How Financial Organizations Can Endure Stress Testing Through ECM

Perhaps the best place where an enterprise content management (ECM) system will help with financial stress testing is in the documentation requirements that regulators seem to increase each year.

Documentation needs to cover almost all aspects of the bank’s financial efforts, from traditional assets and portfolio understanding to a detailed description of every outsourced process and how it is managed.

One increasingly common request from financial regulators is to provide copies of bankers and consultants’ conversations about many of their products and services.[1] This will include meeting minutes, as well as emails, copies of faxes and fact sheets that either side may provide.

An ECM can help a business of any size keep this information in a single place, which is a major requirement. Financial regulations ask for comprehensive details for these meetings and conversations, but it’s likely that you have multiple teams operating on multiple aspects of each project — from marketing and sales to your financial analysts and data scientists.

Stress testing requires documentation for verification. Without it, your financial institution can quickly conflict with the International Monetary Fund or other investigative bodies.

Sophisticated Analytics

Stress testing in the modern age is a woven tapestry of analytics based on your existing business and myriad financial changes and calamities that are possible, and might be predictable.

Simulations based on your balance sheet require significant data to backup each success. Whether you’re performing them to take internal measurements or you’re adhering to financial regulations, things are gaining complexity. As we’ve seen after the adoption of the Dodd-Frank Act, new models are emerging.

If you perform advanced testing, like those recommended by Nassim Nicholas Taleb[2], then you’ll need a robust data set to see how your performance scales relative to risk and increasing fragility of your balance sheet.

Structuring your content through an ECM helps you to perform sophisticated analysis because all of your sources are standardized and your processing requirements are reduced. Not only are you able to ensure that you’re performing analysis on the most up-to-date information, but you also have a clear path to regulatory compliance.

Proper testing and results can be stored in parallel, allowing you to see progress over time and even perform in-depth analysis to determine which tests you best pass and how lessons learned in that segment can carry over to others.

An enterprise content management platform is a core piece of all financial institution infrastructure because it eliminates workload around collating documents, while giving your teams better access to financial decision-making data and insights.

Structured Compliance

Cloud management capabilities allow you to ensure the fiscal viability of your organization while minimizing internal threats. Some stress tests may start to look at internal fraud and financial break points due to individuals or leadership. Financial institution infrastructure is a critical weak point as cyber threats grow. Protecting your data at every turn can enhance your ability to withstand crude hacking and social engineering attempts.

You can institute governance best practices through an ECM that enforces role-based permissions and data lockers.

Structure also looks into the concentration of risks during stress testing. Loan origination and product development that are not spread throughout an institution put the core business at risk. Financial regulators will want to see your cash flow tracked back to income-generating properties or products, which requires a strong structure to successfully manage.

If your financial institution typically sees consolidation or limited products in certain regions, regulators will want to have a deeper understanding of how that risk is mitigated, and structured documentation presents an easy way to tell that story.

Loss-Absorbing Equity

Your financial institution can adopt a CEM and reduce the need for additional staff by eliminating storage and courier requests, minimizing paperwork and preventing information loss in the event of a localized disaster. You’ll also save on man-hours required for data input, manual checks and time spent hunting for the right document in a sea of misnamed PDFs.

The best news is that this savings potentially scales with your operations, so the bigger the bank the more you can shave off and improve operational efficiencies.

ECMs cut overhead costs across the board. You then have more revenue available to you to put into assets. Financial regulations from the IMF and others are increasing their demand for loss-absorbing equity in the event that another financial downturn occurs.

The money you save on an ECM can be put immediately toward equity building. The more funding you can free up for your financial institution, the better you can comply with and exceed requirements for stress testing.

Stress testing has become a significant part of financial institution operations. From your infrastructure to the way you develop and promote new products, regulators are taking a stronger look at every potential flaw. Protect your brand with the right financial-focused ECM support today.

[1] http://www.americanbanker.com/news/technology/five-tech-challenges-banks-face-in-next-years-stress-tests-1071146-1.html?zkPrintable=1&nopagination=1

[2] http://www.bankofengland.co.uk/research/Pages/onebank/seminars/180216.aspx

By | 2016-12-15T11:58:20+00:00 April 12th, 2016|
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