By: Colin Keane
During 2016, the CBI reviewed the outsourcing arrangements of several fund administrators to ascertain the level of outsourcing performed by fund administrators and the governance and oversight in place for these outsourced activities.
The CBI made recommendations in three key areas:
- Management and internal control measures
- Support function oversight and monitoring
- Independent assurance
In this second of a two-part eBriefing series, we look at the final two areas.
Support Function Oversight and Monitoring
CBI looked at the interaction of risk and compliance with firms’ OSPs, noting some OSPs did not have an onsite compliance function.
CBI highlights the importance of the compliance role and the requirement to collaborate with the other control functions. It recommends a more structured annual reporting of outsourced activities from each firm and its OSP.
As a result of industry-wide discussions (e.g. Consultation Paper 100), firms’ risk resources and risk indicators must be identified, assessed, and measured. CBI noted instances where no tolerance levels were set regarding the amount of outsourcing permitted for a specific fund administration activity. CBI recommends that firms regularly assess the concentrations of activities outsourced and the providers used.
The CBI found that the majority of OSPs are unregulated. It reiterated the role of internal audit and the requirement for an independent assessment of a firm’s business strategy and risks associated with outsourcing. The internal audit team should assess the firm’s ability to respond to material breaches or service disruptions and ensure appropriate staffing and expertise is in place for ongoing monitoring.
In a complex and increasingly globalized industry, fund administrators must provide a broad range of services across multiple fund jurisdictions and operating locations. To provide the industry with efficient and effective products, administrators must have robust controls, procedures, and governance across their operational platforms.
By demonstrating oversight in compliance with regulatory requirements and enabling supervision with a clear operational audit trail, they can provide the highest standards of service, remain cost efficient, and support a well-governed industry.
More than 800 fund managers across 50+ countries have assets administered in Ireland. Combining the highest standards of regulation with our client requirements is crucial to provide global clients with services across multiple time zones. As the regulatory landscape evolves, fund administrators must champion good governance, managerial oversight, and independent assurance of their activities.