Erwin Boeren 270002C43V ERWIN.BOEREN@NL.IBM.COM | | Tags:  grc research openpages enterprise algorithmics ibm management risk | 1 Comments | 2,786 Visits
In the last 2 months three independent researchers have given their opinion on IBM’s approach to risk management. All 3 are very positive towards the areas of Innovation, Market Presence, Functionality and Enterprise GRC capabilities.
Forrester in the Forresterwave EGRC 2011: The OpenPages platform remains one of the most consistently strong enterprise GRC platforms on the market today. The company’s vision is to enable senior management to make strategic risk and reward decisions to improve business performance and reduce exposure to risks and loss on investments. The OpenPages platform’s GRC management and analytics features are just one example of where this mission will play out."
Gartner in its September update: The OpenPages platform has solid capabilities in all the core functions, has above-average support for ERM and ORM, and is rated very high on financial reporting integrity compliance. It continues to execute consistently on a well-planned road map.”
Chartis published its Risk Top 100 last November with IBM ranked the No.1 vendor in the area of Risk Management. With special rewards for Functionality, Market Presence, Innovation, Fund & Asset Management, Market Risk, Operational Risk and Enterprise GRC.
In the Chartis RiskTech 100 IBM was measured for the first time along the qualitative and quantitative risk capabilities (read the acquisitions of OpenPages and Algorithmics). In the Gartner and Forrester publications the latest Algorithmics acquisition was not taken into account.
Interesting enough researchers praise IBM for immediately adding value to its acquisitions. One year ago IBM was ranked number 7 in the RiskTech 100 and now IBM is on top of the list. Not because the individual products are that good but because the minimal overlap and immediate integrations create added value for customers.
Adding Risk to the area of Business Analytics (Business Analytics is one of the 4 key initiatives of IBM towards 2015, driven by our new CEO Gini Rometty) is a great step into Smarter Risk. Capabilities like predictive intelligence, driver based planning, regulatory reporting, scenario testing, forecasting, dashboarding, scorecarding, reporting and analysis will give a great boost if you apply this to risk. This is where the convergence of performance management and risk management create great value for our customers.>
Blog post from Erwin Boeren, Governance Risk & Compliance Leader IBM Europe
Liz Andrews 2700041WEU email@example.com | | Tags:  compliance risk openpages grc | 0 Comments | 2,149 Visits
Getting to the Head of the Class: Advancing Your Organizations GRC Maturity
Organizations with GRC processes siloed within departments operate at the Unaware, Fragmented, or Integrated stage. At these stages GRC may be effective within a silo, but lacks an enterprise perspective of risk and compliance and gains no efficiencies from shared processes. Different departments may be at different levels of maturity.
The Aligned and Optimized maturity levels represent maturity of organizations with an enterprise GRC strategy, focused on developing a common GRC process, information and technology architecture. These organizations report process effi
Considerations for Moving From Fragmented to Integrated
Departments at the Fragmented stage have siloed approaches to risk and compliance at the department level. This means no integration or sharing of risk and compliance information, processes or technology.
To move from Fragmented to Integrated requires the department reduce manual data integration and improve overall visibility into risk exposure. Organizations should consider defining GRC process and information architecture at the department level and implement technology to manage multiple risk and compliance initiatives cohesively.
Considerations for Moving From Integrated to Aligned
Departments at the Integrated maturity stage are in a good place to lead the organization in an integrated GRC strategy to the Aligned stage. They have a strategic approach to GRC at the department level, supported by mature GRC processes that can be extended to other departments. These organizations have a shared-services approach to GRC to deliver common processes and integrated information.
To move from the Integrated to the Aligned stage requires a common risk catalog that shows the relationship of risks across the business and risk ownership. The purpose is to enable the business to make risk-informed decisions. Orga
Considerations for Moving From Aligned to Optimized
To difference between the Aligned to Optimized stage is primarily one of context. At the Aligned stage the orga
Achieving the Optimized stage requires GRC expectations set as part of the annual strategic planning processes. The organization has extensive measurement and monitoring of GRC in the context of business strategy, performance and objectives. There is shared information and technology between risk, control and compliance management as well as decision support, optimization and business intelligence. The organization has integrated risk and finance data to drive performance and maximize value creation.
