Compliance

06:07 PM
Bill Kramer
Bill Kramer
Commentary
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Surviving & Thriving in the Current Risk Management & Regulatory Environment

How financial institutions can leverage compliance initiatives to improve their business with a 360-degree view of the customer.

With rapid change transforming the lending and leasing lifecycle and ecosystem, it's important to recognize that financial institutions continually operate in an environment of both constraint and opportunity:

  • Constraints drive necessary change. If a financial institution doesn’t adapt to regulatory requirements and manage risk in a cost-effective way, it faces enforcement actions, extinction through acquisition, or worse.
  • Opportunity is defined by acting in response to change in ways that lead to greater competitive advantage and, in the case of businesses, increased profitability.

There's inherent potential in every set of changes and constraints, so we have to consider how risk management and technology -- two areas of rapid evolution in our ecosystem -- create opportunity to thrive, not merely survive.

Necessity
The ripple effect of the Fed’s stress tests for CCAR banks last year is clear: High cost and high risk of non-compliance are here to stay and affect all banks. To ensure that their organizations survive, business leaders must consider how they can reduce cost and minimize the distraction from core competencies.

Embrace the new normal: As we know, the “new normal” includes higher levels of scrutiny, cost, and ongoing demand for information. Taking shortcuts is risky and can be expensive. 

Organizations should take the time to holistically rethink the ways they approach risk management; they should include the processes and tools that will position them to sustain compliance activities over time as part of their assessment.

Invest in technology: Systems investment is necessary to reduce operating cost and speed processing. This has a direct benefit when organizations are faced with increased demands for compliance. In fact, in recent years, forward-thinking banks have driven the purchase of origination systems from a risk perspective rather than simply from a focus on operational efficiency, because of the necessity of creating a repeatable, sustainable, and transparent risk management process.

Solve the data problem: Data and data management are critical to the success or failure of an organization, both overall and when it comes to compliance. The Federal Reserve expects banks to have robust and comprehensive internal data-collection methods, and better and more complete data can have material impact on establishing capital requirements.

A benefit of comprehensive loan origination and risk management technology solutions is the ways in which they impact overall data governance, through both technology and process enforcement.

...Read more on Bank Systems & Technology

Bill Kramer is Senior Vice President, Product Management at Linedata Lending & Leasing.  Bill manages Linedata Capitalstream, a lending & leasing business automation platform allowing finance organizations to gain operational efficiencies and control risk throughout ... View Full Bio
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GSK28
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GSK28,
User Rank: Apprentice
7/29/2014 | 11:16:07 AM
Embracing the need for Regulatory Enterprise Risk Management is good business
I agree with your article's key premise. Regulated firms need to develop, implement and maintain regulatory enterprise risk managment systems to comply with the challenges of the current regulatory regimes.  Rather than fight this, firms need to embrace the opportunity to better run their businesses and mitigate the lapses that can lead to extraordinory costs and unwelcome regulatory scrutiny.

 See: http://www.conceptonellc.com/documents/FG/conceptone/press/182149_HFM_AIFMD_2014_-_Gary_Kaminsky_ConceptONE_-_4-10-2014.pdf
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