"COMPLY OR DIE"
"Comply or Die", believe it or not, is the name of a thoroughbred racehorse and was the winner of the 2008 John Smith's Grand National at Aintree Racecourse. It pushed ahead at the last fence to win from the leading horse. Bookmakers William Hill conceded that his victory had cost the chain 7 million GBP. Well, we are certainly not here to discuss horse races but this trivia does carry an important point, apart from the interesting name of the horse.
But before we start the discussion, a warm welcome to this blog where I will be looking at important developments in the Financial Risk & Compliance space. I intend this post to be the first of many looking into this much discussed topic from a different angle. The current world economic scenario is such that no organisation can afford to be caught on the back foot, especially with regards to the sphere of Governance, Risk & Compliance, which has captured the attention of everyone involved in the high stakes game of world finance.
Regulators around the world have always been in a dilemma as to how much the financial sector should be controlled. Too many regulations and the business is stifled because money begets money. Too little of the same and things spiral out of control before you can even say "Credit Default Swaps"!!!
Similarly financial institutions are in a conundrum as to how to stay afloat and beat the competition, while ensuring that one does not step on to a minefield and lose a leg or two. Tightening margins and an insatiable appetite to move ahead of others has pushed institutions and individuals, controlling huge amounts of monies, to the brink of taking risks too big for their palate. Carrying forward from the horse race example, such risks can pip you at the last fence and probably cause you to fall from a fantabulous position of unimaginable returns to depths of ignominy. A high profile investment bank which had braved through the recent recession with record breaking profits (when others were crashing out) now finds itself in huge trouble. Does this mean being "ultra-conscious" is the only way to survive?
As a financial institution we are left with no choice but to comply with the myriad regulations which govern our world or die a swift death. But the solution does not lie in guarding the front door while the thieves are escaping through the back door. The solution lies in ingraining a culture of "Risk & Compliance" awareness throughout the organisation. People have to be made individually responsible for their respective interaction scenarios. Such delegation and decentralisation of Risk Management instils a sense of accountability with each and every employee of the organisation right from the CEO to the teller in a branch.
The awareness should flow from top to bottom but the responsibility lies in the hand of each and every employee and should flow from bottom to top to integrate the entire risk and compliance practice within an organisation. The integrating force has to be exceptional and the only way this can be achieved is through technology. Technology can help you in decentralisation, delegation and integration at the same time. Each and every individual person in the organisation, although belonging to varied (and sometimes totally differing) units can be connected to bring about a holistic view of the entire risk the organisation is facing.
I will be thinking along these lines in the coming posts which I believe will help us in looking at risk and compliance not only in terms of specific parts but also holistically. So let us saddle up and get prepared for an interesting race which we surely have to win.
