When international expansion creates operational complexity, process discipline is crucial.
Large global private capital managers look after hundreds of entities in scores of diverse jurisdictions. And the range of potential asset classes in which they invest can be sizable.
For example, in real estate alone, managers are diversifying from traditional apartment blocks and office buildings into science parks, forestry, and sports facilities among other areas.
The upshot of all this is an exponential increase in the complexity of private capital operations.
The holding companies for these assets are spread around the world, and subject to various regulatory regimes. Additionally, there are significant differences in management, reporting, and compliance requirements for different asset classes.
In this global morass of assets and entities, it’s easy to drop the ball in one area or another, and for inefficiencies to repeat and amplify.
The answer is to harmonize systems and standardize operational processes as much as possible and apply them consistently across international portfolios.
Seeing the bigger picture in private capital operations
Operational standardization doesn’t always happen, and rarely to the extent that it might. That’s because people on the front line of fund operations often have too many other things demanding their attention and lack the time and space to step back and see the big picture.
That means they may not see the potential benefits of consistent global processes in terms of cost efficiencies, operational effectiveness, and resilience.
Sometimes, it takes a new C-suite hire to see the potential for streamlining operations. For others, an outsourcing partner is in the best place to provide a holistic view of process inefficiencies and suggest potential improvements.
The problem of ad hoc private capital processes
That fresh, bird’s eye view often uncovers an ad hoc system of operational processes that magnify the challenges of managing a global network. In a complex global operation, it can be easy for local teams to do their own thing for their own reasons, rather than following central models.
Those reasons might make sense from a local standpoint. Certainly, operatives on the ground can feel straightjacketed by what they see as inflexible central processes.
But when they take separate paths, they introduce inconsistencies into global operational models. They create bottlenecks that work against the harmonization of systems and processes.
That can be especially true when funds scale through acquisition. When integrating a smaller fund manager in a far-flung location, a time-pressed central office may delay or avoid the imposition of standardized processes.
Effectively, it lets the firm carry on doing what it has always done. That might be the path of least resistance, but it’s one that makes efficient global scalability more difficult to achieve.
The benefits of standardization in private capital
Why standardize processes across a global network of assets and entities? When jurisdictions are feeding information to a central hub in the same formats, on the same platforms, and on globally agreed upon timetables, it makes administrating diverse assets easier.
It allows for a wider view, with more tailored and timely investor reporting, smoother communications, and easier compliance across jurisdictions and legal systems. It means that when things go wrong they’re easier to identify and correct.
At the same time, standardization allows efficient, centralized teams to do the heavy lifting. For example, central specialists can perform bookkeeping and invoice processing to best practice standards. By doing so, they cut costs and create value for investors—leaving local teams to focus on local challenges.
Making the most of data
Perhaps the biggest benefit of standardization surrounds the use of data. With consistent systems and processes, data is made available for automation and digitalization, and to provide commercially impactful business insights.
When you have good data in a usable format, you can take the next steps in creating efficiency across your global operations. That allows funds to scale without piling on operational costs.
Global private capital firms need harmonized systems for reporting, compliance, and data management. Increasingly, they realize that creating operational discipline is key to successful global expansion.
CSC provides tailored administration and strategic outsourcing solutions to support the complex operations of alternative asset managers across jurisdictions and asset types while adhering to global regulations and compliance. A market leader, we work with funds of all sizes, from start-ups to the largest and most experienced fund managers in the world. Founded in 1899, CSC prides itself on being privately held and professionally managed for more than 120 years. We are the trusted partner of choice for more than 90% of the Fortune 500® and more than 70% of the PEI 300. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscgfm.com.