Operational Risk

Mercer Sentinel®: An Investment Industry Leader in Operational Risk

Mercer Sentinel® is a specialist team focused on advising investors and investment managers on risks associated with investment operations and their execution. The team is focused on operational and service provider risk and is comprised of industry professionals with the knowledge and experience necessary to guide clients through investment operations, execution, custody and risk management decisions.

Mercer Sentinel is a recognized industry leader with respect to consulting on middle office, investment operations, custody and transaction-based activities, including execution quality, operational risk management and governance.

We offer a combination of extensive practical and operational experience through our team of 50+ professionals, who are located in North America, Europe and Asia Pacific. This team is supported by a deep resource base consisting of proprietary databases, analytical tools and Mercer’s best practice framework.

Mercer Sentinel Services

Our experience shows that firms of all shapes and sizes continue to face basic business risks and increasing regulatory demands.  Investors and investment managers need to be cognizant of operational risks in order to effectively manage them and meet their regulatory duties.

Operational risk consulting: Investment manager operational due diligence and investment manager operational infrastructure optimization.

Custody consulting: Custodian selection, fee and capabilities benchmarking and asset safety reviews.

Transaction/execution cost and efficiency consulting: Investment manager transitions support and transition manager selection.

We help our clients reduce risk and costs as well as potentially improve returns through better control and management of the activities associated with holding, trading, and servicing investment portfolios.

Our Services

Operational Risk Consulting

Investment managers focused on delivering performance to investors face a number of challenges in supporting alpha delivery through an operational model that provides appropriate oversight over its firms’ processes and procedures. When we review investment managers on behalf of our clients, our risk assessment involves an in-depth review of processes, controls and procedures across core areas of the organization. In conducting this analysis, our primary focus is to distinguish well-managed operations and control environments from those that potentially expose clients to increased, and often unnecessary, operational risks and costs.

Our approach benchmarks each investment manager against safe and sound practices. We expressly consider increased risks and challenges associated with the investment strategy, firm size, complexity and significant third-party or outsourced relationships, along with the mitigating or compensating controls that a firm may have to manage potential risk issues.

We also provide operational consulting to investment managers and asset allocators seeking to optimize internal operational infrastructure support and controls.

Custody Consulting

A custodian can be an invaluable partner in prudently managing, administering and overseeing your investments. We help clients with a wide range of custody-related projects, from selecting new custodians, custodian governance through capabilities review, performance monitoring and asset safety reviews to simply assessing value for money through fee benchmarking reviews. We apply a comprehensive evaluation process, combining our proprietary best practice benchmarking with onsite research and due diligence.

We also have extensive experience advising on all aspects of securities lending programs.  We advise on program structures, evaluating and selecting lenders, assessing and benchmarking ongoing securities lending operations and controls. In addition to providing a thorough assessment of a lending provider’s capabilities, its internal control structure and collateral management, we also assess the reasonableness and competitiveness of lending revenue estimates.

Foreign Exchange and Equity Transaction Cost Analysis (TCA) Mercer Sentinel performs FX and equity TCA reviews that help clients understand whether their execution costs are appropriate and competitive relative to their size and other offerings in the marketplace.

Based on our analytical techniques and operational insights, clients have been able to both reduce costs and negotiate fee reductions to directly benefit their portfolios.

Transition Consulting

Undertaking transitions can incur significant risks and material costs. Regardless of how simple they seem, each transition presents unique challenges and complexities. This demands oversight, and oversight demands considerable experience and knowledge. Mercer Sentinel has market-leading solutions to assist and advise clients on all transition aspects: identifying, analyzing and controlling risks and costs. Using our extensive global experience with trading, transition controls and capital market operations, we help clients address potential issues and complications prior to moving assets. Our unique and sophisticated methodologies promote transparent cost and risk discovery.

We maintain close contact with all Transition Managers in the market and can assist with selection of a provider where required.

Mercer Advantage

Dedicated specialists focused solely on governance, service provider, investment operations and execution risk

  • We are not generalists. Investment operations and execution risks are our sole focus.
  • We assess the structure and controls surrounding investment operations and transactions, asset administration and key service provider relationships.

Expert team with highly specialized backgrounds

  • Our approach is to provide our clients with access to individuals with extensive professional experience in custody, operations, transitions, risk management and investment administration. 

Extensive knowledge of industry best practices

  • Our team has vast experience globally. We conduct hundreds of projects annually, and have covered over $2 trillion in invested assets over the past 15 years. This provides us with a keen insight into industry best practices.

Global reach

  • As a global team (50+), we use our local knowledge to benefit clients who invest internationally.

Resource on Demand

  • Operations, service provider, and execution risk evaluation can be very time consuming and an expensive use of resources. At Mercer we  can provide experienced personnel on demand.

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