Most financial institutions rely on a patchwork of spreadsheets and documents to catalogue compliance activity. This people-driven system adds untold hidden costs to the compliance process—costs in labor, time, and lost opportunity. Sometimes you have to spend to save, and compliance is one area ripe for dividends. It’s time to automate…for the sake of the bottom line.
As reported in Deloitte’s 2007 Global Banking Industry Outlook, compliance is demanding an ever larger percentage of an institution’s operating budget. As regulations increase, most organizations are responding with additional human resources rather than technology.
In fact, 95% of the financial institutions surveyed said their executives were much more involved in compliance management than in the past, with 40% saying that the time devoted to compliance had increased by more than 25%.
More regulations mean more people—exponentially more people. As regulations increase and as the institution expands, the management task grows larger.
Already compliance costs are growing faster than net revenue. Unless organizations can find a way to automate, they can only expect to allocate increased time and energy to compliance, further eroding financial returns.
Spreadsheets Add Cost
Examiners want to see a consistent and repeatable approach to risk management that’s integrated into daily operations. But processes that rely on spreadsheets are a poor choice because they are usually “owned” by part-time compliance officers who can’t easily pass the system on to others. Spreadsheets aren’t easily managed by multiple parties, and as a result several versions often propagate throughout an organization.
What’s more, spreadsheets lack an audit trail—who changed what, when, and why—that could otherwise provide ready-proof that an organization has made risk management a thoughtful, year-round activity.
Spreadsheets become veritable data silos. Without automation, users must cut and paste information from one data source to another. Without integration, the organization lacks an enterprise-level view of risks, costs and opportunities. Either way, the process is limited and inefficient.
Organizations that automate, on the other hand, control these costs. They streamline processes, eliminate duplication of effort, and trim expense. With automation, organizations use technology—not additional staff—to accomplish risk assessments and track compliance activity.
Remember when email first came on the scene? Andy Grove, former chairman of the board for Intel, prognosticated, “There are two kinds of businesses: those that use email and those that will.” And so it goes with compliance automation; it’s just a matter of how much money you’ll burn on those spreadsheets before you get there.
Here are five hidden ways spreadsheets add costs:
- Built From Scratch. It takes a good deal of time just to figure out what information to collect and how to best record it. Software systems eliminate that learning curve with built-in FFIEC guidance. Users can choose from ready-to-go templates or edit information to suit their needs.
- Everything (and we mean everything) is Manual. Copy, cut, paste. Toggle back and forth between worksheets and narrative documents. Scroll, search, and search some more. The whole process is labor intensive and prone to errors in both data entry and analysis. Software systems automatically update associations between interrelated assets and controls, track user changes, send reminder notices, highlight high risk areas, and generate reports.
- Extended Examinations. Spreadsheets = examiner headaches. The harder it is to pull information for the examiners, the more your costs go up. Lengthy exams are costly as valuable employees are pulled away from their regular jobs. Automated tools deliver commonly requested compliance reports, and users can choose to give examiners direct access to the system.
- Duplication. Duplicate information means duplicate effort. GBLA, BSA, Red Flags, vendor management, your own institution best practices—they’re all interrelated. Now multiply that across all your locations and business divisions. Spreadsheets can’t integrate that information. Software creates a common framework to manage all those requirements in a consistent, connected format.
- Mistakes & Lost Opportunities. With spreadsheets the responsibility for analysis lies solely with the individual. It’s a Herculean task to synthesize all that data. And while human analysis will always be critical, it cannot match software for efficiency, accuracy and depth. The right automation tool will demonstrate which assets are most vulnerable and where new security controls will provide the highest return on investment. Automation provides the institution transparency in both its strengths and weaknesses. Spreadsheets, on the other hand, add layers of confusion.
The attachment to spreadsheets is clear. Microsoft Excel is widely popular and most financial professionals have a strong working knowledge of the application. And yes, it has some powerful analysis capabilities. But it can’t support the depth and breadth of information an organization needs to manage compliance activity.
You don’t use a putter to get out of a sand trap. It’s simply not the right tool for the job.
Switch to an automated risk management tool, like Scout, and suddenly the institution gains. You get efficiency, actionable business intelligence, and better security. And much, much easier examination days.
The cost savings are near immediate. Scout users report drastic reductions in time spent on compliance management. That frees up valuable time to refocus on revenue building initiatives.
Don’t waste another dollar. Organizations that rely on spreadsheets will experience a continued escalation of costs, time consuming examinations and possible fines. Failure to automate will jeopardize your competitive position. And that, certainly, is the most costly risk of all.