Remember the financial meltdown? Experts still can’t decide if we’re on the road to recovery…how long that road may be…or even if there is a road. As a nation, though, we did agree to more oversight over corporate financials. Enter the Dodd-Frank legislation, passed in July 2010.
A recent USA Today article shows that after three years, there’s still much work to be done to not only establish the regulations related to the legislation, but actually implement compliance to the regulation. As of September 3, 2013, only 40% of the required 398 rules had even been finalized. And 31.7% of the rules weren’t even proposed yet! (Source: Davis Polk & Wardwell, Frank Pompa and Denny Gainer, USA Today).
What does any of this have to do with enterprise informaton management (EIM)? Each of the major categories (asset-backed securities offerings, banking regulations, consumer protection, credit rating agencies, derivatives, executive compensation/corporate governance, mortgage reforms, and orderly liquidation authority) requires that data be executed according to new rules, but the data must also be auditable and traceable data to prove that stakeholders did so.
For example, derivatives require central clearing and exchange trading for derivatives that can be cleared, and provide a role for both regulators and clearing houses to determine which contracts should be cleared. This presents a few information challenges:
- Centralized, shared policies on which contracts should be cleared
- Detailed, clean, fit-for-use information on each contract
- Documenting compliance with the policies
Ramifications of the New Office of Financial Research
Banking regulations also require compliance with the new Office of Financial Research to analyze data on systemic risk. Whenever a new agency with different data models and expectations of that data enters the picture, there will be challenges, like:
- Supplying appropriate risk data
- Limiting supply of data to just what is required
- Visualization of data
Preparing Your Information Architecture Strategically
Holistically, the legislation (many of the specifics still pending, as outlined above) will force organizations to think about their financial data more strategically. Beyond meeting individual compliance rules, architectural decisions must also be made to prepare you for future specifications:
- How will you manage this information going forward? Virtually, physically, in-memory?
- How will you govern this process?
- How will you prove compliance and therefore reduced risk?
You need a solid information strategy to meet these requirements. We know there won’t be FEWER requirements in the future, so create an agile information architecture to protect your company today.
I’d like to hear from you. Are you prepared for financial reform? Is your information architecture agile enough to adapt to market changes?
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