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Information Governance Removes the Financial Burden of Compliance


Nick Patience, Director of Product Strategy at Recommind, discusses how having an effective information governance policy can alleviate the financial burden of compliance

Nick-PatienceIt’s no secret that regulation is eating into profits throughout the global financial services industry. Operating costs continue to rise as Financial Services Institutions (FSIs) grapple with the uncertainty of changing compliance and reporting requirements. In fact, failure to meet compliance requirements has now become a major source of operational risk and a mounting financial burden on FSIs, as they are faced with massive fines for noncompliance. The drain on profits as a result of increased regulatory cost and the accompanying increase in operational risk is further complicated as growing investments in mere compliance often results in loss of focus on the marketplace – especially as more resources are devoted to compliance, whilst market facing needs deteriorate.

A major problem for FSIs in meeting compliance requirements is that they struggle to find and manage needed data. This problem is accentuated by the fact that what is defined as ‘needed data’ continues to evolve, whether in complying to trading rules to prove best execution or in meeting reporting requirements that demonstrate fair treatment of consumers. If FSIs continue to take a reactive approach to compliance and continue to under-invest in information and data management, the cost for managing data will approach $8 billion and consume nearly 25% of compliance spending by 2015 – according to CEB, a leading member-based advisory company.

Although FSIs employ external resources to aid them in compliance, work done through internal staff will consume the largest segment of IT spending, representing a third of total compliance costs, according to CEB. Much of this work is in the form of finding, collecting, standardising, and managing the data needed to provide compliance reporting for regulators and to manage compliance internally. With ‘needed data’ continuing to evolve and the vast quantities of information they have to search through, it can often be an expensive, complex and labour intensive task. This raises the demands on IT leaders to make spending less painful through better information management and automation, leveraging that data across multiple regulatory requirements and for increasing business value. Finding additional value in spending on compliance will certainly form the difference between the leading institutions versus those who merely comply.

Therefore, in order to avoid the continued drain on financial resources, FSIs must invest in long-term information management skills and techniques. By lacking a more sophisticated approach to information management, FSIs will find themselves continuing to spend an exponential amount of cash on adhering to regulatory requirements.

To overcome these risks and reduce the financial burden, an effective information governance process is essential. Information is the lifeblood of a FSI, but the ability to quickly find what you need, know what you have, and retain what makes sense is critical to its future success. With that process in place FSIs will be able to gain additional insight and value from their information, as well as ensuring they remain compliant with regulations.

Traditionally, FSIs have dealt with the risk posed by their information in a manual, time consuming way. However, FSIs must move away from manual information governance and turn to a comprehensive, automated process that manages all information much faster, more accurately and more cost-effectively. By using analytics software that accurately categorises any data – structured or unstructured – in context, through the use of supervised machine learning and automatic categorisation technology, FSIs can attain a broad overview of the kind of information that resides on their systems. This will allow them to better find what they need and know what to retain.

Effective information governance optimises overall organisational information value by ensuring the right data – and only the right data – is kept for legal, regulatory, and business requirements. Additionally, having clear, clean data and a reportable trail of servicing actions, FSIs can extend the value of compliance data from thousands of customers. This, in turn, will provide a better understanding of markets, market segments, customer behaviours, customer sentiment, and improve risk assessment. This provides a platform for better customer service, appropriate pricing decisions, and resource utilisation.

Of course, compliance to regulation is not optional. However, too many FSIs spend money in serial fashion to meet discrete regulatory stands and mandates. This fragmentation is expensive, non-productive, and under-serves the institution. Instead they must invest in the foundational elements of information governance, which can be reused across regulations as well as for other business purposes. Through the best of today’s analytics and data management technologies, leading firms will achieve ongoing compliance even as the rules change and fluctuate, as they are certain to do through the remainder of this decade.





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