As the new year begins, investment management firms should take an active approach to ensure their operations are streamlined and compliant. Here’s a checklist of critical items to review and address:

1. Counterparty Relationships

Counterparty relationships are foundational to your firm’s financial operations. Strengthen these relationships by focusing on:

• Fee Schedules: Review counterparty fee schedules to confirm accuracy and avoid hidden or unexpected costs.

• Committed Financing: Evaluate whether term commitments that lock up margin terms and other economics offer you strategic benefits.

Read more about the importance of term commitments and treasury systems here. 

• Point of Contact (POC): Keep an updated list of primary POCs for all counterparties. This is essential for client relationship management, addressing issues, managing negotiations, and ensuring a clear communication channel.

• Rights and Obligations: Compile a detailed list of rights and obligations to and from each counterparty. These include deliverables, compliance metrics, and reporting requirements. Staying on top of these rights and obligations helps avoid breaches or reputational risks.

• Deadline tracking: Stay vigilant in tracking key deadlines associated with counterparty agreements, such as compliance reporting, deliverables, and renewal dates. Missing these deadlines could result in financial penalties, reputational damage, or disruptions to critical operations.

• Contract Term Upgrades: Assess growth in key areas of your firm as this could justify a review and potential upgrade of contract terms with your counterparties.

Read more about upgrading your counterparty contract terms here.

2. Vendor Management

Managing vendors effectively is crucial to maintaining smooth operations and cost efficiency. Key steps include:

• Renewal Dates: Create a calendar of all upcoming contract renewal dates. Missing these can lead to service interruptions, auto-renewals at unfavorable terms, or missed opportunities to renegotiate.

• Fee Schedules: Review vendor fee schedules to ensure payment terms and unexpected price increases. Address discrepancies promptly with your vendors.

• Point of Contact (POC): Verify and update the primary POC for each vendor to maintain clear communication.

• Rights and Obligations: Maintain a clear record of rights and obligations to and from vendors. These include reporting requirements, and any agreed-upon performance metrics (SLAs). Tracking these ensures accountability and helps prevent disputes.

• Deadline tracking: Monitor and manage all critical vendor deadlines, such as reporting requirements, deliverables, and review periods. Missing deadlines could lead to penalties or service interruptions.

Read more about the importance of contract lifecycle management here.

3. Investor Obligations

Investor obligations, including those outlined in side letters, limited partnership agreements, and credit agreements, require meticulous attention to ensure compliance and mitigate risks. To manage these effectively:

• Review Obligations: Conduct a thorough review of all requirements to ensure they are identified, tracked, and fulfilled. Missing obligations can lead to breaches of trust or legal consequences.

• Compliance Check: Verify that all commitments align with current regulations and your firm’s internal policies. Utilize a compliance checklist or legal review to mitigate risks.

• Deadline Tracking: Use a centralized system to monitor deadlines and deliverables. Automating this process reduces the risk of oversight.

Read more about managing side letters, LPAs, and credit facilities here.

4. Regulatory Preparedness

The regulatory landscape is constantly evolving.  Staying ahead of changes is essential for investment management firms. To ensure preparedness:

• Stay Informed: Monitor updates from regulatory bodies and industry associations to understand upcoming changes that may impact your operations.

• Internal Training: Educate your team on new regulations to ensure everyone is aware and understands their roles in achieving compliance.

• Policy Reviews: Regularly review and update internal compliance manual policies and procedures to reflect current and upcoming regulatory requirements.

• Proactive Planning: Conduct risk assessments to identify areas where new regulations could affect your firm. Develop action plans to address these areas well in advance.

• Mock audit: Perform regular mock audits to evaluate your firm’s compliance readiness. These exercises can help identify gaps, test internal processes, and ensure your firm is prepared for actual regulatory inspections.

Using a Technology System to Get Ahead

Managing these critical items can seem overwhelming, but partnering with a third-party provider can automate the process and make it significantly more manageable. The QDS platform, powered by AI, offers advanced technology tools to streamline these practices, enabling your firm to track (1) renewal dates, (2) POCs, (3) deadlines, and (4) deliverables with ease. By securely storing all contracts in one centralized location and automating action requirements, QDS reduces administrative burdens, enhances compliance, and ensures your firm is well-positioned for success in the year ahead.

Click below to request a call or demo and learn more about QDS and Quadrangle.