Fundamental Steps to Establishing Your GRC StrategyTo achieve the benefits other organizations have seen from a GRC strategic plan and common approach, Corporate Inte
Erwin Boeren 270002C43V ERWIN.BOEREN@NL.IBM.COM | | Tags:  compliance grc governance manufacturing smarter energy&utilities openpages risk enterprise deloitte project | 0 Comments | 2,090 Visits
Smarter Project Risk
Last week I came across project risk, and not for the first time! So, time to spend some words on this topic.
Especially organizations in Energy&Utilities and Manufacturing have huge risks in their assets and in their projects. You think you have all risks identified through the standard risk identification process and you just missed that elephant?! This might impact your yearly financial result or worse!
This is why more and more clients start to look at Project Risk methodologies. My client happened to use the PMBOK methodology. In this methodology you consider standard project phases including standard risks and controls. This is great, since you have most of the standard risks covered. But what about that risk that is just not standard? This is where gate reviews will help you. These gate reviews are held after every project phase. Each gate review contains questions used to identify risks, holds monitoring methodologies to check status and behavior and contains audit like activities. Key element here is that all findings roll up to top level so no significant risk can be missed.
all works for what we call manageable risks, but what about risks that you
cannot manage? How will you anticipate on this? Well these risks can be covered
by sensitivity analysis, simulations and business continuity management.
Especially sensitivity analysis and business continuity analysis will help you.
For simulations you will need data, and a significant amount of data. Only in
case you have many similar projects running in a regular cycle you will be able
to generate enough risk identifications and losses to be able to make a sensible
Now the system is in place, and now we are in control? Wrong! This is where the real work starts. How do I get my organization to adopt risk in her daily business? How do I get input with the right quality? How do I make everyone a risk manager? This takes time and effort. Guide your people in how to make the assessments and make them part of it. Give them back where they contributed to, and make their life easier. That is what we call Smarter Risk.
IBM OpenPages and Deloitte have put together a Risk Methodology for project risk where all these technologic and organizational aspects come together and can be integrated in your enterprise risk platform.
Blog post by Erwin Boeren
Senior Governance, Risk & Compliance specialist IBM
Twitter : http
Erwin Boeren 270002C43V ERWIN.BOEREN@NL.IBM.COM | | Tags:  risk operational grc compliance ibm solvency openpages governance | 0 Comments | 1,903 Visits
Solvency II and the need for Operational Risk
Blog post from Erwin Boeren, Governance Risk &
Blog post from Erwin Boeren, Governance Risk &
Liz Andrews 2700041WEU firstname.lastname@example.org | | Tags:  grc risk openpages | 0 Comments | 1,890 Visits
This is the first in a series of four blog posts where we will present risk and compliance speaker and thought leader, Michael Rasmussen's, GRC maturity model. For more insightful information on GRC and to exchange ideas with risk and finance colleagues, come see us in Orlando at Vision 2012.
Success in today’s dynamic business environment requires organizations to integrate, build and support business processes with an enterprise view of governance, risk management and compliance (GRC). Without an integrated view of risk and compliance, the scattered and nonintegrated approaches of the past fail and expose the business to unanticipated risk.
In a mature GRC program, the organization has an integrated process, information and technology architecture that provides visibility across risk and compliance domains. It offers an integrated approach for business managers and executives to leverage GRC data for risk-aware decision-making and resource allocation.
Inevitable Failure: Managing GRC in Silos
The multifaceted risk environment
Risk to the business is like the hydra in mythology — organizations combat risk, only to find more risk springing up to threaten them. Executives are constantly reacting to risk appearing around them and fail to actively manage and understand the interrelationship of risk across the enterprise.
The dynamic and global nature of business is particularly challenging to risk management. As organizations expand operations and business relationships (e.g., vendors, supply chain, outsourcers, service providers, consultants and staffing) their risk profile grows exponentially. Organizations need to stay on top of their game by monitoring risk to their business internally (e.g., strategy, processes and internal controls) and externally (e.g., competitive, economic, political, legal and geographic environments) to stay competitive in today’s market. What may seem an insignificant risk in one area can have profound impact on others.
