FCA has published a report from its review of how a sample of 10 asset management firms selected and used risk modelling and other portfolio management tools. Key conclusions were:
- firms found it hard to assess whether to use a single provider for most of their needs or different ones. There are advantages and disadvantages to either approach;
- firms that used in-house tools found the flexibility useful in terms of functionality and maintenance over third party providers;
- vendor management approaches took the form of either a centralised function with a largely standardised approach, a decentralised approach with first-line users “owning” the relationship with little central input and a hybrid of the two;
- firms took different approaches to model governance;
- most contracts had break clauses of between 2 and 5 years but change programmes often suffered delay and overrun;
- firms should give more consideration to managing different lengths of outages;
- firms had problems balancing the need to implement technological changes quickly against the desire to test them fully; and
- firms should work harder to ensure customer expectations are taken into account.
FCA expects firms to act on any recommendations it has made, and will continue to look more widely at operational resilience in firms.