Financial Regulations – Surviving the Technical Nightmare




Recent high-profile compliance failures in the financial industry are leading to stricter regulations with more rigid authorizations. Only recently, the Financial Services Authority demanded details of how major banks plan to prevent a repeat of the Royal Bank of Scotland’s disastrous mainframe blackout. The increased emphasis on compliance and control, combined with rapidly changing business requirements, means organizations need to demonstrate robust internal governance and reporting systems, albeit in an increasingly fluid and fast paced environment, making IT more expensive and complicated.

Last year banks were subjected to over 60 regulatory changes per day , putting huge pressure on IT teams to react and keep quality to the required level. Regulators are cracking down on non-compliance with substantial fines. Research from The Chartered Institute of Internal Auditors (CIIA) found that 60% of fines charged by the Financial Services Authority (FSA) last year were down to weaknesses in the risk management systems of financial services firms, costing £38.5m in fines during 2011. To manage these changes manually is a very difficult task.

While the regulations themselves may be simple enough to comprehend, the technical requirements for their implementation in IT are often far from it. Core IT system engines, typically residing on big mainframes, are optimized for scalable, resilient production performance and provide the horsepower to keep financial enterprises running. However, with new regulations coming in so fast many organizations are unsure of the best strategy to use.

How IT responds to regulatory change is a critical challenge. Over-burdened IT environments, already working at near-full capacity, could negatively impact the resources and bandwidth available to prepare for these changes – drastically slowing the process down and costing large amounts of money.

Additionally, the larger the organization, the higher the cost of modernizing or responding to regulatory change. Large organizations need to find ways of managing spiralling costs brought about from increases in mainframe capacity.

A genuine option is to review existing core system workload to identify bottlenecks, which could – especially on traditional mainframe systems – reside in the development, testing or even production deployment activities. Using smart technology and exploiting new advances in mainframe technology (IBM’s zEnterprise system, for example, condenses z/OS, Linux, UNIX and Windows servers into a single environment), IT teams can juggle major IT activities across this more flexible environment. This is because it behaves the same way as more traditional mainframe environments, but offers even greater capacity and flexibility.

By looking at how core IT system delivery activities and workload can be optimized across all available platforms, organizations can then refine their development, testing and redeployment activities at a lower cost while also meeting delivery timeframes. By exploiting new technology to modernize mainframe delivery, bottlenecks in the software development cycle will be eliminated and testing and delivery schedules will be able to be met without the previous limitations of mainframe capacity.

Regulatory changes will have an impact on technology and IT managers need to look at alternative environments so that mainframe activities are not hindered. Otherwise, they could face major setbacks in terms of capacity or worst still, regulatory fines.

Micro Focus has been helping clients modernize core systems to solve a variety of business, legislative and operational challenges for decades. By offering organizations the opportunity to eliminate bottlenecks in their delivery cycles, unwelcome costs including regulatory fines can be avoided, while service delivery can be accerlated. With the new advances in mainframe technology, greater capacity and a more flexible environment will be introduced, enabling businesses to cope efficiently with core system workloads.

For information on the Micro Focus Enterprise product set, click here.

1 Thomson Reuters Governance, Risk & Compliance

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