Organizations are increasingly aware of the critical need to link risk management and corporate performance management. To manage corporate performance, the organizations must understand risk and make risk-informed business decisions.
In the area of regulatory risk, organizations face an expanding regulatory environment with rapidly increasing requirements that burden the business. Organizations face expanding regulations, increased fines and sanctions, and aggressive regulators and prosecutors around the world. Reputation and brand protection is also a significant compliance and risk management issue in a global environment.
Isolated risk and compliance initiatives introduce greater risk
Managing GRC activities in disconnected silos leads the organization to inevitable failure. Reactive, document-centric and manual processes for GRC fail to actively manage risk in the context of business strategy and performance, and leave the organization blind to intricate relationships of risk across the business. Siloed GRC initiatives never see the big picture and fail to put GRC in the context of business strategy, objectives and performance, resulting in complexity, redundancy and failure. The organization is not thinking about how GRC processes and controls can be designed to meet a range of risk and compliance needs. An ad hoc approach to GRC results in poor visibility across the organization and its control environment, because there is no framework or architecture for managing risk and compliance as an integrated part of business. When the organization approaches risk in scattered silos that do not collaborate with each other, there is no possibility to be intelligent about risk and understand its impact on the organization.
A nonintegrated approach to GRC impacts business performance and how it is managed and executed, resulting in:
The pain organizations have expressed
Siloed GRC processes, though effective in their own silos, are ineffective at an aggregate level, as the organization does not have a complete view of GRC in the context of the business. Corporate Integrity finds organizations that lack a collaborative, integrated and enterprise approach to GRC have:
Continue on to Part II in this series: GRC Maturity — Measuring a New Paradigm for Risk and Compliance
Liz Andrews 2700041WEU email@example.com | | Tags:  openpages grc risk | 0 Comments | 1,859 Visits
This is the second in a series of four blog posts where we present risk and compliance speaker and thought leader, Michael Rasmussen's, GRC maturity model. For more insightful information on GRC and to exchange ideas with risk and finance colleagues, come see us in Orlando at Vision 2012.
GRC Maturity — Measuring a New Paradigm for Risk and Compliance
Lacking an integrated view of GRC results in business processes, partners, employees and systems that behave like leaves blowing in the wind. Modern business requires a new paradigm for tackling risk and compliance issues across the enterprise. No longer can organizations afford to focus on single risk and compliance issues as unrelated projects; nor can they allow software Band-Aids that are not integrated with the business to masquerade as GRC. A targeted strategy addressing GRC through common processes, information and technology gets to the root of the problem.
With changing and diverse risks bearing down on the organization, there is a clear need to tackle the problem at its root and develop a mature approach to GRC. Instead of treating each risk and compliance issue as an individual problem, organizations need to define a common process, information and technology architecture to manage GRC across the range of issues.
To address these issues, leading organizations have adopted a common framework, information architecture and shared processes to effectively manage risk and compliance, enable risk-aware decision-making, increase efficiencies, and be agile in response to the needs of a dynamic business environment.
The questions organizations must ask:
A well-defined GRC environment will not only do risk assessment and modeling, but will also deliver definition, communication and training on risk-taking and accountability. The organization must map the interrelationship of risks to controls, policies, enterprise assets (e.g., business process, employees, relationships, physical assets and logical assets), and incidents to business strategy, objectives and corporate performance.
Mature GRC delivers better business outcomes because of stronger integrated information, which will:
Architect integrated GRC systems and processes
A properly defined GRC architecture is built upon common process, information and technology components that are adaptive to a dynamic business environment and integrate with critical enterprise applications. No longer is risk and compliance about an annual audit; it now involves continuous monitoring in an ever-changing environment. GRC has to be sustainable as an ongoing and integrated part of business processes. A successful and mature GRC strategy has a symbiotic influence on the variety of business stakeholder roles and their common requirements.
Organizations need to be intelligent about what processes and technologies they deploy. The goal is to make an effective decision once, and comply with many regulations, manage a range of risks and maximize value from the convergence of technology, people and process. A sustainable approach to GRC results in an organization looking to the future and mitigating risk in the course of business, as opposed to putting out fires by reacting to risk and control issues as they arise.
