Dodd-Frank Drives Convergence
John Kelly 270004J7VQ email@example.com | | 0 Comments | 157 Visits
In my last blog post, I mentioned that the new Financial Stability Oversight Council created under Dodd-Frank will collect risk data from various sources including Federal and State financial regulatory agencies and the newly created Office of Financial Research (OFR). The OFR in turn is responsible for collecting risk data from financial services institutions at the behest of the Council. These additional, external information and reporting requests will not only compound the extensive reporting responsibilities of risk committees and risk managers, but will also likely overlap with internal reporting requirements from Boards and executives.
As the Dodd-Frank rulemaking proceeds in the coming years, reacting to each new rule and regulatory requirement with siloed technology and resource investments will clearly not be effective. The financial crisis of 2008 highlighted the interdependency of risks across an enterprise (credit, market, operational) which need to be managed holistically rather than in traditional silos. A siloed approach limits an organization’s ability to streamline risk and compliance processes and reduce costs. It also obscures the opportunity to integrate risk and compliance to gain a comprehensive view of the firm’s risk exposure.
Gordon Burnes commented in a recent blog post that “as companies put in place this information architecture to surface enterprise risk exposure, thinking about interdependencies will be critical to reduce cost.” I’ve worked with numerous OpenPages customers who are actively managing multiple risk and compliance programs on a single framework. The impetus behind these initiatives varies from the need to review enterprise risk and control performance at executive and Board-level meetings, to Federal regulator demands, to the need to simplify and rationalize risk and control assessments. A large, OpenPages financial services customer recently completed the convergence of risk assessments across all risk and compliance programs with the explicit intention of monitoring risk exposure across their business.
Moving forward as new Dodd-Frank requirements emerge, financial services institutions will require a converged information architecture that supports multiple risk and compliance initiatives on a single framework. An integrated risk and compliance framework can reduce the disparate databases and reporting structures, while at the same time meeting internal and external reporting requirements more efficiently. Whatever risk disciplines are significant within your firm, the goal should be to integrate them within a single framework that produces a holistic view of your risk landscape, while meeting the needs of regulatory agencies.