that is responsible for advising, coding
and monitoring the portfolio manager’s adherence to the
investment guidelines. Investment guideline monitoring
helps manage and mitigate key risks or breaches, and as
such it is one of the most critical steps that compliance
teams perform.
Considering the complexity of an organization’s data
management, trade processing, technology and regulatory
control, it becomes difficult to eliminate the risk of a
breach. But it is possible to take steps to prevent a breach
in the first place – and in this case, an ounce of prevention
is worth a pound of cure. The effectiveness of compliance
officers rests in their ability to add value – such as by
supporting the prevention of breaches – rather than being
overly pre-occupied on the routine resolving, managing
and documenting of breaches after they already occurred.
One of the solutions for this is to free up the compliance
team by automating administrative post-breach activities
around breach monitoring and documentation – ie, for
regulatory and audit purposes. To do this, it is necessary to
address what may be the biggest drawback in investment
portfolio compliance systems: the incomplete and
inaccurate data that leads to large workloads and additional
administrative work.
This is where robotic process automation (RPA) can help
teams cope with a high amount of daily data and investment
guideline rule results from the compliance systems. RPA
is a front-end, state-of-the-art automation technology that
enables software robots to replicate the actions of humans.
In this case, an RPA solution can be applied to the “ex-post
monitoring” process, which consists of three parts: screening
the daily alerts generated by the compliance engine;
recognising and classifying breaches that match specific
patterns; and initiating follow-ups for the latter.
The application of RPA at Allianz Global Investors has significantly improved the accuracy and quality of this critical step. With RPA, the number of errors has been reduced and processing time has decreased – which has been particularly helpful during the heightened market volatility of the Covid-19 pandemic. Since its implementation at the beginning of 2020, our RPA software robot (or “bot”) has reviewed some 100 data points daily. The bot covers 30 percent of potential guideline and data breaches, which are now classified automatically. With part of the guideline monitoring work now done by the bot, this leaves our investment portfolio compliance team with more resources to focus on a deeper analysis of data and other more complex tasks to support the prevention of breaches.
One Of The Key Success Factors For Implementing This Technology Lies In The Close Collaboration Between The Business And Technology Sides At All Levels – From Sponsors To Process Owners To Developers
Introducing this technology involves a new way of working – collaboration between bot and human. This in turn enables investment portfolio compliance officers to focus on and to support the first line of defence and build a resilient control framework. RPA and its underlying automation principles have the potential to redesign the compliance function’s nature and generate tremendous value in the years to come.
RPA implementation helps asset managers apply an agile implementation approach and become highly effective. Furthermore, the success seen now in this area gives asset managers the confidence to try similar collaborations between bot and humans to further automate other compliance areas.
For example, Allianz Global Investors is looking into using our RPA bots with artificial intelligence tools to further evolve this technology. We are exploring how AI can help us automatically identify investment guideline restrictions that appear in the investment management agreements or prospectus. Then the software can assign this information to a specific investment guideline rule in the compliance system. The entire process can then be done much more quickly and accurately, while freeing up our team members to add value in areas that definitely need the “human touch”.
One of the key success factors for implementing this technology lies in the close collaboration between the business and technology sides at all levels – from sponsors to process owners to developers. But done properly, it is of great benefit to the entire firm, since productivity, efficiency and accuracy are all improved while reputational risks and financial losses are mitigated. There is no doubt that these types of automation solutions make investment portfolio compliance activities better at what they do.
