Risk Management

06:11 PM
Becca Lipman
Becca Lipman
Connect Directly

Regulation Is 'New Normal,' Industry Shifts Focus Back to Growth

Linedata surveys suggest the financial industry's future challenges are less focused on regulation and more on improving client relationship and developing products.

The lending and leasing industry is making an effort to curb emphasis on increased regulation and reallocate efforts towards growing and managing client relationships, finds a new Linedata survey on the priorities and challenges facing the global lending and leasing community.

Regulation remains the top challenge for 2014, but it was the only category to see a drop in priority compared to the 2013 survey. "Expanding product and service offerings" and "developing online services for clients" saw the biggest increase, closely followed by "improving client relationship management." These shifts demonstrate that the market has reached an important milestone in getting back to growth, according the study.

As for other trends identified, cost cutting as a main challenge remained unchanged. IT priorities are more focused on business development in addition to streamlining processes and managing risk.  

The results are typical across financial services where increased regulatory scrutiny has been accepted as the "new normal."  

For example, Linedata published a similar annual survey with global buy-side customers in February. It found regulation held steady rank as the top concern, but investment performance rose most significantly as a main challenge from 41% to 47%.

It's a mix of fear and acceptance, explains Bill Kramer, senior VP of the Linedata Lending & Leasing business. "Clients have come to accept this is a much more complex and burdensome landscape that they have to navigate, but it cannot consume their future initiatives."

The industry still faces a systematically large cost to manage existing regulation and there's fear of even more to come, but Kramer says years of preparation following the financial crisis have helped firms make this shift to growth mode despite the continued uncertainty.

"Preparing for the unknown meant industry-wide investment in systems that could more easily meet new regulatory and reporting burdens. And culturally, the years of making compliance a priority has increased collaboration between risk and compliance departments, and with other historically siloed areas of organizations."

The results suggest the feeling of financial firms are that they have done their part to lay the groundwork for increased regulatory challenges, and now it's time to let the investments prove their value.

Growth mode
"One of the interesting things from our perspective is seeing analytics playing a larger role in growth initiatives than it has in the past, and I think we'll see that trend continue," says Kramer. "Obviously there's been the buzzword of analytic solutions and big data, but I think that with technology investments one of the ancillary benefits is seeing how analytics can play a role beyond just applying to risk management and compliance. Now analytics are used to get a more holistic view, so the same kind of technologies get applied more towards front-end efficiencies."

Driving that are the cultural changes, he adds, like internal managements shifting to a collaborative mindset. "Smart organizations are learning to better leverage their technology investments, so one solution can attack both ends of a project, from compliance and growth."

Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Chief Data Officers: Organization Strategy & Cultural Change
Chief data officers are new to the financial services C-suite, but they are facing a number of challenges, including the need for new data governance and execution strategies, staffing, and new organizational structures to enable cultural change.
New York FinTech Innovation Lab Calls for New Entrepreneurial Applicants
Wells Fargo joins 14 other major financial institutions providing mentoring and guidance to the six chosen startups.
Micro Data Challenges in an Era of Macroprudential Regulation
Research and statistical analysis experts at central banks are tasked with developing sophisticated forecasts and models to identify systemic risk. Yet they are spending most of their time acting as data entry clerks, rather than developing these models.
The Perks of 'SmartSourcing' Shared Services in Financial Industry
A breadth of vital but undifferentiated business processes are still being replicated across the industry. They are all candidates for centralization.
Managing Social Media Risk Strategy: Technology Can Only Go So Far
Advanced analytical technologies are an important part of a social media risk management strategy, an Accenture report says, but the technology must be balanced with training and procedures.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Inside Abel Noser's Trading Floor
Inside Abel Noser's Trading Floor
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.