Today’s asset manager relies on accurate and timely data to make investment decisions, evaluate risk, calculate performance and inform clients. A popular solution for asset managers who need to organize and pull data is an Investment Book of Record (IBOR). Over the past several years, IBOR has not only become a favorite buzzword of middle- and back-office industry pundits, but it has also become a top strategic priority for operations and technology leaders across the industry.

Yet, with all the time and energy firms have invested in planning and triangulating with third parties on an IBOR solution, we have noticed that many asset managers still struggle with implementation. This difficulty is often the result of underestimating the amount of effort required to set up an IBOR.

How can you successfully deploy an IBOR?

When faced with the potential pitfalls of a journey to an IBOR, we believe it’s important to take these three steps:

#1. Specify exactly what you want your IBOR to do for you

Across the asset management industry, the understanding of an IBOR varies. In our view, an IBOR provides a firm’s daily positions, transactions and cash. This, in turn, helps portfolio managers and traders optimize the investment decision-making process. It also helps other downstream consumers to feel confident in the data they are using for risk, compliance, performance and client-facing reports.

Asset managers should therefore qualify the key characteristics for their IBOR, which may include:

  • On a trade date basis, it provides start-of-day cash and positions.
  • As needed, it reports intraday information on cash, positions and transactions.
  • It establishes a “gold copy” of data for several investment management functions, such as attribution, client reporting, performance and risk.
  • It empowers asset managers with an additional control and oversight measure of back- office processes.

A clear definition of an IBOR provides a range of benefits. Hence our recommendation: clearly define the scope of your IBOR project. This should help to manage expectations and avoid pitfalls.

#2.  Establish the business case

As firms define the contours of an IBOR, they should consider doing the same for their business case. The business case for an IBOR generally has three core components: run-rate savings, net investment avoidance and cost growth avoidance.

To assess the IBOR business case, asset managers should fully model the different transformation scenarios—vendor, proprietary technology or outsourcing. By analyzing each, they could not only derive the savings profile, but also the investment required. For example, the OPEX and CAPEX investment to transform versus an outsourcing arrangement differs considerably. The resulting transparency into the tradeoffs of each scenario helps pave the way to making the appropriate business decisions.

Our recommendation: Evaluate the business decision, which rests on other issues too. These can include a firm’s unique requirements, operating model, technology architecture, size and strategic growth outlook. Ultimately, these factors drive the financial perspectives.

#3.  Instill proper guidelines and safeguards

The success of a transformational IBOR initiative will require a strong and defined governance structure and cadence. This model will align and maintain expectations and cut through “nubby” issues in a timely manner via communication, transparency and collaboration. The appropriate governance structure connects daily operations to strategic discussions. These interactions help ensure alignment with intent, and this theme needs to extend from actions to outcomes.

Our recommendation: Take the following mantras to heart while undertaking an IBOR initiative: place a high premium on clear communications, establish process ownership, assign accountable leaders, make timely decisions and manage the balance between customization and efficiency.

Asset managers, the rewards of an IBOR are worth the risks after all.

As with any great undertaking, challenges may arise. For an IBOR, these could include solution risks as well as transformation, people and schedule/pace risks. However, if your firm clearly defines expectations up front, establishes a clear business case, and puts guidelines and safeguards into place, you will be better prepared for obstacles and well on your way to a successful Investment Book of Record.