Digital’s Impact on Front, Middle, and Back Office Operations
By: Bobby Dormanesh
The industry is experiencing the next stage in digital transformation, leveraging data to make decisions and streamline operations. Developing digital capabilities will help save time on sifting through data, protects organizations from human error, and frees up capacity so that you can focus on what is relevant to your organization. Furthermore, digital solutions can be tailored to what your organization needs, resulting in dashboards or products that are completed within a few clicks rather than hours.
Below are few ways that each part of a fund manager’s operations can benefit from digital innovation.
Front office
Portfolio risk management – Implementing a digital solution can result in a dashboard that provides a snapshot view of the underlying data that fund managers typically have to sort and summarize to get decision-ready. For funds invested in public securities, a dashboard can be built to portray the funds exposure to various sectors, while also tracking relevant information like cost and gains. Funds invested in portfolio companies can drill down on specific verticals or geographical data being reported by the underlying portfolio company, along with tracking relevant KPIs. This snapshot view gives managers a quick way to determine if their investments are still in line with the fund’s strategy and increases the opportunity to make timely adjustments.
Middle office
Client onboarding – How many time have our client relations teams gone back to the limited partner to ask them to complete a missing box in the subscription document? There is a solution for tracking subscription docs and complying with AML & KYC requirements. With the use of Digital, subscription docs can be scrubbed to ensure that they have been fully completed, verified against client restriction lists, and ensure that the investor funding account matches up with the information shared by the investor.
Back office
Fund accounting – A key product of the back office is the capital allocation spreadsheet, which is based on the waterfall stipulations in the LPA. Rather than manually creating a spreadsheet and copying formulas to the next reporting period, fund managers can input terms directly from the LPA and have allocations completed by running the tool. The digital solution provides an efficient method to completing a necessary task.
How we can help
CLA is here to help you step into the rapidly evolving technological environment and bring digital to your organization. If you find that your team reperforms manual tasks on a regular basis, a digital assessment is a great way to determine if there is an opportunity to streamline an operation. Regardless of where you are in your digital journey, investing in your digital strategy is effective and boost efficiency.
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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