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Financial services and insurance re-examine compliance controls in preparation for increased regulation and oversight.

In the U.S. and in Europe, major regulatory changes are being planned and implemented in response to the G20 priorities. In the U.S., the Dodd-Frank legislation provides the enabling framework through which rules for the most far-reaching changes to FS regulation since the 1930s are being implemented. In Europe, new “super-regulators” for banks, insurers and asset managers are being created from what were previously “committees” of national regulators.

As financial services firms prepare for the increased regulation, scrutiny, and oversight, the prudent are evaluating their compliance and control systems.

Strong compliance controls are cost-effective

A strong compliance and control culture is of paramount importance in the heavily regulated financial services industries. Companies need to establish and monitor efficient control mechanisms throughout the organization, especially in the production of reliable regulatory reporting data and due diligence screening audit trails.

Breakdowns in control can be expensive to rectify, lead to regulatory sanctions and damage a company’s reputation. This is a particularly high risk for those companies that have quickly grown and have numerous systems and fragmented processes, and for companies that operate in multiple markets.

The well-controlled company is less likely to suffer costly operational losses. With additional regulatory requirements, companies must optimize the effectiveness of existing controls while demonstrating compliance with the new regulations.

Many companies face resource constraints

Although regulatory, investor and management expectations of compliance programs have never been higher, few companies have increased the resources—technical, business or human—to perform their compliance functions commensurately.

In the U.S., many are still struggling to cope with the increased workload consequent to enhanced governance, anti-money laundering and counter-terrorism regulations from FinCEN, OFAC and other regulatory bodies.

If companies want to meet the demands to achieve higher compliance assurance levels, faster, and without significant additional resources, the choices are clear: embrace technologies that effectively perform and manage each of the day-to-day and oversight compliance functions, or outsource.

Systems generate operational efficiencies

The industry is taking a hard look at profitability and performance. Organizations require carefully crafted business strategies to address the effects of regulatory reform, technology change, competitive dynamics and market movements. The current financial crisis has done more than destroy value—it has redefined what financial institutions must do to compete and win.

Many organizations have found that their attempts to cut costs and improve efficiency in the wake of the financial crisis have been far less successful than hoped and proving difficult to sustain. Smart firms are therefore looking at how to use the crisis as an opportunity to re-engineer their systems and processes in a way that can deliver lasting savings and sustainable improvements in operational efficiency.

This includes realizing potential synergies through the development of compliance “hubs” and greater use of centralized service centers and other sourcing options. Streamlining and simplification can not only cut costs, but also strengthen management control and oversight, as well as support and secure operationally organic and external growth, domestically and internationally.


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