Good Controls Don’t Slow You Down. Bad Ones Do.

We have all been there. The moment when you have to make a decision. Follow a process to the letter, or take the shortcut and send out the document.

In reality, there is only one answer. But the time it takes creates client relationship strain. Achieving operational control and efficiency is possible. Here's how.

Controls. As a governance professional, it’s something I talk about again and again. Unfortunately, the word has earned a bad reputation. It is often dismissed as “red tape”: slow, rigid and inefficient. But in my experience, the right controls can actually speed things up. The important words there are “the right controls.”

Of course, what I am referring to is good governance—in particular, the processes and systems that determine how work gets done within a business.

On the other hand however, you know that not following processes opens you up to potentially damaging mistakes. Maybe you’ll overlook something you hadn’t thought of or a slight lapse in concentration could lead to an irreversible action you’ll come to regret later on.

It is a genuine dilemma. Investors, executives and managers all want strong controls, but not at the expense of efficiency. So how do you protect quality and reduce operational risk without slowing the business down?

This matters beyond the day-to-day running of the business. Institutional investors are attracted to managers with a strong control environment because it reduces operational risk and gives them greater confidence in how the fund is run. Fund Managers therefore have a clear incentive to keep improving their processes. Fund Administrators should see that as an opportunity: the Administrators that continually innovate their processes will be better placed to attract and retain Managers who take operational risk seriously.

In my experience, well-thought-out controls do not have to compete with efficiency. Done properly, they can reduce operational risk, remove bottlenecks and speed up delivery. It comes down to five things: Sign-off, Fit, Understanding, Tools, and Consistency. Here’s how to get each one right.

1.        Sign-off

Having more than one set of eyes on a work product is necessary when dealing with complex fund administration deliverables. Whether it is a set of accounts, a call notice or an advisory memorandum, the level of detail creates a meaningful risk of error. Businesses mitigate that risk by building in system checks and senior sign-off for the most complex work products.

That oversight is important for quality, but it can become a major drain on efficiency when teams are chasing sign-offs from people who are too busy to review the work—or who are not trained in that particular area. Keeping sign-offs simple and assigning them to people who understand what they are reviewing, and why, can reduce errors and speed up delivery to clients.

Getting payments signed off when a deadline is looming is a good example. High-value payments rightly warrant high-level sign-off. But when the release deadline is tight and the executive required to approve it is unavailable, or doesn’t realize they’re needed until the last minute, teams end up scrambling to get the payment released in time — and the margin for error increases exactly when you can least afford it.

Map the process and delivery points. Then decide who does what and who they report to. You will find that there are overlaps in roles and ultimately, you can centralize sign-offs and keep within teams who know what to deliver. Also, peer-to-peer reviews can be a very powerful tool in reducing the senior bottlenecks that can appear when loading up senior personnel with sign-off requests.

2.        Fit

Most businesses have core checklist points or procedural requirements that must be followed. This is for control purposes, but also to satisfy their future control audit (deviation from SOC 1 controls can be damaging). Unfortunately, businesses can also add checklist points to satisfy their biggest accounts. The more errors, or issues identified across the biggest accounts, the longer the checklist becomes. This tends to end one way: an overly elongated checklist, too many procedural points, and steps which just don’t translate across accounts or processes.

In the world of alternatives, funds can vary greatly in their structure. Some Funds have ILPA templates, and some don’t. Some Funds agree specific templates with clients, and some don’t. The challenge in these situations is following a checklist that either doesn’t anticipate these quirks, or the truly valuable control points are hidden beneath a medley of ambiguous checklist points adding very little value.

I’ve seen this play out with capital call notices: a client agrees a bespoke notice template with a specific investor, but the control checklist used internally never gets updated to reflect it. The specific checks that template actually needs get missed, errors surface downstream, and the overcorrection that follows — extra layers added to catch what was missed — creates its own inefficiency.

Spend some time stress testing when launching new funds or taking on new clients. Make sure the most important procedural steps are noted and are clear. And where possible, strip away anything that does not apply. No checklist should include the phrase “Not applicable”!

3.        Understanding

Fund Managers, Administrators and other businesses can have well-thought-out, documented processes. But when the rubber meets the road and the work needs to get done, blank expressions can appear as soon as a task crosses from one team to another. That creates a risk of missed deadlines and ultimately leads to inefficiency and friction between teams.

I have seen this on so many occasions. Perhaps it’s a process only followed once or twice a year or maybe there just hasn’t been enough training about a process, but bottlenecks appear and arguments can happen between teams who just don’t know where they fit in a process.

Annual accounts are a good example. They’re long documents covering a lot of ground, and while the accounting team inputs most of the numbers, other teams — legal, compliance, investor relations — often need to review specific sections. In the past, I’ve seen those teams left out of the loop entirely: they don’t know the deadline, or don’t realize they’re needed at all, until the report is already late.

Spend the time on training. Get peer buy-in to the processes and importantly make sure any new process is signed off and agreed to. It can also be helpful to have step one of a process just being to give a heads-up to those who will be involved. This way, everyone is expecting to receive something and familiarize themselves with a process before the client comes chasing.

4.        Tools

Systems and tools can help teams follow controls and deliver work to clients quickly. But confusion over how to use them—or choosing the wrong tools in the first place—can create inefficiency and new control risks rather than removing them.

I have seen this on many occasions. A system is built into a control step, yet the team responsible doesn’t know how to use it, or maybe it just doesn’t work the way it’s supposed to.

Capital calls are a good example here too. With a large investor base and heavily bespoke notices, the margin for error is naturally high. Using comparison tools or accounting software properly — and consistently — has always been one of the biggest levers for getting notices out on time and error-free.

Spend the time picking the right systems. Stress test them, and most importantly, spend the time on training, user testing and proving the concept. The difficulty is that technology moves fast, and processes often don’t. Try to regularly refresh processes in line with newly available technology. Granted navigating the narrow corridor of being agile and nimble, yet compliant with your SOC 1 report can be difficult and time consuming – but the more technology becomes available and progresses, this is a necessary investment to make.

5.        Consistency

Processes die when they are not followed. Sometimes a work task infrequently occurs and when it does occur, staff forget, or just don’t follow a process they see as overly antiquated. In these situations, the process dies and the work that went into working out inefficiencies, removing bottlenecks and ensuring quality, is essentially lost and has to be done again.

I have seen this a lot over the years – especially as it relates to annual accounts sign-off or even infrequent board meetings.

When things get busy, people take shortcuts — including good ones. I’ve seen key personnel quietly build in extra checks they think are necessary, without ever documenting them. That creates tacit knowledge: the process only works because one person remembers to do the extra step. The next time it comes around, that person becomes a key-man risk, and the process is only as strong as their memory. Document it, and follow it consistently, or the value of that improvement disappears the moment they’re out of the room.

The cure? Spend the off-season refining or updating the process. Stay close to timelines and send heads-up emails to those involved. Keeping up awareness and relevance of processes can go a long way!

Good controls reduce errors and operational risk. Done properly, they can also make delivery faster and more consistent. That matters to institutional investors, to Fund Managers seeking to strengthen their operating model and to Fund Administrators looking to stand out through better service. The real choice was never process versus speed. Get sign-off, fit, understanding, tools and consistency right, and you stop having to choose. If you want to see where your own sign-off chain has more steps than value, I’ve built a quick process health-check you can run in 15 minutes — happy to share it, just reach out.