The recent financial crisis and economic downturn has shown that there is a great need for a properly resilient and robust financial/banking system. This need for stability has prompted the banking industry to undergo drastic changes. Financial firms are adjusting business operations in order to be compliant with increased regulatory demands. Naturally, this adjustment has led to higher operating costs. Falling profits associated with this regulatory squeeze can be ameliorated by strategic adherence to cost cutting methodologies – namely Business Process Management (BPM), Business Process Outsourcing (BPO), and Business Intelligence (BO).
Dodd-Frank introduced significant changes to the financial industry. These changes include the establishment of a prudential supervision framework, and a number of new requirements and limitations on business activities. Below is a list of reforms and affected parties (exhibit A), and the associated complexities and concerns for stakeholder operating modes (exhibit B), and the effect on employer/employee relations (exhibit C).
The complexities and expenses associated with exhibits A through C can be successfully mitigated through organizational adherence to BPM, BI, and BPO.
The Initial reaction of organizations is to find ways to meet baseline requirements for regulatory & compliance initiatives. This often entails establishing a robust system (Policy and Procedure system) to meet specific regulatory compliance needs.
Here are some of the strategic options for larger financial organizations to help incorporate regulatory changes in coming year. These options are geared for companies to start planning for organizational transformation, reducing overall cost of regulatory implementation. The traditional outsourcing model does not involve legal liability of service providers for legal wrongdoing by their enterprise customers.
The impact of the Dodd-Frank Act will continue to evolve over time as regulators study the requirements of the Act and determine the appropriate framework for implementation. The resulting implementation of hundreds of rules over the next few years will certainly impact the profitability of the financial industry. However, managerial utilization of BPM, BI, and BPO will soften the impact of increased regulation on financial firms’ bottom line.
There are multiple ways to incorporate these changes and it is hard to define a specific implementation schema. Successful adaptation of these practices depends on financial institution size, culture, exposure, flexibility to adapt changes and balance sheet strength.
BPM, BPO are an ongoing management practice, not a one off project to final target. Each business and process must be guided along the process maturity model. Every step in maturing BPM, BPO capabilities leads toward optimization and improvement to core processes.
Disclaimer: This educational article is provided purely for your information only and you should check other information before taking any action based on any of the content in these articles. This document is not a legal interpretation or advise in any form. The authors or any affiliate does not make any claims of legal advice or support for the assumption & information contained in article or any of the site's articles
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