Although the financial services industry has experienced some stability in 2010, banks are still faced with significant challenges, such as driving growth, raising core deposits and retaining and acquiring customers.
Adding to these challenges is the ever-present and ever-increasing burden of regulatory compliance that financial institutions of all sizes have to grapple with.
This burden, which I call the compliance tax, poses a real threat to the industry's future.
A recent Gartner report, "Predictions for 2010: Regulatory Compliance and Risk Management in Banking," made the extreme assertion that "by 2013, the cost of regulatory compliance and risk management will have priced Tier 3 and Tier 4 financial institutions out of the market."
This compliance tax can be addressed, and I believe the solution is technology.
The compliance requirements will only continue to grow as the government focuses on regulation to assure the market and the public that the events of the past will not be repeated.
Compounding the increase in regulations is the reality that running a bank in today's environment involves risk — risk that must be addressed to satisfy these growing compliance needs.
Banks have responded by putting manual processes in place, hiring consultants and assigning responsibility to individuals within the institution to create documents, track down papers, obtain signatures, follow up with employees and update spreadsheets.
These methods may have been solid several years ago, but today they make compliance inherently inefficient and detract from supporting your customers and providing them with superior service.
Streamlining this area is a key to managing risk and compliance. A different, structured way of thinking about how compliance can be addressed using technology is paramount.
Imagine if the documentation about the activity is implicit and an audit trail is automatically generated. The extra work that comes with the manual methods is now eliminated, reducing the work associated with compliance and in turn reducing the compliance tax, by up to 70%.
More and more banks are discovering and embracing this approach to compliance.
Using technology to automate and streamline the process moves risk mapping and auditing from people to software. It eliminates having an individual pushing the process along by automatically distributing the policy, sending reminders, ensuring consistency throughout the bank and tracking everyone's progress of reading and signing it.
Financial institutions that adopt this approach will gain a significant advantage in 2010 and can efficiently and effectively deal with the compliance tax.
