Tags: finance | industry | burdened | increased | compliance | costs

Finance Industry IT Burdened With Increased Compliance Costs

Finance Industry IT Burdened With Increased Compliance Costs
(admerzavka/assetsdelivery.com)

By
Wednesday, 26 June 2019 05:41 PM Current | Bio | Archive

Financial services companies are facing skyrocketing compliance costs on top of already-exorbitant IT spending.

To be compliant, financial firms must provide timely, accurate and detailed data about managed transactions—data that must be processed in an increasingly fragmented, digitized and high-speed industry.

The finance sector’s IT systems are already burdened by a tsunami of data that is growing with compliance regulations and costs.

The Thomson Reuters 2018 Cost of Compliance Survey of compliance and risk practitioners from nearly 800 global financial services firms found that more than half of surveyed firms (54 percent) allocate up to 25 percent of their total spend on operating costs maintaining continuing compliant business operations.

The 2019 Compliance Risk Study for Financial Services by Accenture found that nearly three-quarters (71 percent) of financial institutions’ compliance departments are facing budget cuts, and that nearly two-thirds (64 percent) of those are targeting budget reductions of between 10 and 20 percent over the next three years.

But while they face budget cuts, compliance costs are expected to increase, according to another Accenture survey:

  • Nine out of 10 financial services executives expect continued cost increases in their compliance departments.
  • Almost half the survey respondents said they expect 10 percent to 20 percent increases, and nearly one in five expect increases of more than 20 percent.
  • Nearly a quarter of surveyed firms reported spending more than 5 percent of net income on compliance.

In terms of IT spending, the finance sector is already an outlier. The industry dedicates 10.5 percent of total revenue to IT, more than any other sector including government, healthcare and retail. However, each financial industry IT staffer supports only 15.7 users on average, the fewest of any industry.

Increased compliance costs are largely driven by international banking regulations, including the Common Reporting Standard (CRS) that went into effect last year. This anti-tax evasion measure requires financial institutions to provide detailed account information to virtually every sizable depositor’s home government. However, the U.S. government hasn’t signed on to CRS. Instead it requires banks conducting business with Americans to comply with the Foreign Account Tax Compliance Act of 2010—nearly the same thing as CRS but reported differently.

The Federal Trade Commission, Consumer Financial Protection Bureau, state regulatory bodies and others have myriad compliance regulations regarding privacy, data security, anti-money laundering and more.

This means more regulations to comply with—and more data to process, analyze and store.

Solutions

The challenge is to maintain the level of computing performance to comply with regulations without swamping IT systems.

To ease these difficulties, the financial industry must consider advanced technologies that provide cost-effective ways to enhance overall IT system performance.

The only way financial services companies will be able to meet the compliance demands while achieving profitability targets is to improve the efficiency of their existing capacity—namely reducing I/O, the input-output computing action that can bottleneck performance.

Many IT administrators think new hardware is the answer. New hardware is not only prohibitively expensive to many companies; it won’t always solve the problem. Additionally, it entails additional migration costs, compatibility testing, training, downtime and other challenges.

Cost-effective software solutions exist that can increase the performance of existing data centers or cloud-based environments.

Employing an all-software solution can significantly improve performance, especially with heavy duty applications that run on SQL servers. Software to reduce I/O can improve that performance by 50 percent to as much as three times more depending on the workloads – all without additional hardware or migration costs.

Even though compliance costs are rising, solutions are available that can improve performance while saving money.

Jim D’Arezzo has a distinguished career in technology that started at IBM and has included senior executive positions at Compaq, Autodesk and as President and COO of Radiant Logic. He is currently CEO of Condusiv Technologies, the world leader in software-only storage performance solutions for virtual and physical server environments.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
JimDArezzo
Many IT administrators think new hardware is the answer. New hardware is not only prohibitively expensive to many companies; it won’t always solve the problem. Additionally, it entails additional migration costs, compatibility testing, training, downtime and other challenges.
finance, industry, burdened, increased, compliance, costs
643
2019-41-26
Wednesday, 26 June 2019 05:41 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved