Redefining Risk Management: Best Practices For Secure Fund Administration
To mitigate risk, prudent managers must conduct appropriate operational due diligence when selecting a new fund administrator for their fund. The following are vital considerations in ensuring minimal operational risk:
- Cyber Security Risks:
Not only are cyber-attacks more prevalent, but they are becoming ever more sophisticated and destructive. As a result, regulators are increasingly penalising firms over data leaks or for inadequate and ineffective controls for data security. Fund administrators must strive for no less than a 100% safe and secure environment for their stakeholders.
- Regulatory Risks:
Faced with potential sanctions for non-compliance, fund managers are in search of administrators who can offer meticulous and dependable regulatory reporting. This should be supported by robust compliance monitoring programs to ensure all regulatory standards are upheld.
- Third Party Risks:
Outsourcing services to a third party is commonplace across the fund administration industry. Outsourcing brings its own risks and challenges and, as a result, outsourced relationships are gaining greater regulatory scrutiny with an increasing emphasis on service provider management, internal controls, liability, risk management, compliance oversight and data security.Administrators such as Centaur choose not to outsource any of their fund administration services to external third parties. They remain fully in control and accountable for all the services they provide to their clients.
- Organizational Changes:
Even the smallest organizational changes, if not properly managed, can have a significant adverse impact on the day-to-day functioning of the firm and the services it provides. Fund administrators need to be flexible, be open to change and have a robust change management process in place to identify and mitigate the associated risks when changes need to occur.
- Risk from Technology Failures:
Although technology and automation are powerful tools for reducing operational risks associated with manual error, they can also present their own unique risks if not properly controlled.
Risk management forms an integral part of all technology related initiatives to avoid disruption to the provision of services. It is vital that the administrator ensures adequate and effective business continuity planning and disaster recovery processes are in place and regularly tested.
Karen Malone, Global CEO at Centaur, a Waystone Group Company, says “As Fund Administration becomes increasingly complex and regulatory requirements grow, savvy managers must conduct appropriate operational due diligence when selecting a new fund administrator for their fund. At our core, Centaur believes in the importance of managing information security – As a result, we constantly review our processes and controls”.
She continues, “This commitment ensures that we stay ahead of industry challenges and consistently deliver industry-leading services to our clients, safeguarding both their interests and those of their stakeholders.”
ABOUT CENTAUR FUND SERVICES
Centaur Fund Services, a Waystone Group company, is a leading fund administrator with offices in the United States, Bermuda, Canada, Cayman, Ireland, London, Luxembourg and the Philippines. Centaur delivers independent fund administration, fiduciary and regulatory services globally to the alternative investment fund industry, focusing on hedge funds, private equity, credit and real estate funds, family offices and ILS funds. Visit www.centaurfs.com.