Driving business innovation from regulatory pressures
Monday 23 January 2012 - by Claire Paisley and David FitzGerald
This article outlines the key opportunities that financial institutions are presented with by bringing regulatory and innovation agendas closer together across risk management, product development and organisation-wide operating structure.
Across this spectrum the price of compliance is staggering. Indeed, JP Morgan expects that across the 16 largest global banks between $110bn (€84.6bn) and $221bn (€170bn) of additional capital will need to be raised in 2011 and 2012 to meet the new requirements.
On top of this there is the considerable cost of implementing processes and procedures in order to satisfy the plethora of regulatory requirements.
However, the impact of this regulatory pressure is felt not only in monetary terms.
The limitations of compliance
It goes without saying that the most inefficient way to comply with new regulations is to layer new technology and processes on top of existing systems.
Yet this is exactly how most financial services firms choose to operate. Complexity is added - rarely, if ever, is it removed.
The increasingly apparent challenge is the need to drive more fundamental and wide-spread change; not only to reduce this spaghetti of systems and processes, but also to drive more innovative ways of responding to regulation.
Put another way, well-managed regulation responses, could actually begin to promote, rather than suppress, a company's ability to differentiate themselves and compete.
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