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REITs and Fund Compliance: A Case for Modernizing Financial Systems


The regulatory environment is constantly evolving. In this variable state, real estate financial officers need to ensure they are protecting both their company and their investors.

The Security Exchange Commission, for example, is turning its attention to the real estate sector, and increasing its scrutiny of reporting for investment-level and fund-level fees and expenses. As REITs (Real Estate Investment Trust) become increasingly popular with investors, their valuable benefits come with strict compliance rules that must be managed. New revenue recognition standards mean financial reporting processes and systems must change — if they haven’t already — to implement the new guidance and satisfy the new disclosure requirements.

In the coming years, leading alternative firms will shift focus and invest more time and resources on business strategy, organizational design, and data-informed decision making.

SO, WHAT DOES THIS ALL MEAN?

How will these firms respond? Hire more personnel to do the tactical work so senior managers can focus on analyzing the data and making strategic decisions,

OR,

Leverage technology to productively enable the tactical work and redeploy existing personnel for analysis and decision making?

There will not likely be many takers for the former, as there is little appetite among executives for hiring more staff since that only increases the cost of doing business. REITs would still be left with most or all of the following challenges;

  • Labor intensive data collection and sharing via spreadsheets

  • Point solutions that lack the results needed

  • Delays in closing and consolidation processes

  • Risks to data accuracy due to human error

  • On-going, time-consuming manual processes

  • One-off solutions for regulatory submissions

  • Inability to improve process performance due to lack of automation

  • On-going data silos that inhibit drill-down and data analysis

There is therefore a compelling argument for REITs to modernize their Financial Systems and reduce their people-dependent processes. Simply put, a band aid approach or throwing bodies at it will not work for achieving the rapid pace, accuracy, and alignment of data necessary for making key decisions under today’s time pressures.

There are many software choices out there. Evaluate the choices wisely. Some systems might help in the short term, but will not provide a complete solution and will lead to replacement or adding in more software. Buyers should consider the following in attributes in a new system:

  • Look for something that can help consolidate multiple point solutions

  • Guided workflows to take advantage of best in breed processes

  • Deep functionality that can cut across financial consolidation, reporting, budgeting planning, forecasting, analysis, and data quality

  • Deployable in the Cloud or on Premise

  • Allow for BUs to report and plan at a lower level of granularity without impacting the roll up to corporate standards

  • Integrated Data Quality component to ensure cleansed and accurate data

The good news is that there are solutions that will help Finance reduce costs, risks, avoid costly upgrades including the consumption of time of key resources and with superior modeling for better scenario-based analysis along with impressive reporting for the Board. Look to software that meets compliance needs, provides operational benefits, improves management decision making and that can scale with your business.

About the Author

Mr. Marinelli has more than 25 years’ experience in both Industry and Consulting, where he has worked for such leading companies as The Walt Disney Company, Verizon Communication, Deutsche Bank A.G., Siemens A.G., and Guardian Life Insurance Co in various management roles at both the divisional and “C” levels. Mr. Marinelli specializes in expense management, back office re-structing and modernization, vendor management and out-sourcing services. He has worked on nearly all aspects of operational management and organizational re-structing which included systems and process improvement. Mr. Marinelli has been a keynote speaker at trade and research events during his career, and holds a JD from Seton Hall University School of Law.




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