Mitchell Nichter, an attorney with Paul Hastings, a global law firm, says no one should be surprised by any of the new rules. "A number of bills were incorporated to become Dodd-Frank," he says. "Most of these issues have been batted around for a while, so there really shouldn't be any surprises."
But even if a firm isn't surprised by Dodd-Frank, it still will present a major obstacle for CIOs in 2011 and beyond. Modifying systems and processes for compliance will soak up resources and divert focus from projects that may grow the business. After all, no IT organization's budget is infinite, and in today's world of doing more with less, something always suffers.
Within Citi's ICG, the firm's Beyman acknowledges, Dodd-Frank compliance undoubtedly will divert resources from some projects. "We have a big budget, but it's not unlimited," he says. "In any year, there are always some things that get crowded out because of mandatory development," such as compliance initiatives. "When I build an annual technology budget, we look at mandatory development before discretionary. If the mandatory number gets larger, we have to spend less on discretionary [projects]."
The secret sauce that will help a firm be successful, according to experts, will be the ability not only to comply with Dodd-Frank, but also to gain some useful business processes out of the exercise. "Eight out of 10 companies will just focus on Dodd-Frank compliance," contends Mark DeBenedictus, VP of global financial services at HP. "But," he adds, "if in the process of complying, you simplify processes and deliver better information, you can improve business processes and comply with Dodd-Frank at the same time. In the end, getting a better grip on information can help the business change the way it makes decisions," which will create value for the organization.
Creating value for the business while simultaneously complying with Dodd-Frank regulations is the holy grail, asserts John Burchenal, managing director of market growth at Omgeo. "Firms are taking a broad look at the organization and they are taking the opportunity to do things that may not have gotten done" without Dodd-Frank looming over their heads, he says. "For instance, Dodd-Frank may finally be the driver that has firms get data management in order. They have known for a while that they need to break down the data silos and create a consistent process across the enterprise, but there hasn't been the will to do it."
Instead, business units traditionally have insisted on building their own data repositories, risk metrics and reporting capabilites, at the expense of the larger enterprise. "Now Dodd-Frank compliance is driving the need [for better data governance]," Burchenal adds. "Business units may lose some functionality on an individual basis, but the firm will gain in the long run by having consolidated data and technology."
Dodd-Frank Hiring Boom?
Although all firms are devoting resources and personnel to Dodd-Frank compliance, most do not anticipate increasing staff to meet compliance demands. "We haven't had to increase staff for Dodd-Frank, and we don't plan to," reports Citi's Beyman.
Marty Leamy, president of the Americas at Orc Software, a provider of technology and services for the global financial industry, also says firms are not planning to increase staff to meet Dodd-Frank's requirements. "For the most part, firms are trying to meet compliance demands with the same amount of people," he says. "Hiring has yet to take off in the U.S."
HP's DeBenedictus attributes the lack of hiring to frozen technology budgets. "I haven't heard of firms staffing up for Dodd-Frank or, for that matter, that there is a significant hiring push anywhere in financial services right now," he relates. "I do hear that budgets are frozen and there is a need to do more with less. That certainly hasn't changed."