How Asset Managers Can Improve Transparency Within Their Corporate Structure‍

What is Transparency?

In finance, “transparency” refers to the degree to which investors can access required information about a company. This can include financial reports, investment firms, fees, market depth, and so on.

Transparency can include consumer clarity regarding fees and costs and awareness of corporate structure and attitudes.

Investors decide which companies to invest with based on financial statements and public perception of the company. Transparency is critical in today’s social media-driven marketplace.

Connecting departments, even in an automated company, can be difficult. Unless everyone is on the same page with identical information, departments struggle to know who has the latest version of documents, contracts, and other essential data. This means lost time and potentially lost income.

A centralized database with document updating features lets departments edit and correct documents and share data in real time. Information needed to complete or update a document can be called up immediately when the error is noticed. Consistency is the key to correctness, and that is the key to transparency.

Types of Transparency in Asset Management

Here are some forms of transparency that anasset management firm needs to consider.

  • Government transparency is the extent to which a government demands ethics and honesty to allow public oversight. Government transparency is essential for combating corruption and allowing smooth operation of government.
  • Corporate transparency is the degree to which a company’s operations, finances, operating strategy, employment decisions, and other issues can be observed by outsiders. Corporate transparency includes company decisions and board operations.
  • Workplace transparency is the extent to which the front-line employees display honesty, integrity, and ethics in the workplace and the amount of input outsiders have in the workday routine. If a customer can complain to a manager and expect to have something happen, the workplace is reasonably transparent.
  • Price transparency relates to stock prices and how much information is available to traders. This includes bid and ask prices, trading quantities, IPO dates, and other stock information.
  • Blockchain transparency relates to the nature of the specific cryptocurrency, where and how it is recorded, and whether or not the system can be hacked.

Complexity vs. Transparency

Today’s interconnected and global society means complexity is built into the market. As a result, opacity happens even if it is unintended. A corporation may have multiple levels that cannot talk directly to each other, even if they want to. Or a business may have diversified too quickly, have unrelated departments, and struggle to communicate as a single entity.

In times long past, companies would have a single repository of data that everyone would access for information. For instance, newspapers had their “morgue,” where all old files and copies of newspapers were kept. Libraries had “stacks” with descending levels of books. Courthouses had huge rooms of ancient files.

Today, companies may have many different databases in many locations. This is convenient since everyone has their own source of immediate information, but it also means that information in one location is not always added to everyone else’s. As a result, a mistake in one place is not always corrected.

Companies still need a single data repository that everyone can access, input new data, remove outdated or incorrect data, and use with the assurance that it’s correct. Complexity does not need to mean the end of transparency if the right database is used.

Regulatory Compliance and Due Diligence

As companies grow and go global, they come up against multiple levels of regulation. The Securities and Exchange Commission (SEC) governs all things financial in the United States, and they expect quarterly and annual reports from all publicly-traded companies.

Asset managers who handle other people’s finances need an awareness of investment and investor identities under the Financial Industry Regulatory Authority (FINRA) rules of Know Your Customer (KYC) and anti-money laundering (AML). These rules are intended to prevent stock and financial trading from being used to fund illegal and hostile activities, including terrorism.

Diversity, Equity, and Inclusion

Diversity, equity, and inclusion (DEI) have become important in the financial world and other spheres of industry. As a result, investors are increasingly looking for companies with a strong DEI profile and expecting to see this reflected in their financial statements and activities.

DEI investments demand transparency and honesty from asset management firms. Consumers and investors will not tolerate any appearance of hypocrisy or double-dealing in this sphere, particularly regarding the environment or political relations with developing nations.

Companies must have a flexible, responsive data management system that can provide financial reports that meet the requirements of dozens of countries, NGOs, and environmental groups if they want to avoid becoming the next targets of social media fury and civil rights laws.

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