Risk vs reward – the price of chasing innovation

Risk vs reward – the price of chasing innovation

The funds industry finds itself battling day-to-day with a plethora of complexities, this includes heavier regulations, something that has seen the industry in the headlines on several occasions for less than positive reasons, as for many years the industry did not focus on governance. Its main focus was generally economic or ecological, this over the years has changed as the public awareness of governance failings and numerous transparency issues has meant much of the industry needed to rightly swing its focus towards governance, something it has done.

In June 2018, we attended Fund Forum International at the Intercontinental Hotel, Berlin, an event that brings together fund and asset managers from all areas of the globe to discuss the important talking points within the financial services sector. This year, the event focused on five pillars; Business Leaders, Fund Buyer Solutions, Ops, Future Finance 2.0 and importantly for us at eShare, ESG, which from conversations with attendees, is still a relatively new topic with much of the industry still having a long way to go to fully incorporating these fundamentals into their everyday practices.

ESG—Environmental, Social & Governance-, a term used by investors to evaluate corporate behaviour, can have serious effects on the future financial performance of organisations and their investment portfolios. These criteria help make up the six principles of responsible investment and ensure that investors understand the implications of sustainability, with the aim of all organisations within the industry contributing to the development of a sustainable global financial system.

We were spoilt with a fantastic programme full of plenaries and panel sessions, each delving deeper into ESG and how fund managers could integrate these environmental, social and governance focused approaches into their portfolio. With so many sessions going on, we took the opportunity to sit in on a few, one in particular discussed the benefits of integrating these approaches, the challenges organisations face as they work towards expected industry and digital benchmarks including sustainability within the sector. The panel offered great insights into their organisations’ practices, and how they have been dealing with the balancing act of finding sustainable solutions that are also good financial instruments.

For an industry driven towards profit, this is paramount, however, something that was reiterated throughout that same panel session was that the key thing for sustainability is transparency, a subject eShare know a lot about. This notion of transparency and sustainability was a regular topic at the stand, where we had some great conversations with attendees about the positive impact of integrating sustainable governance into their processes and the benefits of using technology to drive this.

The issues we seemed to encounter when talking to people about this were that while companies are keen and see the benefits of embracing technology in this area of the business, not many are ready to fully commit. However, an interesting point was made in another fascinating panel session, where Terry Yodaiken, Head of Operations at First State Investments put forward that the industry needs to build an environment that fosters innovation, and this needs to be pushed from the top down. While this may be true, it seems from our conversations that although the industry is not standing still, it could be moving quicker towards embracing technology and innovation.

This is increasingly more important as investors are getting younger, meaning they will naturally anchor towards the use of technology when assessing the potential investments and the risk associated. With more millennial investors climbing the ranks and talks of fostering innovation, it is clear that the current crop of top-level decision makers need to invest time in becoming more tech savvy, ensuring that innovation and the use of technology becomes part of the organisation’s culture.

Naturally, when boundaries are pushed in the name of innovation, there will be risk associated as an organisation treads new waters, but how do you manage that risk? Looking at what Terry Yodaiken said, technology could hold many of the answers. eShare’s board portal, BoardPacks, includes a risk heat map, a tool designed to help your leadership mitigate risk and stay on top of all the information they are given, so they can make more informed decisions and realise the potential of their organisation. Demonstrating this at the conference, showing the benefits that our software tools such as the risk heat map can bring to the financial services industry, was something that delighted and intrigued the visitors we had to the stand.

We hope that those of you who attended Fund Forum International had as good a time as we did and found the talks, panel discussions and stand visits as insightful. If you would like to continue the discussion you had with us at our stand, or want to know more about our software and how it can help your organisation, please get in touch.

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