CURO FUND SERVICES: Curo Remains Consistent During Crisis

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What a difference six months can make. In just half a year, as a result of the global Covid-19 pandemic, third-party investment and asset management administration business, Curo Fund Services has had to rethink its strategy and operations, adapting to a new normal so that it can continue to best serve its prominent international clients.

2020 is perhaps the perfect example of how fickle life in business can be. There are now so many real examples of businesses thriving in Q1 and then clinging to life in Q3. Certainly the most challenging time in modern history, the year 2020 is one to remember, or forget.

At the start of the year, the spread of Covid-19 began to hit global markets and Schroders reported steep declines in equities and bond yields, falling shares across developed markets as lockdowns began, commodities including oil plunging as a result of slow demand and over supply, and emerging market equities falling heavily – with South Africa in particular underperforming.

By Q3, a global recession was here and the World Bank suggested the global economy would shrink by 5.2% – the deepest recession since the Second World War. South Africa continued to struggle with the headwinds from a strong US Dollar and fall out from a harsh lockdown – the local recession looks set to continue for some time.

So, the choice for businesses was to change to survive or accept defeat while watching the competition do what is necessary to operate in the post-Covid environment.

The perfect example of the right way to do things comes from Curo Fund Services. Featured in Enterprise Africa in April 2020, when the effects of the lockdown and the spreading pandemic were only starting to become apparent, the business has had to make significant changes to ensure critical service delivery for clients was not interrupted. Curo is a third-party administrator for the asset management and investment industries. The company manages the back-office function for Sanlam and Old Mutual, as well as other high-profile clients.

In April, CEO Barri Maggott explained more about the company’s growth plans. Now, he explains about a strategy and operating shift, a few tough decisions, but an enduring hope for the future.

QUICK ADJUSTMENTS

“As with most other businesses we quickly had to move to a work from home model. As an essential service provider, we continued to operate throughout all phases of the lockdown, so it was important that we quickly adjusted and were able to continue providing services to clients. We are very pleased with the seamless transition we made under tight time constraints,” he says.

For many, working from home has been a real challenge. But after the initial uncertainty became normality and people began to thrive in a home working environment. Harvard Business Review suggests that workers spent 12% less time in big meetings and 9% more time dealing directly with customers. Employees undertake 50% more activities by choice, rather than being told to do so, because they realise their importance. Workplace tasks rated as ‘tiresome’ drop from 27% to just 12% while working at home.

In South Africa where load shedding, slack connectivity and extremely strict lockdown was the reality, Curo had to make tough choices to ensure it was compliant from a health perspective, responsible from an operational point of view, and sensible financially.

“Our turnover has been adversely affected by the under performance of the stock markets and this impact has been material,” says Maggott. “With a major impact on our revenue, we had to make financial adjustments, particularly with respect to managing cashflow and cost containment.

“We also had to adjust for the logistics of data allowances, take-home devices and home connectivity, increased bandwidth requirements and of course a host of health protocols for the office to cater for the limited number of staff who had to go occasionally visit the office.”

Curo has more than R2 trillion in assets under administration and utilises cutting-edge digital tools to ensure the highest quality service for its clients. Today, Curo is known for global best-in-class fund administration technology and boasts more than 30% of South Africa’s top asset managers as clients. At the start of the year, Maggott suggested a growth strategy that could see the business grow out of South Africa into new territories where its existing clients already had a base. By approaching life-backed asset managers, Curo could quickly find a foothold in the likes of North America and Australia.

But, while the company is still ambitious in its growth aspirations, the global pandemic has caused a slowdown in activity.

SLOW AND STEADY

“The situation has not impacted our ambitions but has had some impact on our timelines. The switch to work from home resulted in some lost productivity. There were also some new workstreams that were due to kick off with consultants scheduled to arrive from Europe just before the lockdown happened. So, we lost some time – probably six to eight weeks overall – but we are back on track albeit with this slight delay,” explains Maggott.

“Our strategy and focus for the short term remains the same. We have had to make some tactical adjustments in terms of how we get there but our focus of entrenching our market share in the local market by developing a best in market product still holds true as this will give us the platform to tackle international markets in similar fashion. Current uncertainty around international travel and cashflow pressures will force us to be circumspect about our expansion internationally but this will still be our aspiration.”

Fortunately, Curo’s clients have performed relatively well during the first three quarters and through lockdown and pandemic uncertainty. While each has been impacted, the strong financial background that these players enjoy has helped them to ride out the storm. This leaves room for Curo to further tailor its service to new client requirements.

“The bulk of our business is with large players who will be affected by the crisis but will survive. We have heard of some smaller asset managers struggling and even closing their doors. We do expect our competitors to struggle as they do not necessarily have the strength of balance sheet that our business does,” says Maggott.

“The relationships between us and our clients do not necessarily become stronger but I do think that the expectation for us to better support the asset manager’s business, and the initiatives they may have to take to respond to the crisis, increases.”

The concern for Maggott and Curo is the longer term economic and social impact in South Africa, where the situation was already dire following ratings downgrades, high unemployment and seemingly endless government corruption allegations.

“There is a natural concern about the economic impact and the future. Due to the changes we have made we have been able to secure our employee’s jobs and their salaries. Despite this, some concern remains about the future and we will need to communicate frequently and clearly to manage this. Of course, this is over and above the concerns that were already prevalent in the South African economy. However, we were on a journey to overcome these macro-economic challenges, though our journey will now be slower after Covid-19.

“A greater impact is the broader socio-economic one of staff who have to provide support to family members who have either lost their jobs or had their salaries reduced. Many of our staff come from communities where extended family members live with them and rely on one another for financial support and thus if those family members are affected it places that whole home and family unit under financial pressure,” details Maggott.

NO RETURN TO NORMAL

At the end of May, the Curo Fund Services leadership team came together as part of the company’s annual Leadership Summit. For the first time the meeting was held virtually and management discussed the challenges and opportunities for the next three to five years.

“The Leadership Summit is an annual event that brings our leaders together to collaborate on the future vision and progress of our business. This year was additionally astute given the strategy discussion but also the expression and experience of the event as it epitomises a new way,” said HR Executive and Summit speaker, Mandla Dlova.

What was taken away from the summit was that the future will be different and the time to innovate and make changes is now. The company is choosing to use this time to challenge existing norms and fuel the next phase of development. Maggott is certain that a new way of working is here to stay.

“Will things return to exactly as they were before the crisis? No, they won’t” he says. “Work from home and our office strategy has already changed permanently so there won’t be a return to normal. Also, we have proved that we can successfully make decisions and changes in much shorter timeframes so I would not expect us to revert to old/normal ways.”

Even with new working practices and operational norms, the very core of Curo remains a relentless drive to take care of, look after and effectively manage the investment administration of clients, and as long as this continues Curo will maintain its position as a market leader, even through the unknown that is 2020.

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