Mature GRC enables the organization to understand performance in the context of risk and compliance. It achieves the definition of GRC, which is “a capability that enables an organization to reliably achieve objectives [GOVERNANCE] while addressing uncertainty [RISK MANAGEMENT] and acting with integrity [COMPLIANCE].” Effective and mature GRC delivers:
Continue on to Part III in this series: Five Stages of GRC Maturity
Liz Andrews 2700041WEU firstname.lastname@example.org | | Tags:  risk openpages grc | 0 Comments | 1,839 Visits
This is the third in a series of four blog posts where we will present risk and compliance speaker and thought leader, Michael Rasmussen's, GRC maturity model. For more insightful information on GRC and to exchange ideas with risk and finance colleagues, come see us in Orlando at Vision 2012.
Five Stages of GRC Maturity
Mature GRC is a seamless part of governance and operations. It requires the organization to take a top-down view of risk, led by the executives and the board, and made part of the fabric of business, not an unattached layer of oversight. It also involves bottom-up participation where business functions at all levels identify and monitor uncertainty and the impact of risk.
Corporate Integrity has developed the GRC Maturity Model to articulate an organization’s maturity in GRC processes.
1: Ad Hoc/Unaware — Department-Level Maturity
Characteristics of this GRC stage are:
Organizations in the Ad Hoc/Unaware GRC stage answer many of the following questions affirmatively:
2: Fragmented — Department Level Maturity
Characteristics of the Fragmented GRC stage are:
Organizations in the Integrated GRC stage answer many of the following questions affirmatively:
3: Integrated — Department Level Maturity
Characteristics of the Integrated GRC stage are:
Organizations in the Integrated GRC stage answer many of the following questions affirmatively:
4: Aligned — Enterprise GRC Maturity
Characteristics of the Aligned GRC stage are:
Organizations in the Aligned GRC stage answer many of the following questions affirmatively:
5: Optimized — Enterprise GRC Maturity
Characteristics of the Optimized GRC stage are:
Organizations in the Optimized GRC stage answer many of the following questions affirmatively:
Come back next week to view the final post in this series: Getting to the Head of the Class: Advancing Your Organizations GRC Maturity
Erwin Boeren 270002C43V ERWIN.BOEREN@NL.IBM.COM | | Tags:  grc analytics busness management openpages ibm erwin risk performance boeren | 0 Comments | 1,761 Visits
Last year IBM acquired OpenPages as a strategic move into the area of Governance, Risk and Compliance. The lasest announcement to acquire Algorithmics (quantitative risk management) shows the continuous commitment of IBM in the GRC market. GRC software will integrate into the Business Analytics Software group, the area where the former acquisitions like Cognos, SPSS and Clarity systems already resides.
Now that Risk Management is evolving, more and more organizations are starting an enterprise approach to risk management. And this is where I see the need for Risk and Performance Management convergence.
In past Risk Management implementations I see that a major portion of time and budget was spent on Risk Reporting and Dashboarding. Especially the need for self service reporting, where users can ad hoc create their own risk reports, is growing. We do not want to wait in the queue waiting for our report to be created. 2 days later you missed the opportunity to respond and the loss is there.
With this self service capability the question automatically pops up 'can I trust my data'. And now we are back in the area of data governance. This is exactly where the area of Performance Management is today.
Apart from these reporting and dashboarding capabilities Enterprise Risk Management means alignment of risks and controls to the strategic initiatives of the organization. What will prevent me from reaching my business goals? Isn't this defined as a risk? And how will we prevent this from happening? Wasn't that defined as a control?
Even more interesting are questions like, 'What if I was able to perform risk scenario planning?', 'What if I could predict risks from happening?' or 'What is the correlation between the risks that have materialized?'.
And there is the proof that Risk Management and Performance Management have lots in common and should be integrated. Lets call it Business Analytics.
Governance, Risk & Compliance Leader
IBM IOT Southwest Europe
Erwin Boeren 270002C43V ERWIN.BOEREN@NL.IBM.COM | | Tags:  openpages grc ipad solvency reporting | 0 Comments | 1,665 Visits
With Cognos 10.1.1 released you must have noticed the ability of having your reports and dashboards on mobile devices like iPad and iPhone.
