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Information Governance Removes Financial Drain of Compliance

Financial Services Institutions (FSIs) are increasingly faced with a host of regulatory and legal woes, which are increasing operating costs and eating into profits, as they continue to grapple with the uncertainty of changing compliance and reporting requirements. FSIs face potentially business threatening fines for non-compliance. Recently, J.P. Morgan and HSBC have received huge fines, totalling hundreds of millions of pounds, in relation to regulation and compliance breaches. Both banks now plan to spend billions of pounds and commit thousands of extra employees to aid their compliance efforts, after being burnt by the regulators.


The increasingly complex regulatory environment is causing FSIs a major problem in meeting compliance requirements particularly in finding and managing critical data. This problem is exasperated further by the fact that what is defined as ‘critical data’ continues to evolve, whether in meeting reporting requirements that demonstrate fair treatment of consumers or in complying to trading rules to prove best execution.


It is all well and good that FSIs, such as J.P. Morgan and HSBC, are making bold moves in investing significantly in bringing on-board extra employees and looking to commit substantial monetary investment in order to help with this effort. However, simply throwing people at a problem is like letting something burn until it is a full blaze before calling out the fire brigade. It is also a concern that many FSIs are still taking a reactive approach to compliance and continue to under-invest in information and data management. If FSIs continue to take this approach to compliance, the cost of managing data will approach $8 billion and consume nearly 25% of compliance spending by 2015 – according to CEB, a leading member-based advisory company.


According to CEB, work done through internal IT staff will consume the largest segment of IT spending on compliance, which represents a third of total compliance costs. Much of this work involves manually finding, collecting, standardising and managing the data required to provide compliance reporting to regulators. Due to the amount of data that FSIs now store, this can often be an expensive, complex and labour intensive task if done manually. Therefore, FSIs must move away from manual information governance and turn to a comprehensive, automated process that manages all information quicker, more accurately and cost effectively. IT leaders are now being tasked with making compliance spend less painful through better information management and automated compliance, leveraging information across multiple regulatory requirements. This can be compared to putting fire blankets and smoke detectors in place to alert and prevent things from burning.


In order to avoid the continued drain on financial resources and quell the chances of a fire, it is critical that FSIs invest in long-term information management techniques and skills. FSIs can achieve this by having the right governance in place, with technology that supports data and information discovery, classification, and prioritisation which forms the basis to efficiency. In addition to putting policies and processes in place, FSIs must take advantage of  analytics software that accurately understands any information in context, through the use of machine learning and text analytics, to attain a broad overview of what information exist on their systems. This should be part of an overall information governance solution.


Information is the heart of a FSI, but if they lack the ability to quickly find what they need, know what they have, and retain what makes sense, their future will not be a prosperous one as they will more than likely get burnt by the regulators. With a governance process in place FSIs will not only be able to remain compliant with regulations and avoid a fire, but also gain additional insight and value from their information.


By ensuring the right data, and only the right data, is kept for business, legal and regulatory requirements, FSIs can optimise the overall organisational information value. Having clean, clear data and a reportable trail of servicing actions, FSIs will be able to extend the value of compliance data from thousands of customers. This will provide a better understanding of customer behaviours, customer sentiment, improved risk assessment, markets and market segments, enabling FSIs to offer better customer service, appropriate pricing decisions and resource utilisation.


Despite the challenges that today’s FSIs are facing, leading institutions will find it possible to exploit information assets in meeting growing and changing regulation. The ability to find, properly manage, and leverage massive amounts of data is still in a nascent state. But with the right commitment, technology, and goals, financial services institutions will find they can master a new level of business performance, amid the crush of compliance mandates, through sound information management.


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