Around half of the firms we surveyed tolerate, rather than support, this break from the traditional approach of centralised software development. However, with a third actively encouraging business-developed IT, it is expected to increase substantially over the next three years and will require the appropriate levels of governance.<\/p>\n
We discussed this challenge with a group of \u201cC\u201d level managers at our most recent Davies Signals forum, held virtually in December 2020.<\/p>\n
Why?<\/strong><\/p>\n While some of this development is down to lack of functionality in existing applications and frustration with the speed of centralised software development, the main reason is to enable more sophisticated data analysis and \u00a0to allow investment teams to add their \u201csecret sauce\u201d to the investment decision making and portfolio construction process. This has been facilitated by:<\/p>\n Python is the most prevalent programming language and PowerBI the most popular tool for data visualisation, given its ease of use. It is most widespread amongst the investment desks, though reporting, finance and operations teams are also undertaking their own development.<\/p>\n Why not?<\/strong><\/p>\n Nearly two-thirds of the firms we surveyed are managing business-developed IT as a medium to high level of operational risk:<\/p>\n How to manage the risk<\/strong><\/p>\n The main approach has been to implement a governance framework to provide some form of control over how and what software is developed; this tends to be created and managed by the IT function. Nearly 80% of the firms we surveyed require IT approval for the use of development tools, so there is a basic level of control, but in most cases, more work is required to build out these frameworks.<\/p>\n The challenge is ensuring adherence with the framework. This will be achieved by educating capable employees on good practice and behaviours, as well as building a strong culture supporting internally developed software.<\/p>\n Going forward<\/strong><\/p>\n This begs the question, to what extent does IT becomes more federated? 28% of the firms we surveyed felt that it would and that the centralised IT team would provide a more oversight and mentoring role. In discussion, it was felt that the IT function should be an enabler of business-developed IT and needs to evolve to focus on creating operational alpha. This includes offering further enhancements supporting the business in areas such as data science and advanced development techniques.<\/p>\n With growing interest from the regulators looking to test technology maturity, Operational Risk teams need to ensure there is robust management of the risks that business-developed IT poses, as firms increasingly look to the use of technology to improve investment performance for their clients and enhance their competitive edge. Culture plays a large part in this, with organisational awareness and buy-in to the controls crucial to the success of the risk management framework.<\/p>\n","protected":false},"excerpt":{"rendered":" Our sample study shows 93% of asset managers developing software solutions outside the IT function. How do firms manage this business-developed IT and address the operational risk?<\/p>\n","protected":false},"featured_media":21187,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false},"practices":[70],"industries":[103],"capabilities":[104,109,112],"class_list":["post-21186","blog","type-blog","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n\n
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