While buy-side firms face numerous factors that could drive up their costs, these institutions have an ace up their sleeve: leveraging technology to reduce expenses.
Buy-side faces many challenges
Currently, these industry participants are struggling to overcome the dual challenges of constantly-increasing benchmark costs and a difficult compliance environment. This landscape, which is complex, uncertain and always changing, is the product of lawmakers and regulators enacting and then implementing several regulatory regimes.
While this framework has changed markedly in the years following the financial crisis as government officials passed landmark reforms, its intricate nature has grown even worse because of the challenges that industry groups and lawmakers are bringing against the current regimes.
In order to meet this complex set of regulations, companies must invest significant time, energy and expense into focusing employee resources on compliance and fostering broad regulatory awareness.
Total cost of ownership
Since complying with existing regulations can be quite costly, many buy-side firms have significant motivation to manage their expenses effectively. One good place institutions can start is viewing their enterprise through the lens of total cost of ownership.
The key importance of TCO was noted by an executive of a major global exchange operator, according to Securities Technology Monitor. He stated that buy-side firms have become much more picky in their buying practices.
The executive emphasized that his company was working with many such institutions on “deliver more with less” or TCO initiatives created to generate greater results with lower initial cost, the media outlet reported.
It would seem the executive’s statement holds true today, as many buy-side firms are concerned about the rising cost of benchmark data. In addition, these industry participants are facing pressure from investors to leverage a larger number of benchmarks, including ones that have been customized, as they seek to outperform the broader markets.
Cutting expenses through data management
While information can be a major driver of expenses, companies can leverage data management to cut costs, according to Finextra. By having valuable metrics on mission-critical functions, buy-side firms can make better-informed decisions and avoid costly mistakes that could send expenses soaring.
In addition, using technology to automate specific functions can help a company reduce errors that would regularly crop up as a result of individuals. If company staff members do not have to focus on tasks that could be covered through automation, they can devote their time and energy to higher-level tasks like helping an organization meet its business objectives, the media outlet reported.
Harnessing cloud-based applications
Another way a buy-side firm can free up the time of its employees – and help trim expenses in the process – is working with cloud-based applications, according to TechRadar Pro. Companies can access a wide range of applications via this method, which permits them to shift many responsibilities involved with the software elsewhere.
Since firms that use cloud-based applications do not have to invest in the hardware, software and staff resources required to run the software, they can generate substantial cost savings.
Effectively managing software
By eliminating superfluous or redundant applications and therefore simplifying one’s software, an institution can reduce its overhead and therefore cut its overall costs. However, one major roadblock that can hinder these efforts is use of legacy applications.
Some members of staff might push back against any efforts to remove these old programs, and this situation can easily rear its ugly head if a firm installs an ERP without taking the time to decommission legacy applications.
To move past the use of these older software programs, companies should obtain buy-in from users at as many different levels as possible. This involves getting senior executives, low – and mid-level managers and the rank and file on-board.
Successful data governance
Another cost-saving opportunity that requires across the board buy-in involves setting up the right policies and procedures for data. If buy-side firms can establish the proper data governance framework, they can potentially reduce the instance of redundant or erroneous data.
Having the right data governance framework can save an industry participant significant time and energy, since they will not have to worry about decommissioning old information or finding and then fixing data that is inaccurate.
While buy-side firms are currently facing a tough environment, they should not be intimidated. They can employ numerous techniques to reduce their expenses and increase their odds of turning a profit by considering the aforementioned steps. In addition, they might consider undergoing a comprehensive assessment – an inventory of existing technological resources and business processes – to find the most efficient path toward effective cost management. Taking this route could save the organization considerable time and energy.