With these mobile capabilities CROs (Chief Risk Officers) will now have the ability to measure risk from their mobile devices. For volatile risk areas like Market and Credit Risk this can make a huge difference.
IBM developed a risk monitoring system for CROs where one single version of the truth is provided of different risk areas like Credit Risk, Market Risk, Counterparty Credit Risk, Liquidity Risk, Basel II, Solvency II and Operational Risk. Not only does a CRO have the ability to monitor all these risk areas but he can also monitor the correlation between those risk areas and he is able to respond immediately to changes. Responses can immediately be formulated in the integrated social media platform.
One version of the truth and guaranteed quality of your data is simple to say but how do you govern this? This is where IBMs investment in data models starts to pay off. Since decades IBM develops and maintains data models for financial services including out of the box technical and business definitions. This enables organizations to come to one definition of risk over the entire organization. Taking definitions centrally will add value in the process of taking down the silod approach we spoke about in earlier articles. It will also help you in the accountability process of the business. Finally it is the business that should own the business definitions.
As discussed in our previous published blog (The convergence of GRC and Performance Management) Business Analytics capabilities like risk forecasting, risk adjusted profitability calculations, scenario planning and predictive risk analysis are part of this risk monitoring system called FIRM (Finance Integrated Risk Management).
The new regulation for Insurance companies, Solvency II requires organizations to plan their risk assessments and capital requirements 2 to 5 years ahead and to reflect impact on financial positions when a risk materializes. All this means that an integrated approach to risk management is a must. In next blogs we will go deeper into the Solvency II regulation.
Liz Andrews 2700041WEU email@example.com | | Tags:  openpages regulatory_compliance dodd-frank sec | 0 Comments | 1,644 Visits
The following excerpts are taken from “Compliance, complexity and the need for XBRL: An interview with former SEC Chairman Christopher Cox”:
What are the key drivers of regulatory reform? Will Dodd-Frank really reduce systemic risk? Can better compliance processes drive better financial results?
In the weeks running up to the Vision 2011 and OPUS 2011 conferences, experts within IBM Business Analytics Financial Performance and Strategy Management posed these and other questions to Christopher Cox, a former SEC Chairman and keynote speaker at both events. Below is a transcript of that interview.
Looking forward into the next three years, what are some of the key drivers in the US that will be shaping regulatory and compliance reform? How are those different from the past five years?
The most significant characteristic of the time we are living in right now is the remarkable pace of change, both in legislation and in regulations governing corporate America, in particular the financial services sector.
Of course, the Dodd-Frank 2,300-page behemoth is well-known already to senior finance executives. But what is unknowable are the hundreds of rules that will be forthcoming under that legislation. The schedule called for in the statute has the bulk of the final rule makings scheduled for completion in the third quarter of 2011. It is very clear across the regulatory agencies that these deadlines are going to be largely missed.
As a result, not only will there be regulatory uncertainty on a continuing basis this year, but also for several years into the future. There are over 100 rule makings that have no statutory deadline at all. I think a significant share of even those that were expected to be completed earlier will also be rolled into the future. So during all of this time, senior Finance executives are going to have to be reading the tea leaves – not to mention the statute itself – to determine how to comply. And it isn’t just Dodd-Frank, of course, where we have all this legislative and regulatory ferment. The unprecedented rapid pace of chance in law and regulation and the continued uncertainty about what the government will do next pertains to the tax area as well. During the last year alone, Congress enacted no fewer than six major pieces of tax legislation – including the two “Obamacare” bills, the HIRE Act, the Education Jobs Act, the Small Business Jobs Act and, of course the year-end Tax Relief Act that temporarily extended the current tax rates.
That last piece of legislation bought us at least two years of tax certainty, but when it comes to long-term capital gains or any of the other rules governing the taxation of investment, two years are scarcely enough to permit long-term planning, and so the uncertainty continues.
That uncertainty about where financial, tax and regulatory policy are headed in turn creates a challenging environment within companies and within firms when it comes to shaping their response to regulatory and compliance changes. That’s the environment in which we find ourselves. Given the extent of this change and the predictable uncertainty that will continue for several years, it is very important that companies respond to this in ways that are exceptionally flexible.
