Regulatory Pressure Moves to the C-Suite, Finds SunGard

A new survey from SunGard has found that regulatory concerns have moved beyond just compliance departments into the C-Suite, and almost half of the respondents describe themselves as “highly stressed” by regulatory change, with little prospect of the pressure improving soon.
By Jake Safane(2147484770)
A new survey from SunGard has found that regulatory concerns have moved beyond just compliance departments into the C-Suite, and almost half of the respondents describe themselves as “highly stressed” by regulatory change, with little prospect of the pressure improving soon.

The survey, commissioned by SunGard and conducted by Longitude Research in late 2013, polled 400 senior financial services executives globally and found that regulatory change is second only to market volatility as an executive issue for financial services firms, and for some it is the top strategic risk. Aside from just keeping up with the changes, half the respondents say that dealing with regulatory change has impacted shareholder returns and the ability to invest for the future.

“The thing that struck me is how the impact of regulatory change has risen to such senior levels as far as visibility…While this speaks to how much attention it’s getting and how concerned senior executives are about getting regulatory change right, there’s also a little bit of regulatory fatigue. The uncertainty is wearing on businesses and their desire to allocate more to other business,” says Jeffrey Wallis, managing partner and president of SunGard Consulting Services.

The survey also found that half of the companies surveyed view themselves as highly ready for the regulatory changes on the horizon in 2014 and 2015. Wallis says that for larger firms, especially international ones, these changes have been harder to prepare for because of the different interpretations of regulations in different jurisdictions. So there will be a two more years of hard work getting ready for these changes, he says, but this time and money spent on preparation can be limiting.

“There’s not a debate as to whether regulation is appropriate; the concern is at what point does this cost firms growth in business,” he says. “How I view it is it’s a regulatory tax that’s hitting institutions. There’s additional overhead being put into this problem that quite frankly could be used in more advantageous ways.”

For example, he says, the manufacturing sector and other tangible goods industries typically rely on the financial services industry for financing, and it’s possible that the constraint from regulation has the broader effect of limiting growth in these other industries, which might explain the economy’s slow recovery rate.

On the positive side, firms who have responded to regulatory change well have been those that have taken an organizational/operational holistic approach. 40% find it hard to move beyond a checking-the-box approach, but those that look at compliance in a cross-functional fashion can turn the regulatory agenda into a strategic advantage. Firms that build good operational processes by breaking down silos, says Wallis, can reuse and scale the data that has been consolidated for regulatory reporting.

“Once you get that right, there’s tremendous value in looking at that data in different ways and making strategic decisions,” says Wallis. “The problem has been for those that have been locked into the way of checking a box. It’s not always easy to break down silos.”

“Regulations may be putting a strain on the industry, but we are starting to see some companies use them as an opportunity to reorganize themselves along more efficient lines,” says Sang Lee, managing partner, Aite Group. “These businesses will be the future leaders in the industry.”

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