The New Compliance Mandate: Enterprise‐Wide Transparency

A Financial Technology Network Webcast

Sponsored by: 

Today’s Panelists

Rodney NelsestuenSenior Research Director

Financial Strategies & IT InvestmentsTower Group

(RiskTech Blogger)

Gary RylanderAssociate PartnerIBM Global Business ServicesRisk & Compliance Practice(RiskTech Blogger)

Damian TrzebuniaEnterprise Content Management

Compliance Product MarketingIBM Information Management Software

Greg MacSweeneyEditor-in-Chief, Wall Street & Technology

IBM’s Integrated Risk Management offerings and capabilities are organized around a holistic view of risk

Risk Area Industry Requirement

Financial RiskUnderstand market and credit risk exposure across multiple silos to make financial and risk decisions consistent with business objectives

Financial CrimesSecure all transactions and forms of interaction, proactively prevent increasingly sophisticated internal and external prohibited activities and effectively manage detected events

Operational &IT Risk

Proactively manage potential risks, both internal and external, business and IT, resulting from events impacting operations, processes and applications

Governance & Compliance

Understand and manage compliance across a dynamic set of voluntary and mandatory requirements imposed by multiple regulatory bodies, across operating jurisdictions, at an optimal cost for value

Financial Risk

Financial Crimes

Operational & IT Risk

Governance & Compliance

Integrated Risk Management

Financial Services

TowerGroup – Opening Comments

Regulation of electronic content complicates the IT architecture

New demands for visibility and transparency in financial services have the benefit of delivering business value

On‐demand intelligence will have a growing role in holistic risk management

Electronification of business processes brings new demands to the IT group and redesigns business flows

Source: TowerGroup

Is this transparent?

• >50% over retention

• >75% unclassified or misclassified

• >20:1 duplication

. . .

Financial Services

Frequency of Access and Use

Time

Born DigitalOver 90% of information is born digital … and the rest should become digital

ExpirationRoughly 95% has a retention policy … very little should be kept forever

85%of enterprise information

is unstructured

The Information Lifecycle

Financial Services

Basics of regulatory content management

–E-discovery refers to any process in which electronically stored information (ESI) is sought out, secured, and searched for use in civil or criminal legal cases.

–By year end 2008, 28 states had or were planning e-discovery provisions in their general civil procedure codes or modified specialized rules for business courts

–Data classification is the categorization of data, an approach to storing computer data

•Data can be classified according to its value to the business or how often it needs to be accessed•Goal is to optimize the use of storage for many purposes:economic, technical, legal, and administrative

Diagram Source: EDRM (edrm.net)

E‐discovery regulation brings new architectural and process issues to financial services

The proposed regulatory framework increases the importance of transparency, operational risk management and the underlying dependency on records and systems management

1. If its securitized or traded, it will require transparent, dynamic record keeping throughout its lifecycle

2. If its reported, be prepared to report it with XBRL tags

3. If its an operational risk, be prepared to do quantitative risk reporting

4. If you are a Tier 1 FHC, expect more scrutiny

5. Harmonization among agencies and international bodies will result in less variability among regulatory regimes

6. Greater reliance on prudential instead of rules based regimes will increase the value of being able to prove effective operational risk managementhttp://graphics8.nytimes.com/packages/images/nytint/doc

s/obama-s-plan-for-financial-regulatory-reform/original.pdf

Financial Services

Business value of electronic content 

management in action

Source: TowerGroup

CreateDocument

DigitizeDocument

Index, Archive, and Store

User Roles, Business Rules 

Disaster Recovery

Obtain Approval, Authenticate, and 

Authorize

Regulatory Requirements and Audit Trail 

Connect with core processing, loan origination, or lending systems to complete transaction

Execute Transaction 

Communicate and Distribute

Technology is your friend in attaining transparency

• Automated Classification– Data– Content

• Deduplication• XBRL beyond reporting

– Automated XBRL Classification of• Documents• Process Definition linked to XBRL taxonomy

• Automated monitoring & audit

Financial Services

Agile Enterprise Content Management

IBM agile ECM helps companies make better decisions faster by:

● Managing all forms of content

● Delivering content intelligence

● Optimizing associated business processes

● Enabling compliance

through an integratedinformation infrastructureUnified platform for content,

process, discovery and compliance

Financial Services

Frequency of Access and Use

Time

Agile Enterprise Content Management Delivers Compliant Information Management

A Standard Model for

Paper, Data and Content

Financial Services

ECM Platform

Enterprise Compliance is Invisible to Line-of-Business

Active Governance (GRC)Security policies, controls and risks

are enforced, tested, monitored, audited and reported “in-process”

Records automatically retained and Classified

Content / E-mail is collected, enhanced and managed in context

with Content Collection and Advanced Classification

Proactive eDiscoverySearch and Analytics

are enabled

Financial Services

InfrastructureSavings

InsuranceSavings

The business case for transparency

Records Management

& Compliance

Labor

LitigationSupport

ProcessSavings

Benefits

Key Benefit buckets

Financial Services

– $75 billion dollar asset regional US bank operating under a national charter in 10 states. 

– No formal policy to delete or otherwise reduce the amount of data held across the institution. Some kept, some discarded, no discipline. 

– No metadata or tagging process to identify data and its value

– Email archiving done via an automated tool but no classification system

– A data warehouse exists which is under separate governance and policy must address all data in the institution that is kept in the enterprise data warehouse.

– Coordination with governance resources over the data warehouse is recognized as a fundamental need. 

– While bank has not outsourced significant business processes, it is evaluating several BPO/ITO options. Policy should provide for this potential

• Include unstructured electronic data including credit files, loan documents, legal documents and vendor contracts 

• Back up vendor has all servers in a storage area network (SAN) – need to extend policy to vendor.

Case Study: A national bank develops e-discovery capability – Current state

– Developed an e‐discovery policy with a process and IT roadmap

– Prior to policy setting, the bank established a means to decide its retention goals

• The value of information to the bank – with a classification system 

• Risk assessment of keeping information of different types –with amelioration strategies

E‐discovery policy must coordinate with policies on physical assets as well as electronic assets – but won’t day one.

Case study: a national bank’s compliance with e-discovery policy

Outsourcing can be another ally

• Make it someone else’s responsibility too

• Make your KPI’s their SLA’s

• Reduce your costs

• Leverage community “learning” and assets

– Best practices

– Someone else’s SAS 70

– Analytics as a Service trained on a global sample

Financial Services

ROI of Compliant Information Management

11

22 33

44

Control Growth, remove duplicate

data – reduce storage costs by

50%-80%

Automate decisions, clean up legacy data –

save up to 17 cents per document

Enforce records retention to reduce

eDiscovery and storage costs by

50-80%

Optimize eDiscovery decisions to

reduce costs byup to 80%

Leveraging a common

infrastructure accelerates cost

reduction

Financial Services

• IBM Assessment Expertise

– New:  Free No Paper Weight ½ Day Checkupat no obligation

• Register here:  https://www.informationmanagementrequest.com/mk/get/npw0509rp

– In‐depth No Paper Weight Prescriptive Assessments now available from the IBM Centre of Excellence for Compliant Information Management

• IBM Solutions

– Agile ECM solutions for Content, Process, Compliance and Discovery

– Information Infrastructure solutions

The No Paper Weight ProgramSave money. Risk less. Know more. Go green.

Financial Services

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Financial Services

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