By the Dashboard Light
As regulatory concerns persist, many firms are turning to dashboard technology to simplify compliance initiatives.
Recent surveys of C-level executives at financial services firms continue to highlight one theme: Compliance concerns have become one of the biggest headaches for management.
With SEC-mandated e-mail and document-retention requirements, Sarbanes-Oxley, the USA Patriot Act and other regulations looming on the financial services horizon, executives increasingly are acknowledging the need to monitor compliance on an enterprisewide basis - not just in select divisions of the company. And many companies have started to assess or install compliance dashboard tools with which compliance officers, C-level executives or other managers can obtain a visual snapshot of the company's compliance outlook at any given time.
But, are these splashy tools - often featuring traffic lights, racing-car-style speedometers and even "Star Wars"-like imagery - truly helpful? And, what is needed to make these visually engaging tools most effective?
According to Stephen C. McCabe, co-CIO and executive vice president of New York-based Daiwa Securities America, which began a compliance dashboard and attendant workflow development project utilizing a JBoss application system at the start of this year, such tools are proving to be a tremendous help - at least for Daiwa's highly targeted purposes. "[Computer dashboards] are particularly helpful for a midsize firm such as ours, where you don't have 50 compliance people - you only have two," he says.
McCabe explains that Daiwa's customized dashboard and attendant workflow system currently are focused on facilitating compliance with e-mail and trade reporting requirements, including the Order Audit Trade System (OATS) rules. They currently are not being used for Sarbanes-Oxley compliance.
However, McCabe adds, over time, the system also is expected to accommodate Automated Confirmation Transaction (ACT) requirements and TRACE reporting. A related project involves the creation of an executive dashboard for the ongoing review of company financial performance.
The compliance dashboard, McCabe continues, lets compliance officers review trade reporting activities - as reported regularly by 15 trading supervisors - on one computer screen. Previously, they had to walk around to individuals and retrieve paper reports. "For us, the dashboard is a one-stop shopping situation where viewers can more easily see the compliance status of the firm at any given time," McCabe says.
Analysts and a growing universe of vendors eager to provide compliance-related solutions note that regulatory-specific and customized dashboard compliance programs such as Daiwa's system certainly show the potential power and convenience of compliance dashboard tools. But they also note that, over time, many U.S.-based financial services firms must address an ever-growing roster of regulatory requirements, and many firms have yet to fully automate and streamline their compliance systems. As a result, for many firms, the ultimate effectiveness of compliance dashboards - end-of-the-process reporting tools - remains to be seen.
Walk Before You Can Run
According to Cubillas Ding, a London-based senior analyst with Celent, key questions need to be addressed and answered before companies even can start to think about installing a sleek compliance dashboard. First, he asks, do you have the culture in place to support the changes - including new workflow, training, documentation and management changes - required to achieve enterprisewide compliance?
"Many financial services institutions need to raise the awareness of some of the compliance issues as it relates to day-to-day processes," Ding says. For example, if the IT department fixes code or automates something, what implications do those changes have for SOX compliance? This sort of thinking needs to be embedded in the mind-set of everyone at the firm, Ding insists.
Second, how solid is the data behind the dashboard, Ding adds. Is it credible? And what are the processes and methodologies being employed to gather that data? Ding notes that during first-round efforts to comply with Sarbanes-Oxley, many firms did not fully automate the process and still are using spreadsheet applications that lack transparency to facilitate compliance.
"In my conversations with financial institutions, many view the process and integrity of information gathering as most important," Ding says. "The compliance dashboard is simply a tool that helps you convey information so that people can understand the compliance requirements more effectively, but it's the actual processes behind the tool that are key."
Still, others scoff at the idea of implementing compliance dashboards at this early stage. They point out that far more important today is for firms that don't have the resources to build their own compliance automation system to start thinking about selecting one of the new financial compliance process management programs now on the market.
"What you want is a tool that everyone in an organization uses to do their job around managing these internal controls required by Sarbanes-Oxley compliance," for example, explains French Caldwell, a research vice president with Gartner Group (Stamford, Conn.). "You need good workflow tools, good documentation management to maintain all the records and good reporting capabilities, including not just a dashboard, but also the ability to issue a paper report that an auditor would need." These tools may pull together various activities associated with compliance processes, including documentation, records and content management; workflow and collaborative activity; audit support and error recognition; and, finally, reporting and compliance dashboard functions.
Such end-to-end solutions are available from a number of vendors, including Certus, IBM, Open Pages, Oracle, Paisley Consulting, SAS Institute, Stellent and Qumas. Reporting and dashboard tools that can be used in concert with other systems for compliance purposes are available from Cognos, Business Objects, Hyperion and Microstrategy, among other providers.
Despite the many solutions available on the market, analysts and vendors alike note that many firms are only just starting to track the commonalities among regulations to enable more-holistic compliance efforts and, ultimately, allow firms to gain more value out of their compliance efforts. "The big change we are seeing is companies moving away from niche, compliance solutions and moving toward a higher level and more strategic view of overall compliance," says Mike Walker, a senior product manager with Qumas (Florham Park, N.J.), a provider of enterprisewide compliance technology.
Celent's Ding also believes that institutions are starting to realize the benefits of centralizing various compliance efforts into one, enterprisewide program, using common technology. "Can institutions afford to make regulatory initiatives piecemeal where there is such a high degree of cost involved?" he asks.
But, ultimately, many are convinced that while dashboards are only part of the compliance solution, flashing dashboard lights are not going away anytime soon. "Once the executives start using dashboards, they can quickly become the standard for an entire organization," says Mike Malwitz, senior product marketing manager at Santa Clara, Calif.-based Hyperion, a provider of reporting and dashboard tools.
12 Key Questions to Ask Before Starting a Compliance Dashboard Project:
1. What is the overall compliance management goal?
2. What is the scope of the project?
3. Does management support the effort?
4. Who is the intended audience for the dashboard effort?
5. Who will review the dashboard data?
6. What set or sets of regulations will be monitored?
7. Will the dashboard serve select groups or the entire enterprise?
8. How solid is the data behind the dashboard?
9. Is the data credible? Is it pertinent? Is it timely? Is it secure?
10. What are the processes employed to gather and update data?
11. Can these processes be applied to the automation of more than one compliance effort?
12. How can compliance dashboard and workflow efforts be leveraged to help the company's bottom line?
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