By Steve Bailey, Director, Financial Services Solutions, Harte-Hanks Trillium Software
As financial organizations look to brighter economic times, it’s a guarantee that governments and international regulatory agencies will introduce new legislation in the aftermath of the global freeze-up of credit markets. If Sarbanes-Oxley is an example of legislation introduced in response to the collapse of Enron and Worldcom, then what will NEW legislation and reporting requirements look like? Scary to think about!
Everyone knows that responding to the new demands of compliance will require complex combinations of legal experts, business analysts and implementation teams. It could cost millions of dollars - and may eventually be perceived to have no appreciable business value at all. Frightening!
However, many of the world’s leading financial services organizations recognize that by taking steps TODAY to establish better information and data quality management processes, they can achieve returns with measurable business value immediately. Even more important, they would position themselves to respond more quickly and at less cost than their industry peers to a new world of “oversight and transparency.”
Take one of my financial services clients for example, who revealed that due to a data quality error, the institution was forced to implement a compliance-mandated Risk Weighted Average, making it a policy requirement to set aside capital reserves of $800K on a $10 million loan. But, through a Data Intelligence & Governance solution engagement, the data error was detected and corrected, resulting in an immediate $600K INCREASE in capital for use in other critical projects. These types of real-world, tangible benefits can be experienced by any financial organization that really gets serious about data quality NOW.
The reality for most banks today is they’ve built webs of non-integrated compliance systems, each with extremely limited focus, typically centered on fulfilling a single compliance initiative at a time. Managing this hodge-podge of systems and data repositories adds multiple costly development steps to every business initiative, while creating silos of information and data that could defy data quality efforts. And, consider the myriad of data that underpins KPI calculations, customer credit measurements, agency debt ratings, and accounts receivables, and you have an extremely difficult compliance challenge. All these issues add up to hefty risk exposure.
This begs the question – how can firms address these data problems now in order to comply and protect their businesses from even greater risk exposure?
I believe financial institutions need to consider a flexible, best-fit solution that leverages an enterprise technology platform and employs a consulting engagement model that empowers business owners to become proactive participants in the validation, measurement, and management of all data. This type of solution would provide foundation processes for enterprise governance of risk and modeling data, and ensure data is matched and linked to enable business users such as GRC teams to correctly validate, aggregate and model risks as required by new regulation.
What compliance and data quality challenges is your organization facing now? Care to comment? Would love to learn more.
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