Enhancing and Restoring Safety & Quality Cultures - Dave Litwiller - May 2024...
Alpha FMC Luxembourg - Preparing for the new norm
1. 1
STRICTLY CONFIDENTIAL The content of this document may not be disclosed to third parties without prior consent from Alpha FMC
Luxembourg, June 2020
Preparing for the “New Norm”
post COVID-19
2. STRICTLY CONFIDENTIAL The content of this document may not be disclosed to third parties without prior consent from Alpha FMC
Asset Servicing
• Margins pressure due to the lower performance of the asset
and wealth management industry
• Need to adapt to potential changes in the regulatory and
compliance landscape
• Outdated, manual processes with high face-to-face
reliance need to be amended
• Dependence on physical presence for traditional BAU and
lack of digital agility for remote work
Asset Management
• Increased client demand for AM services and bespoke
reporting, as several AM activities have been suspended (e.g.
large corporates)
• Investment performance pressure
• Significant supply chain risks caused by:
• Heavy reliance on a network of service providers
• Lack of insight into third-party crisis management
plans for administrators, custody, pricing and other
services
• Clear increased need to strengthen oversight of
outsourced functions (intense review of KPIs,
understanding of providers WFH strategy, data protection
controls)
Wealth Management
• Challenges to maintain client relationships (Face-to-face
meetings)
• Withdrawal of assets, difficult business development / client
acquisitions may cause business plan challenges and require
amendments to the current planning (e.g. investments,
recruitment, planned acquisitions)
• Slowdown of the front office presents opportunities for
client-focused initiatives (e.g. CRM, client segmentations,
client experience analysis)
• Less than ideal portfolio performance leads to lowering
consumer confidence
• Additional workload from settling into teleworking
arrangement, impairment assessments, and regulatory
pressures
What Alpha is seeing in the market:
Streamlining Operations
The heavy reliance on conducting business in a face-to-face environment (e.g. AML/KYC checks, handling of onboarding documentation, payments management) now requires a structural re-
design and cultural shift. Furthermore, the crisis has revealed the critical dependencies on delivery chains with third parties which are now slowing down operationality of business and
testing the resilience of Operating Models. To address this operational risk due to external dependencies, players must reassess their outsourcing strategies and look to implement greater
monitoring controls.
Developing a Digital Culture
Many players have been forced to adopt a digital culture “overnight,” demonstrating significant need for (1) establishing a new management approaches to motivating teams and integrating
remote work into the corporate culture, (2) agility in implementing and adopting new tools to re-organize priorities and ensure continued BAU, (3) training and change management of staff
and upper management to adapt to a digital working culture, and (4) ensuring the organization carries over the resulting added value to the post-COVID world.
Accelerating Digital Readiness
The global crisis has exposed the negligence of investments in IT infrastructure over the last decade. This lack of digital readiness has created significant hurdles for continuing BAU and is resulting
in the need for (1) an assessment of current remote readiness infrastructure and agility (hardware and software (incl. licenses), (2) infrastructure capabilities (incl. internet bandwidth, server
communication, etc.), and (3) accelerating IT change processes (incl. procurement, change requests, etc.).
Monitoring Risk, Regulatory, & Compliance
Although regulators have started to ease remote work access, this greater flexibility brings greater risk for regulatory breaches resulting from teleworking (e.g. NAV calculation disruptions, cyber
security risks due to the higher levels of remote access to core systems, etc.). Companies must address these risks while also preparing for new regulatory requirements and restrictions
announcements (e.g. limitations on personnel in office buildings, upcoming Sustainability Disclosures Regulation).
Experiencing the Capital Market Impact
Adverse effect of the capital markets environment on liquid and illiquid funds demands additional operational and regulatory attention (NAV suspensions, valuation considerations, etc.), and
potential inefficiency of traditional investment strategies that can cause lack of performance and damage client relationships. On the bright side, the mixed pricing (flat fees, volume-based, or mix of
both) of many players has limited their impact by market turbulences. Additionally, players having trading have seen a significant increase in trading costs.
What Alpha is seeing across the different arms of the financial industry:
2
Understanding the current environment
COVID-19 has revealed weak points of the financial industry in Luxembourg and has forced companies to revisit their top priorities.
3. STRICTLY CONFIDENTIAL The content of this document may not be disclosed to third parties without prior consent from Alpha FMC
Preparing for the “New Norm” post COVID-19
Do we have to adjust our
vision in the new
situation?
