The Changing Role of Compliance within Financial Services Firms

It was a beautiful afternoon in Boston as Chief Compliance Officers from the area convened to discuss the changing role of compliance at their financial services firms.  The venue, Top of the Hub, is situated at the highest point in Boston – amazingly appropriate given the conversation quickly gravitated towards visibility and the difficulty of transforming ISDA Masters & CSA’s into data that can be more easily analyzed and operationalized.

Conversation was lively with several topics resonating with all participants.  A significant theme of the conversation was around the changing role of compliance within the business.  Compliance leaders are now asked to sit at the negotiation table with clients and have become a key member of the team.   With the regulators playing a more resident role in corporations, compliance has become a more visible component of daily activities.  There was a general theme that the integration of compliance into the business functions has also integrated the role of Chief Compliance Officer.

When speaking about ISDA Master Agreements, many felt that this was an area for ongoing automation and restructuring.  Specifically, the harmonization of the ISDA-related data would reduce cost and risk for many firms.  The advent of tools in this area is an opportunity for the teams to improve their process.  The process of collecting the ISDA detail is very manual today. Once automated, however, this data would better enable companies to address questions regarding most favored nation clauses and other contract call outs.

The general consensus is that there are many regulations for the buy side firms to cover. It is easy for things to fall through the cracks as many companies cannot cover all regulations with a SME.   The attendees discussed that the maturing of the processes was key to success, with several recommendations offered.  Three of these suggestions included:

  1. lobby ISDA collectively to request more structure,
  2. designate key staff members to be SMEs in areas of greatest concern and,
  3. agree on a standard CSA

The attendees discussed how to best direct their limited resources, thus being a main concern. One recommendation was to provide incentives to the organization for meeting guidelines.  A detailed conversation was held recommending teams to review the operations logs on a regular basis to spot check for any opportunities open for improvement.  

Firms at the table had many different types of risk: fiduciary vs. deposit risk, while some companies were faced with both risks and answered to multiple regulatory bodies, that often had conflicting recommendation or reporting.  Additionally, the impact of international regulation was discussed as an area of rapid change that is also causing workload on these teams.  

Overall, there seemed to be consensus about ways to improve:

  1. Implement a central repository for all important agreements
  2. Capture key contract terms related to risk and compliance
  3. Provide proactive visibility for business users that quantify the indicators they find most valuable

The event ended strong with many of the participants exchanging cards and committing to continued sharing of best practices.  Many thanks to the participants for such a lively discussion and to Exari for hosting an amazing event!

9.thumbnail Patricia Flynn is a Compliance/Big Data Consultant. Reach out in the comments or on her Linkedin .

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