10 Trends in regulatory risk

Contributor: Tony Scianna

Despite continuing uncertainty around global rules implementation, firms should be taking an adaptable approach to data management in order to minimize regulatory risk. This means looking at how 2011 budgets have or have not been used, assessing the flexibility of data management technology, achieving an enterprise-wide view of activities and exposures, and more.  With this in mind, I have identified 10 key trends involving regulatory risk that touch upon transparency, efficiency, and networks.

I’ve included the full list below. Are you paying attention to these 10 trends in regulatory risk?

Transparency

1. Regulators will require firms to report a greater breadth and depth of up-to-date information, possibly on demand, to assist their efforts to reduce systemic risk and increase transparency.
2. Firms will need to be able to capture relevant data in as close to real time as possible, standardize it, and have access to it 24/7 for reports to relevant agencies and their own management.
3. The development of Legal Entity Identifiers will be the first of many projects on which industry groups will coordinate for a single response to regulators.

Efficiency

1. Firms will need to focus on solutions that will transform their business process for data management as well as migrate away from traditional batch-based processes.
2. To help manage costs, firms will look for off-the-shelf, flexible and easily adaptable technology frameworks to help them meet whatever regulatory requirements develop.
3. The cost of clearing and expense associated with additional regulations in certain highly regulated asset classes will rise, which might negatively impact profitability.
4. Budget that was allocated in 2011 but unused due to continued uncertainty may be re-evaluated. Firms may not allocate the same level of funding in 2012, potentially leaving them under-budgeted when the implementation details are finally confirmed.

Networks

1. The borders between geographies, asset classes and lines of business will continue to break down as regulators and management demand an enterprise-wide view of activities, risk and exposure.
2. Regulators will continue to cooperate with each other, and regulations will expand beyond initial scope wherever authorities adopt rules that are introduced in other jurisdictions.
3. Differences between regulatory regimes will continue to exist. However, regulators – with support from the industry – will aim to reduce regulatory arbitrage by working toward common goals of greater market oversight, stability and transparency.

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