Courage is Knowing What Not to Fear

There has been a marked uptake in CASS automation and governance initiatives since the higher audit standards published by the FRC came into effect.

AutoRek wanted to understand more about how investment firms are changing their approach to CASS governance and so we circulated a CASS survey. On the whole, the results confirmed our observation that investment firms are increasing their focus on CASS this year, but also revealed more about how CASS gets prioritised and where the improvements are felt.

The answers to the survey prompt some further questions. For example, getting a budget for CASS improvements was not reported as a challenge, but the deficiencies of accounting and operations systems were identified as the biggest challenge. The next question we would want to ask is; why hasn’t the budget been allocated to improving those IT systems?

I suspect some of the answers to why allocating budget is difficult can be found in how many departments are involved. Who will take responsibility? Yes, there is a CF10a and that helps focus minds, but if there are marginal improvements and cost saving efficiencies across the business, which department is going to drive the project through? The survey pointed towards Compliance as being the biggest driver, suggesting that some individual departments only prioritise CASS when they are prodded. It seems there is more stick and not enough carrot. Yes of course firms take note of £180m in fines issued by the FCA from 2013 to 2016, but they should also understand the cost savings available from automation as they build a reputation for careful guardianship of client money and assets.

Over 60% of firms surveyed reported additional spending on CASS consulting, training and technology over the next 12 months. Part of the challenge is understanding the regulators expectations and mapping CASS rules to firm structures and products. It is not surprising that external advice is sought to understand what standards are emerging, and how peer firms have responded to the new areas of focus from the audit firms. The other part of the challenge is enhancing existing core systems to reach a new level of automation and transparency on where risks emerge. With clear structure and automated transparency the CF10a and Heads of Operations, Finance and Compliance know where their attention is required. With up to 30% of CF10a roles currently served by interim appointments, it seems that a certain amount of courage is needed to accept that responsibility and liability, but it need not be that way. Plato explained that, ‘courage is knowing what not to fear’. He must have had clear CASS Management Information dashboards in mind when he shared his wisdom with us.

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