"We need to ask the question, is compliance, and the broader area of risk management, strategic for banks and corporates?" says Ray Mulhern, senior vice president at Wachovia Bank. "And, in particular, are the costs of compliance and the greater costs of non-compliance really understood at the top of the house ?"

In an increasingly global business environment, regulation remains regional. "The regulatory environment is not homogenous ; it varies by geography," observes Mulhern, who intends to use the session to explore regulatory requirements from a geographic perspective, "because they do differ greatly."

In Europe, with SEPA, the regulators are at the forefront of efforts to reduce geographical complexity. But this process is having the knock-on effect of highlighting a cost and benefit issue. "Being in a position to move money from one European country to another with the same standards and the same format, at a price that is equivalent to the price of a domestic transaction, delivers clear benefits to corporate treasury departments," says Bore. But this will be at a cost to the banks, he adds, who will have to invest significant amounts to achieve SEPA.

Data management

How can corporates maximise the benefits of SEPA ? How can banks differentiate their offerings cost-effectively ? The context of those questions may be European, but the issue is global: compliance cannot add to cost. Related to this, there is a potential downside to regulation in the way that it effectively interrupts corporates' and banks' business processes. "There's a tension between speed of execution and compliance. There are more and more regulatory hurdles, but they can't be allowed to slow down transactions," says Mulhern. This is the core issue: how to mitigate the potentially slowing effect of compliance in a business environment where speed is of the essence. The impact of this extends beyond transaction speeds and into such key management processes as data management. Citing one instance of the potential slowing-down effect of regulation, Markus Straussfeld, head of cash management at Bayerische Hypo- und Vereinsbank, says that, "Corporates must understand when banks ask for legal documents and verified copies. They must build up authorisation concepts within ERP."

Andrea Klein, vice president, financial services industry, strategy and marketing at Oracle, will focus on the data management issues. "One of the big issues is the data-gathering aspect of regulation, the pulling together of information from so many disparate sources and different formats." There are different ways of calculating data, and the challenge is exacerbated if there are mergers and acquisitions in a corporate's history; the component companies may have had different approaches to storing and validating data. "We all want data, and we want more of it, but somehow there has to be a cleansing of it. There's so much now, and we need to be able to sort through what to use and what not to use," says Klein.

There are also issues around distinguishing between data that should be held and data that cannot legally be held. "What we find most often is that people really don't have any idea that they're not in compliance or that they're not doing the right things to become in compliance," observes Klein. Data is not only complex in itself; the handling of data is a distinct and separate area of complexity that must also be addressed.

But what about the benefits of regulation? "Although it is a painful experience to get to the point where you can go through the data easily and analyse it and manipulate it in the ways that you need for the different reporting requirements, once you come out at the other end of that, you are in a much better position with your shareholders, your stakeholders, and your management team in that now they have data they can trust," concludes Klein. "There is definitely an upside at the end of all the pain."

Source : www.swift.com