In today’s stringent regulatory environment with new standards and mandates coming to effect at a never-before seen pace, the mandate to keep up with regulatory changes and ensure ongoing compliance with these changes is a priority. Furthermore, banks are facing increasing compliance complexity from the growth of regulations and ad hoc approach to compliance management. Due to the nature and levels of risks inherent to their business activities, tier 1 financial institutions should have a compliance risk management framework that enables them to identify, monitor, and effectively control the compliance risks facing their entire organization. As a result, compliance risk management has emerged as key business concern across the globe.
Compliance risk, which is often overlooked as it blends into operational risk and transaction processing, is the risk to earnings or capital arising from violations of, or non-conformance with, laws, rules and regulations, code of conduct, customer relationship rules or ethical standards. It encompasses all laws, as well as prudent ethical standards and contractual obligations. Compliance risk also arises in situations where the laws or rules governing certain bank products or activities of the bank's clients may be ambiguous or untested. Compliance risk, also referred to as integrity risk sometimes, exposes the organization to legal penalties, payment of damages, limitation of business opportunities, diminished reputation, reduced franchise value, lessened expansion potential and the voiding of contracts.
Managing compliance risk has become a core skill that every financial institution must possess in today's highly regulated industry and a consolidated - or "enterprise-wide"- approach to compliance risk management has become "mission critical" for large, global financial institutions. Some of the critical factors that financial institutions should consider when embarking on this journey are:
A smart blend of a great Compliance Risk Assessment framework and strong internal processes and governance can lead to a stronger overall compliance rating for the organization. A strong Compliance Risk Assessment program can help global bank’s achieve improved processing efficiencies in all of the identified Assessment areas. The rewards that will be realized with this achievement include the ability for the Compliance Risk Assessment teams to continue its growth plans through process automation and induction of additional risk assessment methodology, improvements in cycle times, improved customer satisfaction and reduced data integrity risks.
We’d love to hear what you’re doing to keep up with regulatory changes. Do you have a strong Compliance Risk Assessment program in place? We look forward to hearing your opinions and suggestions.
Garima Chaudhary is a Senior Sales Consultant for Oracle Financial Services Analytical Applications. She can be reached at garima.chaudhary AT oracle.com.