Wolters Kluwer Financial Services Expert Highlights Importance of Increased Collaboration between Risk and Compliance

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25 September 2014

 Wolters Kluwer Financial Services today highlighted the increased collaboration of financial institutions’ risk and prudential regulation areas to reduce risk and optimize performance while meeting regulatory requirements. Expert Selwyn Blair-Ford, head of global regulatory policy at Wolters Kluwer Financial Services, presented this growing collaboration and dependency between the two functions during a speech at the RiskMinds Risk & Regulation Forum held on 23-25 September 2014 in Barcelona. During his presentation, Blair-Ford outlined four key steps to achieving equilibrium between risk and regulation:  

  • Have a single reconciled source of information – A standardized approach to data management across functions can create faster and better quality data, which can be reused for multiple purposes, helping to address regulatory requirements and yielding significant benefits at the operational level.
  • Use a common internally understood language – Along with a standardized data set, setting common vocabularies across different business operations can enable organizations to break down silos created by multiple geographies, functionalities and asset classes.
  • Verify that each function recognizes the same risk events and issues - Where this does not occur, firms should understand and agree on why this cannot be accomplished.
  • Present information to key decision makers in a controlled and concise manner – Granular, reliable and accurate risk information must be reported internally in an organized and controlled manner, in the form most easily understood by those decision makers.

Selwyn Blair-Ford commented, “Regulators now require more detailed qualitative information and expect to see evidence of effective risk management processes. This requires firms to be able to express their risk appetite, demonstrate that the board is responsible for setting it and that the firm is being managed appropriately within those risk parameters. As there are now many prudential regulatory calculations that require risk expertise from the departments of finance, treasury, risk, credit and operational risk, it is becoming increasingly essential that risk and compliance work hand in hand to effectively manage the organization’s risk, report on it quickly and in detail to senior management and regulators, while optimizing business performance.”

Regulation standards such as Basel III and Dodd-Frank Act require financial institutions to perform multiple risk calculations and modeling techniques such as VaR, expected shortfall, loss given default, exposure at default and CVA, in order to accurately report on the business’ capital, liquidity, counterparty, credit and market risk to regulatory bodies. Risk expertise is also required to meet stress testing and reverse stress testing requirements outlined by regulators.

To find out how Wolters Kluwer Financial Services’ Risk Management andRegulatory Reporting solutions can help, go to http://www.wolterskluwerfs.com/compliance/home.aspx