With increasing global regulations and growing pressure to cut operational costs, traditional and alternative asset managers are turning towards technology to increase operational efficiency and gain a competitive edge. Cloud computing continues to be the choice for both newly launched funds and established players. By harnessing cloud-based applications, fund managers of all sizes can reduce capital expenditures and increase firm-wide efficiency.
There are many advantages of SaaS and self-service solutions in the reconciliation space. Other than the obvious benefit of reducing costs due to a lower capex, having cloud-based reconciliation means worldwide access to your reconciliation data from any internet browser on any device, resulting in on-time break management and resolution. Moreover, since reconciliation data contains a fund’s highly confidential information, state-of-the-art security features of cloud-based applications are more than an advantage – they are a necessity for users.
Cloud-based reconciliation allows users to exchange and have access to resources like analytical reports and intuitive dashboards, which enable the latest product additions to be accessed in real time. This also allows managers to avoid the hassle of going through risky and bulky upgrade cycles.
Key Advantages of a Cloud-Based Reconciliation Environment:
Cost Effective: With cloud-based applications, capex gets reduced drastically as costs associated with hardware, facilities, utilities or routine maintenance of data centers are transferred to the service providers. With vendors managing cloud-based infrastructure, funds no longer have to spend capital on purchasing and maintaining costly IT equipment. There is also no need for large IT teams to handle the firm’s data center operations. Due to the fact that cloud applications rarely have any downtime, costs associated with fixing downtime and server issues are also saved as service providers ensure that your application is always up and running.
Safe & Secure: One of the major concerns of every business, regardless of size and industry, is the security of its data. Data breaches in the hedge fund industry have the power to devastate a firm’s revenue and brand trust. Cloud computing’s advanced security features guarantee that a firm’s data is securely stored and handled. Cloud storage providers have implemented baseline protections for their platforms and the data they process such as authentication, access control and encryption. Cloud-based reconciliation applications usually come with multi-factor authentication to ensure safe and secure access to the application. Periodic data backups and cleanups by the application provider also ensures data security and reduces the total cost of operations.
Quick Onboard & Access: With a cloud-based environment, access to any application is just one click away. This is a huge relief compared to legacy software infrastructure that typically takes weeks for installation and access. Also, the cloud infrastructure can leverage the existing information and knowledge for faster network set up with external parties such as prime brokers, fund admins, custodians, etc. Access to shared knowledge and experience is another key advantage of cloud applications over an on-premise application. A cloud-based reconciliation system would typically also come with an existing shared library of reconciliations with the industry’s major prime brokers, fund admins and counterparties, reducing the go-live time to just one week.
Free Upgrades: Software upgrades can be bulky and tiring on on-premise infrastructure as it requires intensive involvement and coordination between the client and service provider IT teams. Functionally, software upgrades for investment funds are an unnecessary stress on operational resources with the risk of system failure and downtime. However, cloud-based application upgrades tend to be less bulky in volume and are managed by vendors in multiple cycles. Hence, the operational cost of software upgrades are negligible, helping funds to rather focus on alpha-generating activities.
Intuitive User Experience: Since cloud-based applications are accessible across geographies and users, the applications are more sensitive to understanding the functional knowledge of users across the globe. Hence, they come with an easy-to-use and intuitive user interface. For hedge funds’ reconciliation teams, the ability to create their own reconciliations from scratch with little to no configuration and without writing a single line of code is a powerful feature that cloud-based applications can generate.
Analytics & Business Intelligence: Most of the cloud-based applications these days also come equipped with powerful business intelligence (BI) tools. These tools can be used to create intelligent analytics over the reconciliation data, helping funds to not only monitor and track performance but also make timely decisions. These cloud-based BI tools are extremely flexible and can be used to create dashboards, showing real-time analysis of both trending and KPI data.