How should Finance organizations prepare for this future regulatory environment in spite of uncertainties, particularly global companies that do business in multiple jurisdictions? What sustainable practices in their control and reporting processes and systems do they need to invest in to prepare for the future?
Being globally active, of course, only ramps up the uncertainty because the requirements from multiple jurisdictions are layered on the responsibility of senior Finance executives for U.S. compliance. It is nonetheless possible to synthesize thematically many of the global requirements, because at least topically, they have very much in common.
What is most important is that the different parts of a global organization can talk to one another and that the human beings who must extract information from the IT systems that collect and disgorge that information can rationalize it. In particular, companies that address these changes in ways that are adaptable and flexible will have a clear advantage. Companies that fail to manage the process in this way will likely find their companies non-compliant and their risk management practices called into question – not only by regulators, but also by their shareholders and their customers.
Do you think that the passage of Dodd-Frank will reduce systemic risk and improve stability in our financial services institutions?
Unfortunately, the Dodd-Frank Act failed to address several of the
most significant causes of instability in the financial system and
sources of systemic risk. The first is the status of the
This is particularly salient, as the conservatorships have required the GSEs to engage in practices that support housing at the expense of their financial well-being. Likewise, the government’s completely unjustifiable practice of keeping these two GSEs off the federal balance sheet, even as they are under government ownership, makes a mockery of financial reporting norms and honest accounting. Addressing this glaring omission in the Dodd-Frank Act remains a top priority of financial reform.
Next in importance is the inadequacy of bank capital and liquidity standards. Dodd-Frank did not adequately address the obvious failure of the Basel standards in the financial crisis. Those standards continue to create powerful incentives for asset concentration in mortgages and a reliance on credit ratings, and of course both of those had a role in generating the mortgage bubble that led to the financial crisis.
So the short answer to that question would be “No.”
Correct. I’d also say that Dodd-Frank has given the Financial Stability Oversight Council a strong incentive to protect competitors rather than to protect competition, which might take market share from the dominant firms. The systemically important designation implies government readiness to support those firms in a crisis, perversely encouraging more risky behavior despite the more stringent capital and other requirements and thus deepening moral hazard.
Can you discuss some of the best practices for boards of directors with regard to risk oversight? Do you think that changes in proxy disclosure with regard to risk governance has had an impact on risk management practices?
Yes. In 2010, the SEC added requirements for proxy statement discussion of a company’s board leadership structure and its role in risk oversight. Now companies are required to disclose in their annual reports the extent of the board’s role in risk oversight, and they’re required to address such topics as how the board administers its oversight function, the effect that risk oversight has on the board’s processes, and whether and how the board or one of its committees monitors risk. That increased focus on risk management has had considerable and very earnest take-up across the corporate community.
There are several types of actions that companies and their appropriate committees have been taking to step up their focus on risk management. Without question, they are spending more time with management, and isolating the categories of risk that the company faces – focusing on risk concentrations and interrelationships, the likelihood that these risks might materialize, and the effectiveness of the company’s potential mitigating measures.
Many companies have created risk management committees. Financial companies, of course, that are covered by Dodd-Frank must have designated risk management committees, but boards of other companies have carefully considered the appropriateness of a dedicated risk committee, and many of them have found it prudent to create one. In other cases, boards have delegated oversight of risk management to the audit committee, which is consistent with the New York Stock Exchange rule that requires the audit committee to discuss policies with respect to risk assessment and risk management.
For large-cap companies that have a Big Board listing, that has continued to be another way to address these heightened concerns. I think boards are carefully bearing in mind that different kinds of risks may be better-suited to the expertise of different kinds of committees, so they may not always wish to stovepipe responsibility for risk in a single committee.
Above all, best practices today are focused on the fact that regardless of how the board subdivides its responsibilities, the full board has the responsibility to satisfy itself that the activities of its various committees are co-ordinated and that the company has adequate risk management processes in place.
It’s a fascinating world. I can see why if you’re a controller or CFO it’s an exciting but intense place to be.
