Comply with Your Regulations – They’re Good for You

Remember that face you made as a child when mum brought a steaming, stinking, seemingly mountainous pot of broccoli to the dinner table?

Chances are you make the same face when your regulator brings a heaping pot of FATCA, EMIR or Dodd-Frank to your office.

Now regulators don’t necessarily evoke feelings of warmth. But, like mum, they do know what they’re talking about.

You can pout, kick and fuss all you want. Regulators often have your health in mind and, as a result, regulation is generally good for you – and for the financial industry. And we’re finding that the handful of firms who have pinched their noses, opened wide and took that first big bite have found compliance to taste more like dessert.

How exactly does a seemingly foul regulation end up being so rich and satisfying? Two reasons:

1. It helps you grow big and strong: Each regulation presents its own challenges, yet the fundamental principles are quite similar: promote cross-enterprise transparency and the emergence of best practices such as data aggregation, standardisation and quality management. Rather than swallow similar plates of regulation over and over again, you can approach these multiple objectives through a broader, strategic approach to data management and regulation.Your objective should be to achieve 360-degree view of the business by connecting the pieces: consolidating and linking critical data assets, such as instruments, counterparties and issuers, as well as positions, accounts and transactions. When all the pieces are in place, you get a deeper understanding of client relationships – and get better insight into how to potentially grow those relationships. Case in point – we helped one of our asset management clients build the ability to perform profitability analyses of client relationships by linking data on financial products, securities, accounts, customer hierarchy, and positions. Other clients of ours are using this 360-degree view to help roll financial products faster and improve processes to help strengthen investment performance.
2. It makes you a lean, mean fighting machine: The push for cross-enterprise transparency also creates the need to understand where your information comes from, its quality and how it is used in business decisions. When you understand how much data you actually need to consume, you stop over-consuming and avoid the operational indigestion that results. When you understand how data is digested, you create conditions for more effective operations and you can make decisions with greater accuracy. Recently, we worked with a major broker-dealer to develop the infrastructure needed to achieve this level of understanding. Not only did they improve their data quality, but they also became more efficient in how they procure, process and distribute instrument data.

Just like that big pot of broccoli, your regulator won’t let you leave the dinner table until you finish your compliance.

The key to getting your just desserts is not immaturely seeing each regulation in isolation, but approaching them with a grown-up mindset – that is, a strategic, integrated approach that simultaneously tackles the need to quickly and accurately analyse systemic risk and achieve greater transparency.

Bon Appetit!

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