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Tapping into the Business Benefits of Financial Services Compliance

Banks and financial services providers must comply with a vast number of internal, external, national and international regulations. With the recent rise in regulatory oversight, executives and boards require clear visibility into risk exposure and compliance status to effectively manage the organization’s long-term strategies, avoid large fines and build a respectable brand and corporate reputation. As a result, companies are looking for a long-term approach to ensure accountability and transparency, to manage and mitigate risks, to build customer and shareholder confidence and ensure that every department is communicating with each other on the same level.The current climate in the financial markets has once again highlighted the issue of insecure communication and placed the sector firmly under the microscope. Jerome Kerviel, the rogue trader at Société Générale who cost his bank billions in unsolicited trades is believed to have been using an instant messaging package to communicate with his cohorts, whilst the ‘malicious rumors’ which initiated the record fall in the share price of HBOS (Halifax Bank of Scotland) were believed to have originated through a combination of email and instant message conversations.

These recent incidents have provided a jarring reminder of how important it is for financial and corporate institutions to secure, monitor, log and record all possible forms of real-time applications. It is clear that banks need to take tighter control of their communications in order to protect themselves both legally and financially.

Nonetheless, many organisations have been reluctant to adopt anything other than the minimum level of required regulation. The problem lies in the fact that most companies just cannot yet see the value in it and for many smaller companies, the massive investment required and uncertainty around all this newly required red tape far outweighs the purported benefits.

However, there are a range of business benefits to be gained from sound communications practices in compliance, including streamlined business processes, quality improvements, business intelligence, risk mitigation, and lower costs of doing business. Forward-looking financial services organizations should be carefully considering these benefits as they look to advance their communications infrastructure.

How can management take the enterprise towards a secure, compliant communications framework? Here are a few best practices:

Migrate communications infrastructure onto the existing WAN: By transferring all voice traffic (which is currently routed over the PSTN) within organizations to the existing IP network, financial service organizations are able to significantly reduce telecommunications costs and realize the full ROI from unified communications.

Truly unified communications enable a host of other advantages such as streamlined information delivery by eliminating or at least minimizing human delays. Unified communications also allows for easier, more direct collaboration between co-workers, suppliers and clients, wherever at the office, or working remotely. Subsequently, business travel can be reduced and with an increasingly mobile workforce, businesses are rarely centralized in one location.

One top ten financial services firm realized they could dramatically reduce operating expense by routing all intra-company calls and whenever possible, long distance calls, over its own WAN. In addition, this move enabled the company to enforce a single point of policy control over all of its voice traffic facilitating compliance mandates simultaneously.

Create a single point of policy administration, management and control in the network: Using all-IP based communications and a next-generation session management solution, organizations are able to leverage a system by which policy-based control over multimedia services can be enforced through a single point of administration. This allows for much stricter enforcement and control over the quality-of-service experienced by users within an organization. Depending on job function, level of seniority and main applications used, the system would enable organizations to control and monitor access to certain services and ensure a level of quality that users have come to expect from their real-time communications. An investment bank would be able to control which employees have access to video and IM services and be able to prioritize optimum network access to real time applications used by a senior trader on the front line, as opposed to applications necessary to someone in a more junior back-office or administrative role.

Utilizing a pure IP-based system would also allow for thorough session auditing, whereby communications can be monitored, logged and recorded thus providing an audit trail and the ability to enforce policies. To an extent, the damage sustained in the aforementioned Société Générale’s incident was mitigated through similar monitoring tools which they already had in place.

Société Générale’s ability to retrieve thousands of pages of Instant Messaging conversations exposed the fact that Kerviel may not have been working alone. Without this trail from which to work, investigators might never have identified his accomplices and the task of unraveling and reversing his unsolicited trades would have been significantly more difficult.

Integrate critical real-time information into the existing management framework: To reduce operating expenses and ensure SLA compliance, find a session management solution that delivers out-of-the-box integration with popular FCAPS compliant management frameworks. This integration gives the enterprise operations team the complete visibility and span of control needed to manage real-time applications and services from the data center all the way to the branch offices.

By using the existing WAN, deploying a session management solution and integrating with the existing management framework, organizations will gain from consistent policy enforcement across all modes of communication including multi-modal sessions whereby a session might begin as an instant messaging conversation and escalate to a voice call. Finally, large organizations also stand to gain much in the way of automation and simplification delivered by streamlined business processes and the reduced operational costs and ease of management that come with all-IP communications.

–Rod Hodgman – Co-founder and VP of Marketing, Covergence

About Rod Hodgman: Hodgman was a member of the Covergence founding team and is responsible for positioning the company’s session management solutions for maximum value and growth. Rod brings over 25 years of related business experience in technology start-ups and large companies.

Prior to joining Covergence, Hodgman the VP Product Marketing, Enterprise Products at Macromedia where he was responsible for the definition and introduction of Flex, an XML-based programming environment for the creation of rich, multi-modal Internet applications based on the Flash platform. Prior to Macromedia, he was COO of WorldStreet Corporation, a developer of real-time collaborative solutions for institutional equity broker/dealers and their customers. Hodgman also held positions as VP of Marketing at Borland, VP of Marketing at Open Environment Corporation and various executive management positions at Digital Equipment Corporation.

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