Castle Hall, Bringing FinTech to Operational Due Diligence
Dec 14, 2015 10:41:00 AM
As we look to 2016, Nova Scotia Business Inc., the regional development agency in the province recently interviewed Castle Hall. The discussion focused on the changing model of due diligence and the increasing role of technology within an effective operational due diligence program.
Q. What is Castle Hall?
A. Castle Hall provides research and data products which assist asset owners and financial intermediaries with managing the operational risks of investments. Our most obvious task is to identify any risk of theft or fraud when our clients invest in a hedge fund, a private equity partnership, or a stock or bond fund. Our broader role is to provide a sophisticated suite of risk management tools which enable governance. Governance, risk and compliance professionals exercise oversight over diversified investment portfolios.
Q. What kind of industry do you serve from Nova Scotia and where are your clients located?
A. Castle Hall’s client base is diverse. We serve institutional investors such as sovereign, corporate and public pension plans, banks and financial institutions, endowments and foundations, and fund of funds.
We are proud to work with clients worldwide, with relationships across the Americas, Europe, the Middle East and Asia / Australasia. In addition to our offices in Canada, Castle Hall also operates from London, Zurich and Sydney.
Q. Why financial technology?
A. Our business has evolved significantly in recent years. Like many industries, due diligence and risk management have been disrupted by technology; the services our clients ask for today, and certainly the services they will require in the future, are very different to the services we provided five years ago.
In the past, the traditional due diligence model involved a schedule of in-person diligence meetings, with the output of each diligence cycle limited to a report memorializing information gathered during each meeting. This process was then repeated every 1-3 years.
This legacy diligence model is now largely obsolete. Operational risk oversight has evolved into a flexible, risk-based approach to oversee multiple asset classes, with diligence conducted continuously via real time monitoring. To adopt this business model – and meet the service needs of a sophisticated, institutional client base – technology has become critical. Systems, ability to process large amounts of public and private information, bandwidth to curate data, and quality reporting and dashboard capabilities are vital.
For Castle Hall, this means that our firm is now as focused on FinTech as we are on the subject matter knowledge contributed by our CPAs and CFA Charterholders. Internally, this has been reflected by the growth of our firm: of our current 50-person headcount, 9 people focus on technology. Our most recent hire in our FinTech group is a cyber security specialist, which will allow us to further enhance our technology and cyber diligence capabilities.