How will our
competitors respond
to the new normal?
Does the operating model
have to be adjusted to cope
with new challenges?
How will we deliver value
to customers in this
new reality?
Do we have
adequate processes
and policies in place?
Is our Digital Readiness
adequate in supporting
our operations?
How have our clients’
behaviors and
expectations changed?
Does our project
portfolio still align with
our vision?
Are you asking the right questions?
4. STRICTLY CONFIDENTIAL The content of this document may not be disclosed to third parties without prior consent from Alpha FMC
Hot topics within Risk, Regulatory, and Compliance (1 of 2)
How do your capabilities & execution stack up against the evolving needs?
Much of the uncertainty that Alpha has been seeing concerns companies’ Capabilities & Execution within Risk, Regulatory, and
Compliance. We have therefore prepared the following breakdown of the key topics that should be top of mind, the main
challenges facing companies, and how Alpha can support.
Remote Working Business Continuity Plan Delegates NAV Suspension
Ensuring a proper level of
data protection and IT
security against
cyberattacks, fraud or data
loss.
Ensure adequate work-from-
home organisational setups
Efficient distribution of
computers and server
accesses. Access rights
management
Sufficient data security
controls in line with CSSF
and GDPR requirements
Data security training for
employees
Well-being management
Proper allocation of
responsibilities
Proper communication plan
Scenarios covering
simultaneous impacts on
several activities or
delegates
Several recovery scenarios
(early recovery, extended
intervention or resurgence)
Review of activities
performed by delegates to
assess the level of
dependency in case of event.
Ensure proper workaround
plan is ready to implement if
necessary.
Review of service level
agreements with a focus on
BCP
Review of swing, gate and
NAV suspension processes
including investors
communication
BCP that enables quick
change from working location
(recovery site or home)
BCP that facilitates the
performance of key activities
using manual workarounds
Dependence on delegates
located in foreign countries to
perform key activities (TPA,
Custody, Data Vendors)
Key activities disrupted in
case of delegates’ incident
(ex: IT down, sick staff)
Be able to reimburse
simultaneous redemptions
Proper use of swing, gate
and NAV suspension
processes & appropriate
investor communications.
Proper documentation to be
able to justify to CSSF
TopicChallengesHowAlphacansupport
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Hot topics within Risk, Regulatory, and Compliance (2 of 2)
How do your capabilities & execution stack up against the evolving needs?
Board Management Risk Management Reporting & Disclosers Compliance
Holding virtual Board
meetings.
Remote voting for Annual
General Meeting
Review of Board meeting
process to be in line with
CSSF requirements
Review the liquidity risk
management process
Selection / implementation of
appropriate liquidity
management tool
Risk management process
review to address emerging
risks
Reporting process review Review of AML/KYC
processes to include
enhanced measures in line
with CSSF requirements
Implementation of CSSF
regulations for COVID
Properly manage the liquidity
risk with highly volatile
markets
Manage increased
operational and regulatory
risks due to remote working
and the use of manual
workarounds
Possibility to request
extension for regulatory
reporting deadlines. Require
proper justification /
documentation
Fund Managers to weekly
report to CSSF on several
funds financial data
Address emerging AML/CTF
threats resulting from
COVID-19 through enhanced
due diligence and monitoring
(circular CSSF 20/740)
Be compliant with the various
CSSF regulations on COVID-
19
TopicChallengesHowAlphacansupport
Much of the uncertainty that Alpha has been seeing concerns companies’ Capabilities & Execution within Risk, Regulatory, and
Compliance. We have therefore prepared the following breakdown of the key topics that should be top of mind, the main
challenges facing companies, and how Alpha can support.
6. Should you have any further
questions on the information
contained within this pack,
please contact:
STRICTLY CONFIDENTIAL The content of this document may not be disclosed to third parties without prior consent from Alpha FMC
Alpha office locations
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12
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Switzerland
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Netherlands
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STE 1500, Boston
MA 02108
USA
+1 617 520 4953
LONDON LUXEMBOURG PARIS AMSTERDAM
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Switzerland
+41 (0)22 596 22
89
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Singapore
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2737
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Denmark
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TORONTO
Contact Information
GENEVAPARIS
BOSTON
SINGAPORE
AMSTERDAM
LUXEMBOURG
EDINBURGH
LONDON
NEW YORK
Additional key TORONTO
ZURICH
COPENHAGEN
Veit Jung, Associate Director
Veit.Jung@alphafmc.com
+352 661 877 909