Is compliance a burden or a challenge? The answer is: Yes.

As in so many issues of the day, the cost of complying with regulatory requirements continues to escalate. It the pendulum has swung so far in one direction, isn't it time for a swing in the other direction? In the short term, a decline in reporting requirements, record keeping, and related costs is unlikely.

But, do these costs really need to be treated as a burden? Can't they be treated as an opportunity in disguise? I think so.

Different Points of View

The real cause of increased regulation, in what has become referred to as "compliance," has its roots in the disparity of opinions between managers of financial institutions and elected officials. Each has a different viewpoint about who has access to capital and. whether or not one group is receiving more favorable treatment at the expense of another.

Pricing Key in Commodities

By definition capitalism and the free enterprise system might imply equal access to capital. But such is not the case. For a multitude of reasons some individuals have ready access to capital and others do not.

We all prefer to do business with people whom we know and understand. In the sale of a universally recognized product, the importance of the vendor and the buyer is certainly less important than the price and quality of the product. In renting or lending a product or service the familiarity between provider and user is more critical.

Logically, then, in managing a financial institution of a relatively small, homogeneous community, it is likely that both customers and their financial needs are known quantities. Making products and services universally available is easier and less costly.

Conversely, in managing an institution of a larger, heterogeneous community, identifying customers and their needs is more difficult. Consequently, making products and services universally available is complex and costly.

What measures can be taken to facilitate the process of being open and equitable? Several come to mind:

* Define your market precisely. Measure its social, economi and political characteristi carefully. Determine whom at what you are prepared to serv,

* Articulate clearly how you will meet the needs of the entire market that you have concluded is your focus and objective.

* Hire people who understand and identify with those market objectives. Mind you, AfricanAmericans, Hispanics, as well as Caucasians identify with each other more easily than with others.

* Open the gates of informalion. Trust in the fact that if there is honesty and integrity in the process, confidentiality will not be breached.

Resisting Is Counterproductive

Does this process make compliance less a burden and more a challenge? Yes. Much of the cost rests in the resistance of participants to the process. If one is producing data merely for the satisfaction of a compliance officer or, worse yet, a regulator, then the cost and reliability of the data will be faulty and the goal will be perceived as selfserving. On the other hand, if the data indeed reflect genuine goals, the natural inclination is to comply.

Having identified profitable market opportunities, the challenge is finding or developing the people who not only have the skills but also the characteristics to relate with each market segment and produce profitable, equitable results.

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