It feels difficult to overstate the way technology is about to transform the back-office operations of private equity firms. A few weeks ago we talked with Jason Murphy, the management chief financial officer of The Riverside Company, who dreams about how blockchain can help facilitate business information. In a more recent interview, the chief legal officer of The Blackstone Group, John Finley, talked about putting technology to use in his legal and compliance work, now.
Big firms will lead the way
One of the key takeaways from the interview was that the biggest firms will be best positioned to take advantage of emerging technologies. Blackstone Innovations, the firm’s technology group, is already doing that. The team is finding ways to eliminate much of the manual work and reduce paper documents through automation.
In the case of its anti-money laundering system, the innovations group streamlined documentation requests according to risk rating and investor type. Artificial intelligence has the potential to assist in areas of high-volume contract management, such as non-disclosure agreements, Finley says.
Another takeaway for Finley was outsourcing. Just like CFOs who turn to consultants for accounting and tax matters on which they’re not experts, general counsels like Finley turn to law firms that can enhance and fill in the knowledge gap on issues they’re less familiar with.
“We also rely on their good judgment because they’re doing the same deals over and over, and very sophisticated ones. And so just like the brain surgeon that has done a thousand surgeries, they’ve got that great judgment that comes from doing it over and over,” Finley said.
A third point from the interview was taking a proactive approach to regulation and putting it to Blackstone’s advantage in a term that Finley put as “winning legally.” That can mean putting regulation in the EU to the firm’s benefit or working with other groups on legal cases.
Ultimately, Finley’s discussion about utilizing technology for legal and compliance matters, using outside resources at his disposal and having his team take a proactive approach demonstrate how he could drive value to the firm. Surely something anyone in the back or middle office should be aspiring to.
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