I think that’s absolutely right. All of these changes we’ve discussed – in particular in the US – mean that we are entering an era of unprecedented demand on companies’ governance, risk, and compliance processes and IT infrastructures. I think that companies have dealt with regulatory changes over the past half-century largely incrementally. They’ve made adjustments to their enterprise-wide systems as needed to comply with what have been modest changes from year to year. But given the enormous scope of changes in these forthcoming new regulations, companies will find it necessary to find a comprehensive and holistic approach to at least regulatory reporting – and, in my view, their management control as well.
Companies have traditionally relied on different processes to gather enterprise data to help management run the business on the one hand, and to gather data in order to satisfy regulators, on the other. In part, that was sustainable because the information that regulators were requiring was historical and post-facto. But things are rapidly changing under these new frameworks. Regulators including the SEC are now requiring information that is risk-based and predictive. While that is a big change, it’s also a significant silver lining in that this will align the process of collecting and gathering information more closely with what management needs. That means that CIOs should be looking for ways to integrate their regulatory and their management reporting processes. For that reason, regulatory reporting doesn’t have to be viewed as sheer cost, or necessary evil. Instead, there can be significant efficiencies and productivity gains for the enterprise by merging the requirements of management and regulatory data gathering processes.
This convergence will also allow companies to restructure their data in a way that will feed predictive analytical systems. That, in turn, can lead to an improvement in both risk management at the board level, and risk-based decision-making processes at the management level.
About Christopher Cox, Former Chairman, United States Securities and Exchange Commission (SEC)
Beginning in 1988, when he was elected to the House of Representatives, Christopher Cox established a record of legislative accomplishments that elevated him to the top of the Congressional leadership. His wide range of expertise in a variety of complex issues gives him the ability to take the long view of the economic future, predicting both the actions of Congress and the effects those actions will have on the marketplace. The author of the Internet Tax Freedom Act, which protects Internet users from multiple and discriminatory taxation, Cox held leadership positions ranging from chairmanships on committees and taskforces overseeing everything from budget process reform and policy to homeland security and financial services. During his tenure as chairman of the Securities and Exchange Commission, he continued this fight for justice and transparency in the world of investing.
An Accomplished Lawmaker and Reformer. During his seventeen years in Congress, Cox served in the majority leadership of the U.S. House of Representatives. He authored the Private Securities Litigation Reform Act, which protects investors from fraudulent lawsuits, and his legislative efforts to eliminate the double tax on shareholder dividends led to legislation that cut the double tax by more than half. In addition, he served in a leadership capacity as a senior member of every committee with jurisdiction over investor protection and U.S. capital markets, including the Energy and Commerce Committee, the Financial Services Committee, the JointEconomic Committee, and the Budget Committee.
An Advocate for Investors. At the SEC, Cox focused on the enforcement of securities law enforcement, bringing a variety of groundbreaking cases against market abuses such as hedge fund insider-trading, stock options backdating, and municipal securities fraud. He also helped turn the Internet into a secure environment, free of securities scams, and he worked to halt fraud aimed at senior citizens. As SEC chairman, he was one of the world’s leaders in the effort to integrate U.S. and overseas regulatory policies in this era of global capital markets, making international securities exchanges safe, profitable, and transparent. As part of an overall focus on the needs of individual investors, Cox reinvigorated the SEC’s initiative to provide important investor information in plain English, championing the investor’s right to a transparency. His reforms included transforming the SEC’s system of mandated disclosure from a static, form-based approach to one that taps the power of interactive data to give investors qualitatively better information about companies, mutual funds, and investments of all kinds.
In 1994 Cox was appointed by President Clinton to the bipartisan commission on entitlement and tax reform, which published its unanimous report in 1995. From 1986 until 1988, he served in as senior associate counsel to President Reagan. From 1978-1986, he specialized in venture capital and corporate finance with Latham & Watkins. Cox received an M.B.A. from Harvard Business School and a J.D. from Harvard Law School, where he was an Editor of the Harvard Law Review.
