Banks should adopt holistic governance, finance, risk and compliance (GFRC) strategies in order to operate more efficiently in the post-crisis environment, according to a white paper from Wolters Kluwer.
The paper suggested that GFRC strategies can reinforce links between the different critical functions in an organisation, leading to more efficient operations, and breaking down the silo approach to operations.
The report said: “Silos at their worst have the effect of breaking large firms up into smaller ones, creating a sum of the parts that is less than the whole and an enterprise run with less consistency and clarity of analysis in its planning and decision-making.”
It also suggested that barriers between departments could have historically prevented departments from being alerted to potential hazards, and highlighted the issue of having no one person responsible for assessing risk for a whole organisation.
According to Wolters Kluwer, a GFRC approach can encompass all sources of risk, both financial and non-financial, and can facilitate more effective processing and interpretation of data.
The paper highlighted the various challenges facing institutions post-crisis, and that there are more changes on the horizon that may be difficult to predict.
Therefore, institutions will have to start acting more consistently, analysing data using the same set of rules throughout, communicating more effectively, and considering all aspects of an organisation when making decisions.
GFRC strategies could facilitate a best-practice approach to new regulatory standards by treating the bank a “single organism”, the report said, reducing duplication of operations and improving the ability to respond to market changes quickly.
The model could also help firms to get a broader view of their businesses and anticipate potential market events, while generally improving business processes, as well as regulatory compliance.
However, the report also noted that some institutions may have become dependent on silos, which limits their ability to adapt to market conditions. These institutions should consider adapting their way of thinking about technological infrastructure, the paper said.
Richard Reeves, vice president of strategy for OneSumX at Wolters Kluwer, said: “Firms adopting a GFRC approach need technology that can store massive amounts of historical and current data — data sets that are often so large and complex that traditional processing methods are inadequate.”
He added: “Banks need to overhaul antiquated organisational structures and technology if they are to benefit from a GFRC model. Failing to recognise that means losing ground to more nimble, progressive rivals and running afoul of regulators who are demanding that banks handle increasing amounts of interrelated data and display ever greater foresight.”
