Mastering the Art and Science of Governance, Risk, and Compliance, Part 1

Analytics, Usability, Socialization, and Conduct
by Cubillas Ding, July 23, 2014
Industry Trends
Global

Abstract

Celent urges financial firms to work towards strong analytical underpinnings that can shape the softer elements of socialization, trust, culture, and conduct.

Global US and European institutions are especially suffering from a backlash, with legal settlements paid to US and UK regulators for misconduct rocketing in recent years. These fines have been substantial; in some cases, in orders of magnitude larger than anything that has been dealt out in the past. Emerging regulatory frameworks depart from the legalistic, compliance-driven approach of the past and place an emphasis on culture and conduct risk management.

In the report Mastering the Art and Science of Governance, Risk, and Compliance, Part 1, Celent examines the operational capabilities and technologies required to respond effectively to emerging governance requirements and new standards.

“Even if institutions have the capacity to absorb penalties, they still have to contend with the notion of whether institutional investors will continue to have the appetite and patience to accept persistent hits to bottom line performance, and the degree this cycle of pervasive ‘falling and fining’ can be sustained,” says Cubillas Ding, Research Director with Celent’s Securities & Investments Group and author of the report. “Our viewpoint is that it cannot. Even though you can afford to pay the fines, does not mean that you need to. Over time, firms will need to re-create and reinforce a cycle of virtue and conduct based on one key pillar of having the appropriate analytical posture and capabilities.”

In a series of reports, Celent highlights perspectives on best practices and technologies for financial firms pursuing initiatives to achieve effective governance, operational risk, and compliance.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Higher Stakes in Governance, Risk, and Compliance

2

 

Falling Foul of the Law: Inevitable Cost of Doing Business — Really?

2

 

Renewed Fight Against Money Laundering and Financial Crime

3

 

Non-Financial Risk Reveals Its New Face: The Conduct Agenda

4

Taking Action: Focusing on Outcomes

7

 

Business and Organizational Levers

7

 

Operations and Technology Levers

12

 

Weaving the Right Elements to Achieve the Right Outcomes

16

Looking Forward

18

Leveraging Celent’s Expertise

19

 

Support for Financial Institutions

19

 

Support for Vendors

19

Related Celent Research

20

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