5 core benefits to aligning risk, finance, and compliance

In order to optimize business performance while maintaining regulatory compliance, financial institutions should look to integrate risk, finance, and compliance functions, according to Wolters Kluwer Financial Services.

It outlines "five core benefits" that integrating the risk, finance and reporting functions of a business can bring when addressing such regulatory requirements as the European stress test, various Basel III elements including COREP, FINREP, and liquidity reporting, as well as IFRS9 hedge accounting.

These are:

• Integration of functions enables better support, accuracy, and transparency to management decisions by bringing mutual impacts into perspective.

• Shared engines and analytics, such as cash flow engine, probability of default, fair value and forecasting, and simulation, simplify the overall architecture, and lowers the cost of ownership by removing redundant software.

• Shared market observations, such as credit assessment, means that additional processes can be avoided and economies of scale can be realized.

• Shared data provides the advantage of presenting data in a consistent way and avoids timely reconciliations.

Wolters Kluwer' subject matter experts spoke of the importance and process involved in integrating both risk management, finance and reporting functions during a series of recent events.

Nancy Masschelein, vice president, market management financial risk management and finance, said: "Underlying trends towards risk, finance, and reporting integration are both a regulatory agenda and a business agenda. Regulatory changes such as IFRS9, Basel III, hedge accounting, and the European stress tests demand greater alignment between risk, financial management, and regulatory reporting. Firms that have taken the steps to align these functions increase shareholder value and capital saving, as well as develop risk-based pricing structures."

Jeroen Van Doorsselaere, director, business development for global finance and performance said: "Integrated risk and finance gives institutions the opportunity to avoid costly reconciliations while providing forward-looking and risk-adjusted performance management. Furthermore, risk management stresses used across the organization provide institutions with the first choice on the market to retrieve capital or additional resources.”