Richard Steinberg 270004HRBG firstname.lastname@example.org | | Tags:  risk openpages dodd-frank grc sec whistleblowing | 0 Comments | 1,462 Visits
The SEC’s final rules implementing Dodd-Frank’s whistle blowing provisions failed to remove angst among compliance officers and general counsels. While there are some incentives for potential whistleblowers to first report alleged misconduct via internal reporting channels, there’s no requirement to do so – and many are concerned the internal channels will be bypassed. And going outside is on the rise. It’s been reported that in only seven weeks after the SEC’s program began, there were 334 whistleblower filings. Compliance officer concerns are well founded – that bypassing internal channels will deprive the company of being able to investigate and fix problems before they grow, and company personnel will need to play catch up with investigations in reaction to SEC probes.
We can point to many resolved whistle blowing cases for clear evidence of the potential impact of the SEC’s still relatively new program. One homeowner delinquent on her mortgage ultimately received $18 million for reporting suspected use of fraudulent documents in the bank’s foreclosure process. It’s said that in acting against this homeowner – an attorney and career insurance fraud investigator – the bank “picked the wrong person at the wrong time in the wrong place,“ but the robo-signing and other compliance failures were widespread and surfaced from a number of sources. Nonetheless, this individual was one of six whistleblowers receiving $46.5 million said to be part of the five-bank $25 billion settlement. In an unrelated case, a member of a major bank’s quality control team who reportedly was displeased that the misconduct wasn’t reported to regulators, decided to do so herself – ending up with a settlement of $31 million. And there are many more.
Worth noting is a recent survey that indicates more than one-third of American workers have seen misconduct on the job. While many instances of misconduct have been reported through internal channels, it appears the vast majority have not. Why? The survey shows it’s because of fear of not being able to remain anonymous, and of retaliation. Those two factors, plus the possibility of monetary reward, are reported as key factors in incentivizing internal reporting. And the survey also shows two-thirds of respondents didn’t know about the SEC’s program – at least not yet.
Certainly it’s in a company’s interest to be first to know about alleged misconduct, and compliance officers are working hard to upgrade policies, training, communications, and the internal whistleblower systems, all to encourage internal reporting. Actions to ensure anonymity, with positive responses and nothing close to retaliation, are expected to help. Some companies have begun to pay bounties for valued reports. There are indications that when employees believe their reports will be taken seriously without adverse repercussions, there’s increased likelihood for internal reporting. Law firms and others have provided guidance on which companies are acting. However, it remains to be seen the extent to which the possibility of a huge, life-changing payday by the SEC will be too much to resist. Time will tell.
Richard Steinberg 270004HRBG email@example.com | | Tags:  dodd-frank risk risk_management openpages | 0 Comments | 1,238 Visits
If you’re in or work with the financial services industry, you probably know about the late December holiday "gift" from the U.S. Federal Reserve – proposed rules implementing provisions of the Dodd-Frank Act which could have a profound effect on how boards and managements deal with risk. In any event, you’ll want to keep in mind that the Fed is accepting comments only for the next month – until March 31.
The proposed rules are far-reaching, including requirements for risk-based capital and leverage, liquidity, stress tests, sing
The risk committee is required to "document and oversee, on an enterprise-wide basis, the risk-management practices of the company's worldwide operations." The committee would be chaired by an independent director, and at least one member needs to have risk-management expertise commensurate with the company's size, complexity, and other risk-related factors. Further, its members are expected to understand risk-management principles and practices relevant to the company, with specified experience in risk management. And there are rules for a committee charter, meetings, and documentation.
The committee’s responsibilities include reviewing and approving an appropriate risk-management framework commensurate with the company's size and other factors. The framework’s scope is outlined, including requirements for risk limits appropriate to each line of business, policies and procedures for risk-management practices, processes for identifying and reporting risks, monitoring compliance with risk limits and procedures, and specification of management's authority and independence to carry out risk-management responsibilities. Additionally, the larger covered companies will need to appoint a chief risk officer in charge of implementing and maintaining the risk-management framework and practices approved by the risk committee, with the rules specifying responsibilities and qualifications for the CRO and reporting relationships.
If not already under way, now is the time to analyze the proposal and its implication, and let the Fed know what changes are needed. If interested, you might want to tune into the upcoming IBM OpenPages webinar where I’ll be discussing the proposed rules, their implications and the challenges they present – March 8, 2:00 pm Eastern Time.