Johannesburg, 22 Aug 2006
In light of the new regulatory environment, the framework within which banks operate is changing, particularly in the way they manage risk.
This is according to Len Berzen, senior mechanisations manager at Nedbank. He says the banking and financial services sectors in SA are taking the lead in testing and implementing the latest technology on offer to ensure compliance.
Berzen says the impact is huge, although the change is subtle and happens mainly in the background on back-end IT systems.
"Banks have been in the business of risk management ever since the Basel II accord redefined banking as the 'acceptance of risks for value creation`, which necessitates a more rigorous approach to reporting on what they do," he explains.
Consequently, Berzen says, logging has become the most important part of the compliance process and the way banks build and test systems is changing to include risk calculations and transaction recording.
However, he warns, throwing technology at the problem will not make it go away. Berzen says it is necessary to define the problem first and then look at what business processes need to change before considering a technology solution.
"A consolidated single approach for logging data and enabling effective error handling is especially important, considering the global trend towards service-oriented architecture," he says.
Berzen says compliance with regulatory requirements should be taken seriously, because failure to do so could have dire consequences, not only in terms of penalties provided by the regulations, but also in terms of direct foreign investment.
Quoting the US Exchange and Securities Commission, Berzen says capital will flow elsewhere if a country does not have a reputation for strong corporate governance practices, if investors are not confident with the level of disclosure, and if a country opts for lax accounting and reporting standards.
"Event-driven architectures, with real-time response and risk management, are key to addressing future compliance concerns and there will be a focus on services rather than systems in the future," Berzen predicts.
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