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1 ©LogicaCMG plc 2005 Making Compliance Pay Ian Larkin Head of Risk and Compliance LogicaCMG UK FICCI-IBA Conference 5th October 2005

Making Compliance Pay

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Making Compliance Pay. FICCI-IBA Conference 5th October 2005. Ian Larkin. Head of Risk and Compliance LogicaCMG UK. Regulatory Compliance. The harsh reality is: Cost of regulation is huge Implementation, then operation & maintenance - PowerPoint PPT Presentation

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Page 1: Making Compliance Pay

1©LogicaCMG plc 2005

Making Compliance Pay

Ian Larkin

Head of Risk and Compliance LogicaCMG UK

FICCI-IBA Conference5th October 2005

Page 2: Making Compliance Pay

2©LogicaCMG plc 2005

Regulatory Compliance

The harsh reality is:

• Cost of regulation is huge

– Implementation, then operation & maintenance

– £200m for a Tier 1 bank, £1bn in 2005 for B2 across Europe

• Aim for minimum acceptable compliance

– Minimizing spend, cutting scope

• Regulatory programmes are “siloed”, despite overlaps

– Minimizing the project dependencies

– Little coordination, few synergies, multiple hits

• Compliance causes business and strategic disruption

– Delays strategic business programmes

– Impacts business as usual Is a rubber stamp the only benefit?

Page 3: Making Compliance Pay

3©LogicaCMG plc 2005

An Alternative Strategy

Regulatory compliance is not just an overhead - it should add value!

so…

Don’t do it because the regulator says so;

do it for business benefit,

and comply “en passant”.

Page 4: Making Compliance Pay

4©LogicaCMG plc 2005

Two ends of a spectrum

– Disparate projects to cost, implement & manage

– No strategic overview

– “Do what we must”

– Back-pressure

– Repetition of work

– Resource intensive

– Co-ordinated strategic approach

– “Compulsory spend – use it wisely”

– Business gain costs less!

– Progressive, incremental development

– Optimal economic capital allocation

Minimum compliance Benefit-based

Page 5: Making Compliance Pay

5©LogicaCMG plc 2005

Some quotes

Woolly or wise?

– “We don’t want MI to provide information internally – only to send reports to satisfy the regulator!”

– “We are not spending anything on Basel II! We are enhancing our Credit Risk system, which will be Basel compliant.” (Tier 1 Head of Risk)

– “We see B2 as giving us the opportunity to develop risk-based pricing for our retail customers.”

– "Spending on Sarbanes-Oxley is an upfront investment in making the processes of the company better," says BP’s Macdonald. "We don’t view it as an intolerable burden.”

Page 6: Making Compliance Pay

6©LogicaCMG plc 2005

How to get some benefit…

• Re-use information & systems

• Sox process maps B2 OpRisk

• AML analysis CRM

• Stress testing risk navigation

• Use aggregated information

• Counterparty exposure limit utilisation, sales authorisation

• Shared statistics model calibration, benchmarking

• Use consistent metrics

• Enterprise Compliance Data Management

• Comparative risk measures risk-adjusted returns

• Finance & Risk Integration

Page 7: Making Compliance Pay

7©LogicaCMG plc 2005

Managing Compliance Data

Paper

ProductionSystems

Datamart, calc & reporting

Step by step• Map existing models to Metamodel• Migrate extracts to ETL• …..

EnterpriseDataWarehouse

Paper or XBRL

ProductionSystems

StagingServers

DataMart

Basel II

IASPSB, SarbOxFraud, AML

Credit Risk &Op Risk

MetaDataData definition, Lineage

Config MgtVersioning, dev & prod, time stamp

ReportingEngine

Stovepipes

Page 8: Making Compliance Pay

8©LogicaCMG plc 2005

Enterprise Compliance Data Management

C’ptyData

EnterpriseDataWarehouse(logical or physical)

Regulatory(Paper or XBRL)

ProductionSystems

StagingServers

DataMarts

Basel II

IASPSB, SarbOxFraud, AML

Credit, Market,Ops, ALM…

MetaDataData definition, Lineage

Config MgtVersioning, dev & prod, time stamp

ReportingEngines

Key Benefits• Enterprise risk management• Compliance with SarbOx• Single extract, single clean up• Easier reconcilation• Reduced storage• Consistent business reporting

MktData

Risk MIS

RiskEngines

Transports

Page 9: Making Compliance Pay

9©LogicaCMG plc 2005

Beyond Basel II – Adding ValueB

enefi

ts a

nd im

ple

menta

tion c

om

ple

xit

y

Regulation

Economics

Adding Value

Basel II

Internal Ratings-Based Approach

Risk Adjusted Pricing

Based on IRB

Active Credit Portfolio Mgt

with

Front & Back-End Steering

Typical Implementation Sequence

Page 10: Making Compliance Pay

10©LogicaCMG plc 2005

Steering the OrganisationC

usto

mers

Secon

dary

Mark

ets

Back OfficeProduct Processing

OriginationActivities

Active Portfolio Management

Secondary Mkt.Products

AccountManagement

Credit RiskManagement

Syndication

CreditDerivatives

StructuredDeals

Insurance

CreditPortal

CentralPortfolio

ManagementUnit

Secondary Market Mgt

Front-End SteeringFront-End Steering Back-End SteeringBack-End Steering

Page 11: Making Compliance Pay

11©LogicaCMG plc 2005

Making Compliance Pay

In summary…

• Manage your enterprise compliance data

• Re-use compliance systems for business benefit

• Implement economic measures of performance

• Work towards maximizing the value of the enterprise

Ian N. LarkinHead of Risk & ComplianceLogicaCMG UK

[email protected] +44 (0)20 7446 5150

mobile +44 (0)7802 462 067

Page 12: Making Compliance Pay

12©LogicaCMG plc 2005

Who are we?

Logica cm… who?

• LogicaCMG has implemented RTGS for RBI, nation-wide• LogicaCMG is a major international force in IT services to

clients across diverse markets • We provide management and IT consultancy, systems

integration and outsourcing services• Formed in December 2002, through the merger of Logica

and CMG, the company employs around 20,000 staff in offices across 34 countries

 

Page 13: Making Compliance Pay

13©LogicaCMG plc 2005

Contact…

Nath ParameshwaranBusiness ManagerFinancial Services - South AsiaLogicaCMGExpress Tower3rd FloorNariman PointMumbai - 400 021India

Tel +91 (22) 5635 2984Mob +91 98203 15084Email [email protected]

Page 14: Making Compliance Pay

14©LogicaCMG plc 2005

LogicaCMG has taken reasonable care to ensure that the information contained herein is correct at the time of publication. Before using or relying on any content in this presentation, independent verification should be obtained. LogicaCMG accepts no liability nor responsibility for any use of or reliance upon the content of this document.