The past five years have been extremely challenging for banks and capital markets. Basel III and Dodd-Frank have not only made things more complex, but they’ve also dealt a blow to the bottom line. According to McKinsey & Company, Basel III and other regulatory compliance could potentially cost anywhere from 3 to 5 percent return on equity (ROE).
Global firms are faced with different regulations in every country in which they operate. Adding to that complexity, governments are demanding greater transparency, reporting, and documentation. And, at the same time, new CCAR stress testing is becoming more burdensome every year – what was satisfactory in 2014 may not be acceptable in 2015.
The increased scrutiny means an increase in data processing for financial services firms. But legacy systems that aren’t synchronized have separate silos for different businesses and asset classes, and often have agonizingly slow batch-processing that make regulatory compliance difficult. Many firms have managed to cope by throwing a lot of bodies at the problem, especially outsourced data reconciliations and clean up – a strategy that isn’t sustainable over the long haul.
All this complexity – in architecture, processing, data acquisition, integrity, and reporting – is squeezing resources available for revenue generation, and for true innovation.
Some firms have figured out that if they must expense to meet regulatory requirements, they should find a way to use their new-found access to intelligence to transform their business for the future and greater market competitiveness.
Regulatory compliance is the initial driver, but competitive advantage is the end result.
Making the next step a giant step forward for capital markets
The fact is that financial institutions today can’t afford to be encumbered by old, inflexible technology. Those who are not innovating and adapting will fall behind, unable to satisfy customer and market demands.
But developing a golden data source that provides fast access to complete, correct, consistent data across the enterprise – the same information that’s used to report earnings, and calculate profit and loss, but also for risk and regulatory reporting – is no longer an unattainable goal. And it doesn’t have to reside in a single database; it could be in many that function as one, with uniform governance and data models across the organization.
There are two ways to capitalize on killing complexity. The first is to create a robust platform for high growth or expansion, in businesses, geographies and in sheer transaction volume. The second is to use business intelligence to optimize capital allocation across legal entities, increase growth and revenue, lower operating costs, and provide better customer experiences.
The SAP HANA platform makes both possible. When deployed in the cloud, it simplifies data architecture, and reduces latency, complexity, and cost.
Financial services companies that are reducing complexities and running simple are becoming more agile, transitioning away from their old environments and opening new opportunities for the future. Run Simple today.Comments