Chief Operating Officers in UK investment firms overwhelmingly expect challenges in the next six months will require changes to their operating models according to new research being reported by Morse, the international management consultants specialising in the investment industry. Happily, 63% of those expecting changes already have specific budget allocation, showing that operating model change is being taken seriously by firms.
The Morse survey canvassed the views of COOs at traditional fund managers, hedge fund managers, and wealth managers, as well as some brokers and service providers. The study sought to analyse the pressures on operations and how those with operational responsibility perceive these pressures.
95% of respondents expect changes to their operating model, and of these, a third believe that the operating model will be a constraint on achieving business objectives. The challenges driving change were diverse, but new instruments and new products were mentioned the most frequently, and seen as the biggest challenges to the operating model.
COOs are particularly concerned about OTC derivatives, alternatives, and structured products, with nearly half of respondents mentioning something in this space.
Miriam Edelman, principal consultant at Morse, notes, "The challenge of supporting derivatives, structured products, alternatives, and the like is usually seen as primarily technical, and our respondents are certainly concerned about finding good systems to support their needs. However, it is also clear, both from comments generously provided in the survey and in a subsequent focus group discussion, that people are equally concerned about operational processes to handle these instruments and products."
The survey shows that most people feel that their operating models are already able to accommodate growth, the most important business objective. Based on their comments, respondents are optimistic in expecting ‘growth of current and new business’, in words used by several participants, primarily from globalisation. Miriam Edelman commented that "COOs generally think the business understands the operating model fairly well, at least for current business, although, as one participant noted, "For new products/instruments and/or new markets-it is a journey."’
50% of respondents said that knowing what their peers are doing would help them meet the operational challenges they face. One survey participant wrote, ‘Knowing what peer groups are doing will influence future change and having insight to this is always of benefit.’ Miriam Edelman suggests that COOs may be underserved in opportunities to learn from each other: "User groups set up by technology providers sometimes provide a limited forum, and industry groups exist, but none are focused particularly on COOs. In response to this finding from our research, Morse has offered to host a COO Forum to fill the gap." At the suggestion of focus group participants, meetings will have a specific topic of interest and will endeavour to include like-minded COOs who can share perspectives with peers.
Invitations to participate in the survey were sent to a sample of 85 chief operating officers and other senior operational managers at investment industry firms in the United Kingdom. The survey had a response rate of 47%. Miriam Edelman added, "We were gratified not only at the high response rate but also at the depth of the additional comments people were willing to provide to us. Perhaps COOs are not often asked for their perspectives in this way, which is another reason we feel this barometer and the ongoing COO Forum are important."
Morse plans to publish findings of the research, and to repeat the survey periodically to assess changes in COO perspectives over time.