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Insight

How compliance technology can strengthen PERE funds against COVID-19

Strengthening resilience and keeping up with regulatory standards

The world is facing an unprecedented challenge in the fight against COVID-19. This global pandemic is unlike anything any financial services organisation has ever experienced, challenging us to operate in a new paradigm that is changing daily. The decisions organisations make today may have far-reaching implications, and private equity and real estate (PERE) funds are not immune.

As a fund manager in these challenging times, it can be hard to stay on top of the ever-changing global regulatory standards and compliance obligations. The implementation of MiFID II, GDPR, new anti-money laundering (AML) directives and the Senior Managers & Certification Regime (SMCR) have all added to the pressure on compliance departments. Keeping up is enough of a challenge without a global pandemic layered on top.

With mandatory social distancing and lockdowns in place across the globe, how can we ensure that standards are met?

Adapting to the new normal

Financial organisations and fund managers are now truly realising the potential of compliance software to streamline their compliance operations.

With more people working from home than ever before (e.g. Finder research estimates that 60% of the UK’s adult population is home-working during lockdown), video conferencing is playing an integral part in keeping clients and stakeholders connected. This remote connectivity is keeping the compliance wheels turning as portfolio and risk management, operations and compliance functions can be seamlessly performed remotely.

At times like this, compliance solutions and software play a critical role, complementing the way firms continue to operate, both efficiently and ethically. Lawson Conner’s MaxComply platform, for example, offers firms an effective and cost-efficient approach to meeting their regulatory obligations and eliminating risk for non-compliant activity, before it arises.

Systems like this are key to centralising data, making it much easier for fund managers to manage and distribute updated regulated policies and procedures. But the real game changer is the ability to make compliance more transparent and easier for all stakeholders to access, as well as meeting FCA expectations in real time.  

Fund managers can log in, run reports, review data in a dashboard and slice and dice it as needed, whether for investors or regulators. What’s more, that information is also made readily available to investors, thus cutting down on the back and forth and minimising questions. Equally important is the ability to facilitate both external and internal audits by providing important and relevant documentation.

The challenges faced by PERE managers

Considering the nature of how these sectors operate, the ability of PERE fund managers to undertake due diligence (in particular, face-to-face meetings), receive appropriate internal approvals and obtain relevant signatures – not to mention determining the value of a company’s investments – is proving a real challenge due to physical distancing.

Nevertheless, those fund managers that harness technology in their compliance planning will be more prepared to overcome these issues during the pandemic and beyond.

Looking at the bigger picture, most private equity professionals are expecting some measure of decline in deal activity – UK Tech News is predicting there will be a slowdown and considerably fewer deals to be done in Q2 and Q3 2020. However, the PE sector is always ready for a challenge, and COVID-19 certainly presents just that.

When it comes to real estate, many owners and occupiers of commercial properties are growing concerned about potential impact on their businesses. Fund managers wish to clarify their obligations and remedies in light of constantly evolving government requirements. Multinational companies face the added challenge of having to deal with real estate laws and practices that vary significantly across jurisdictions. This reinforces the importance of staying on top of compliance and regulatory solutions throughout these unprecedented times.

Right now, there are more questions than answers, but throughout this crisis, society has been forced to embrace change, work from remote locations and function in a profoundly different way. Compliance teams need to quickly pivot and consider the risks and challenges created by these rapid and radical changes – and technology is proving critical in this regard. Fund managers that succeed in strengthening their position at this time will be the ones who go beyond just adapting: they will have taken bold actions that not only improve their operations but deepen relationships with their investors and other stakeholders.

About Lawson Conner

Part of the IQ-EQ group, Lawson Conner is supporting emerging and established fund managers to navigate their way through the challenging global market conditions as well as day-to-day compliance and regulatory obligations.

Please get in touch if you would like to understand more about how it could streamline your firm’s compliance and regulatory activities.