Survey Exposes Gaps in UK Asset Managers’ Financial Controls

Asset managers must adopt a more proactive approach to financial controls, says AutoRek. The UK-based financial controls software group reports that its survey revealed that 28% of those polled do not have a financial controls procedure in place for managing a critical breach. The research indicates that there is an underlying risk among asset managers, who would be likely to detect significantly more breaches if rigorous procedures were in place.

The survey, spanning financial services professionals in the asset management, banking, foreign exchange, insurance and stockbroking sectors, indicates that 91% of asset managers are currently convinced that they have enough resource allocated to managing the financial controls agenda. However, it also demonstrates that asset management is the sector most likely to fall victim to a critical breach in processes. In the past 12 months, nearly 9% of asset managers admitted experiencing a fault in the financial controls function.

“The Financial Conduct Authority (FCA) has already highlighted the central role that asset management could play in the non-bank financing of the UK economy,” said Jim Muir, director of AutoRek. “Yet, before asset managers can assume responsibility for this role, the sector needs to build on principles-based guidelines that governed activity during the pre-crisis era and develop more rigorous and granular financial controls.

“Instead, there is a need for the industry to place more focus on the proactive prevention of breaches, rather than on detection and correction. Only then can the sector continue growing and play a fundamental role in the UK’s recovery.”

Despite the lack of official processes for dealing with breaches, the survey suggests that asset managers recognise the importance of financial controls in helping to eradicate industry losses. The fragility of margins in asset management means that the impact of a breach in financial controls could be more significant and any mistake could wipe out large amounts of income and profit.

As a result, 69% of asset managers claimed that the financial controls agenda is a help to their business and its growth, with 66% listing more rigorous profit and loss (P&L) control as the most important area of the financial controls agenda.

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