Four tips for finding a balance between revenue growth and regulatory compliance

By Waynette Tubbs, Risk & Fraud Insights Editor

In a recent Argyle Journal article, Do you understand risk?, Sanjiv Talwar, the Head of Risk Capital and Stress Testing at the Bank of Montreal, and Tom Kimner, the Head of Americas Risk Practice at SAS talk about the difficulties banks face with meeting regulatory requirements. Talwar also shares his philosophy for approaching those difficulties – build a growth strategy based on the lessons learned from the regulatory exercises.

Here are four topics I picked out that are generally challenging to all banks:

1. Think on your feet. “One of the challenges when you are responding quickly to supervisory demands is that you have to keep moving forward – even if you don’t have a complete picture of the problem you’re solving, let alone the “end game.” This poses a real challenge for any institution that’s significantly investing in a rapidly evolving requirement,” says Talwar.
   
2. Find the right people. The war is not just about banks fighting for the limited quantitative experts, it’s about getting the right people – those who possess critical thinking and problem solving skills. He also recommends creating cross-functional, collaborative teams to help break down the functional silos.
   
3. Develop clearly defined and articulated processes. Don’t assume a knowledge transfer – write your processes, goals and expectations down. Codifying your processes ensures continuity and uniformity.
   
4. Trust your instincts. Technology has a lot to offer in terms of automation and data integration and aggregation, but Talwar cautions against the false sense of security it can create. He recommends the inclusion of human “judgment and analysis.”
   

Complying with the growing number of regulations can be a costly burden, but it may seem less painful if you could see it from a different angle. For instance, Talwar’s current focus is stress testing. He says he views the stress testing exercise as a flight simulator … “it is a useful tool to contemplate and rehearse – without recourse – a playbook of strategic moves. This practice should improve [forward-thinking] and timely recognition of adverse, or opportune, events as they unfold and foster more rapid adaptation to market conditions.”

See? You’re still looking for that balance, but aren’t standing on a tight rope in a howling wind. Read the entire article, “Do you understand risk?”