Limina Blog

4 Risks of Operating with Legacy Investment Data Management Solutions & Processes

Kristoffer Fürst

November, 2022

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While change is daunting for any organisation, legacy investment data management systems pose great risks that shouldn’t be ignored. From compromised security to reduced productivity, sticking with the systems you know may seem safe, but puts your firm at potentially devastating risk.

In this blog, we unpack the risks associated with legacy systems, and the benefits of adopting more modern, cloud-native solutions in your own firm. We also look at how a suitable software partner can make the move more manageable for businesses, and the positive long-term impact that comes once firms have effectively addressed their legacy systems and the risks associated with them. 

Reasons businesses continue using legacy investment data management solutions and processes

The process of replacing legacy systems and software is often an overwhelming undertaking for asset managers, especially since these systems contain large amounts of data that can be daunting to migrate to new platforms. What’s more, there’s usually a misconception that so long as legacy systems perform the tasks required to maintain day-to-day operations, there’s no need to replace them.

Despite the growing unreliability that comes with maintaining legacy systems, firms either wait for issues to start arising before they replace their systems, or suddenly scramble to find a new solution when a complete system breakdown occurs.

This approach is considered the more cost effective route, as many firms associate moving away from legacy systems with hefty costs. However, while upgrading does require initial investment, trying to maintain legacy systems becomes much more cost-intensive (and challenging) in the long run.  

The reluctance to move away from legacy systems is further compounded by the complexity of choosing a new solution. With the number of solutions available on the market, and the number of unique business requirements that need to be considered when selecting a solution, making the choice isn’t always the most straightforward process. 

Key risks of using legacy investment data management solutions and processes

While changing to a new investment data management solution does require considerable time, effort and investment, in reality, the risks that come with putting off the move and sticking with legacy systems far outweigh the temporary challenges that accompany making the change. Here are just some of the risks firms face when keeping with their legacy systems. 

1. Cybersecurity

The worst-case scenario of sticking with legacy systems is that you experience a security breach and lose valuable (and even sensitive) business data, leading to devastating consequences. 

Security vulnerabilities arise because of slow, inefficient legacy systems that are outdated. These outdated systems are a prime target for cybercriminals on the hunt for weak points in a system to exploit. 

Because these legacy systems are outdated, necessary bug patches and more modern security measures are largely unavailable, or these systems no longer have the capabilities to support these new measures and updates. As such, neglecting to upgrade your systems so as to maintain a high level of security exposes your organisation to threats. Not to mention, without proper updates in your security technology, your IT team will be left to deal with any security breaches on their own, wasting valuable time and resources.  

2. Increasing operating costs

Maintenance is the most obvious cost that comes with keeping legacy investment data management systems running. This can be worsened by sporadic or discontinued software updates that need to be dealt with in another way.  

Additionally, the system downtime that comes as a result of old, unreliable tech that can’t remain stable in production, can bring operations to a grinding halt and waste your team’s time and your business’ budget. These unpredictablities put your operations further at risk because they can negatively impact your portfolio management process, which can affect your investment decisions and your risk management, which can hinder your portfolio’s performance long-term.  

3. Compromised work productivity

Speaking of wasting your team’s time, continued reliance on clunky legacy systems doesn’t just compromise your team’s productivity, it’s also a prolonged operational disruption waiting to happen, that can put your operations at a standstill indefinitely. 

Because older investment data management systems can’t integrate with other key systems, which results in data silos and therefore, compromised data quality, they can greatly impact your team’s productivity and efficiency, leading to oversights, frustration and decreased motivation. This can be further aggravated by minimal configuration capabilities and insufficient functionality that doesn’t meet changing business requirements.

This inflexibility can also hinder your team’s – and organisation’s – ability to modernise and evolve processes to meet customer demands and remain competitive in today’s digitally-oriented environment.   

4. Software integration issues 

Integrating systems and software is a key requirement for the modern business, as without proper integration, teams need to manually capture, rekey and move data between tools for different processes, which is a time consuming process. Unfortunately, most legacy systems have been designed as self-contained, standalone systems without integration capabilities, which compromises a business’ flexibility considerably. 

A typical result of this lack of integration is data silos that are difficult to access across different departments, leading to fragmented, disparate systems and processes, and decreased efficiency. 

Why business are moving to cloud-native investment management solutions and processes

In the face of the risks that come with the continued use of legacy systems, many firms are considering moving to, or have made the move to, cloud-native investment management data solutions, to leverage the vast capabilities the cloud has to offer. 

Some of the benefits of cloud-native solutions include:

  • Stronger security that is continuously being improved
  • Enhanced and more speedy data cleansing and processing, across systems
  • Readily available scalability to meet the needs of growing businesses
  • Process automation, which eliminates the risks that come with manual processes 

Cloud-native investment management data tools allow investment and operations teams to evaluate investment performance and risk more quickly and accurately, while providing real-time reporting capabilities for more efficient decision making. Additionally, these tools empower firms with comprehensive portfolio management and performance insights, while enabling more streamlined compliance. 

Overall, leveraging cloud-native solutions means spending less time worrying about your systems themselves, and more time enjoying the benefits that your system provides. 

How to choose the best investment management software partner for your business

While you may be eager to modernise your firm’s systems and processes, hastily installing too many solutions, too quickly, without a proper implementation and change management plan, can have the opposite effect on your business. Taking the time to understand your business and operational requirements, and then developing a sound digital transformation strategy accordingly, is the best way to ensure you adopt solutions that are suitable and can deliver. 

Leveraging the expertise of an investment management software partner, both when developing and implementing your strategy, can help you ensure you start off on the right footing, and transition smoothly to your new system. The best software partner should be able to help you scope out your needs, and then provide an implementation plan that includes seamless onboarding and training, before assisting with system testing and go-live. 

When exploring investment management software providers, keep the following considerations in mind:

  • Is the provider’s solution cloud-native and leveraging the full capabilities of the cloud? 
  • Is the solution scalable without requiring significant infrastructure changes?
  • How does the provider handle software updates? Do these come with an additional fee or system downtime?
  • If my business needs evolve and my investment management software needs to change accordingly, will the provider be able to support this? If so, to what extent and how can I be sure?
  • What kind of post-sales support and maintenance does the provider offer? Does this come at an additional cost?

Summary

Moving to more modern systems is an inevitability for any firm that wants to remain relevant and competitive in the market, whether they make the move out of necessity, or because they’re looking for greater operational efficiency. These systems offer compelling capabilities that guarantee improved processes and outcomes, and as such, you should look to make the move sooner rather than later. 

With a proper plan in place, and a suitable solutions partner by your side, you’ll be well on your way to implementing an improved investment data management system, leading to a more productive firm that offers employees greater support, and clients more improved outcomes, all while saving costs in the long run.

Reach out to our team to learn more about our solutions.