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At the recent 32nd Annual Securities Industry Association Operations Conference, hot topics for attendees were regulatory issues, increased transparency, greater volumes, cost pressures, new product development and enhanced services to clients. However, the overwhelming focus on achieving compliance has led to a disturbing trend within corporations. According to Tim Lind, director of securities and investments and senior analyst for Tower Group, “the top macro industry driver today is industry scandals leading to regulatory scrutiny.”



Due to the recent scandals, risk management to some is equivalent to risk suppression. In the drive to meet the zero tolerance demands of new regulatory decrees, organizations and vendors may actually lose focus on the business of serving customers.

Why? Because risk management and compliance are entirely different beasts that just happen to be joined at the hip. Compliance is a good and important goal, but effective risk management is the heart of business success. Low risk equals low returns and high risk can mean high returns, and good businesspeople know how to strike the right balance to hit their targets. When corporations strive to eliminate risk in the name of compliance, they drive a stake into the heart of their business operations.

In the fast-moving securities industry, where the value of an organization can change daily, managing risk is absolutely essential. Securities firms tend to be at the front of the adoption curve for new risk management ideas and technologies. The lessons learned here can be applied to businesses in any industry.

Shifting responsibility and accountability to the frontline

Operational risk management is incorporated into the weekly senior executive meeting at Morgan Stanley & Co., according to John Wagner, director of client and technology services. It is a critical part of addressing the operational issues that affect department heads, regional directors, line managers, supervisors and analyst levels, he indicated.

As was discussed in this space last month, companies in many industries have discovered the need to develop a risk plan that combines a top-down with a bottom-up approach, to allow employees at the operations level to contribute to senior management planning. New business rules, workflow, collaboration and dashboard technologies are enabling that type of collaboration, bridging gaps that exist between people and systems and between levels within the organization. The article is available at http://www.ebizq.net/topics/tech_in_biz/features/6021.html.

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