Manish Solanki
Operational Risk Consulting Leader - Sentinel Europe
Risk advisory and due diligence for investors
We can help you conduct due diligence and mitigate operational risks within your portfolios and strategies. We assess asset managers, custodians and other service providers to help guide your decision-making and achieve your governance objectives. We can also review your internal operations to help ensure they are in line with Mercer’s best practices.
Operational due diligence is critical for investments
Building and maintaining an investment portfolio requires significant work across many functions. One of the most important areas is operational due diligence. Trying to gain a detailed understanding of a service provider before engagement is a multi-layered process — and a critical one. When appointing asset managers, your operational due diligence process helps you understand their investment strategies, structure, resources, policies, systems and other essentials.
When conducting due diligence reviews, our primary focus is to help you distinguish well managed asset managers and other service providers such as custodians, from those that potentially expose you to increased and unnecessary risks and costs. We can help you assess these providers and support you with risk mitigation.
Considerations when assessing service providers
Four stages of a robust operational due diligence process
A robust operational due diligence process can make all the difference when you’re seeking to appoint the providers best placed to support your business objectives. Four key areas of focus could help you uncover the necessary information:
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Understand the operating modelYou will need to form an overall understanding of your asset manager’s (or other provider’s) operating model. At this initial stage, you should obtain a top-level view of the organisation’s qualities, culture and priorities.
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Carry out on-site meetings where feasibleExploring a service provider’s working environment firsthand can be useful when assessing its culture and ascertaining whether the business has the right level of resources to support your mandate and wider objectives. If feasible, and an onsite meeting can help you verify and validate your initial findings.
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Document your findingsAfter completing your on-site review, it’s critical to document your findings and record any additional information to support your decision making. Accurate records of your operational due diligence outcomes will also help demonstrate the robustness of your processes to regulators and stakeholders.
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Plan your next stepsOne you have established a thorough and properly documented process, you should be well placed to take any subsequent actions and follow up on any areas of concern. Your operational due diligence outcomes should help you feel confident in making the right decision, in accordance with your specific risk appetite.
How we can support your operational due diligence needs
Leveraging our extensive experience in the investment industry, we can help you gain a deeper understanding of your requirements. We have access to a deep insights base, including a proprietary database of industry practices as well as analytical tools. Our team of 50 professionals1 are located across the Pacific, North America, Europe, and Asia regions.
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Operational risk assessment
We can help you develop an operational due diligence process that meets your governance requirements and budget. Our assessment process and proprietary benchmarking against Mercer’s best practices can help you select and monitor service providers that meet your needs. -
Operational risk consulting
Leveraging our operational due diligence framework, we can assess and provide recommendations on where operations in your investment process may be improved. We help you understand whether your existing operating model is appropriate and competitive, relative to your peers. -
Custodian consulting
We have extensive experience advising on custodian selection. Our evaluation process and proprietary benchmarking against best practices can help you in your mission to select the service providers best suited to your needs. -
Securities lending
We can help you structure a programme to optimise cost benefits from your investments while also helping ensure you have the right lenders for mitigating risks and meeting your performance objectives. -
Ongoing monitoring
We can help you establish ongoing monitoring to help ensure continuous management of any operational risks associated with your investments. -
Local expertise
We have professionals around the world ready to support you. We can assess the regional nuances you may encounter within the different regulatory jurisdictions in which you and your service providers operate.
How we helped a global insurer with due diligence
- 1 The issue
- 2 The solution
A global insurer and asset manager was looking for operational due diligence support for its portfolio of more than 110 third-party asset managers.
An internal audit uncovered a need for robust operational due diligence and oversight for external asset manager relationships. This included an analysis of governance structures, corporate factors, company reputation, compliance, operations, and environmental, social and governance (ESG) capabilities. The client also wanted a risk scoring system to highlight areas of potential concern.
The operational due diligence provider needed the scale and expertise not only to handle a significant number of asset managers but also to deal with the complex nature of the client itself.
Working closely with client stakeholders, we were able to demonstrate a high level of professionalism and technical ability.
The combination of various operational due diligence products ensured the client was able to meet its timing and budgetary requirements.
Our existing database of operational due diligence reports was of significant use to the client, informing decision-making on legacy and new external manager appointments.
Our team’s robust approach to operational due diligence for all types of managers globally also set us apart.
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$16.2T
US $16.2 trillion in global assets under advisement1
$548Bn
US $548 billion in global assets under management2
11K+
More than 11,900 investment strategies rated3
3K+
More than 3,000 asset managers rated4
* 1 June 30, 2023, 2 September 30, 2024, 3 March 31, 2024, 4 March 31, 2024
Related insights
Introducing some of our team
Contact our due diligence specialists
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