How Financial Services Sector Can Reduce Costs and Time in Operations

Since the global financial crisis of 2008, bank profit margins have remained considerably low in the United States and other advanced economies. One of the biggest reasons is that the expenses have been outpacing revenues and, especially in Europe, the average return on equity of banks has dropped to undesirable lows. Furthermore, regulatory compliance and high levels of expenditure due to the suddenly remote workforce and increased risks due to defaults, insurance claims, client insolvency, and other factors added to the pressure. Therefore, the financial sector must act fast to increase profits, or be forced to continue laying off staff, which reached half a million last year, since 2014. 

The profits can be increased in many ways, such as streamlining offerings, digitizing processes, seeking low-cost organic growth, and scaling up through mergers, acquisitions, and partnerships. But apart from increasing the profits, cutting costs can also help the financial services industry better manage finances. In fact, according to a report, streamlining the process and adding technology can reduce as much as 60% to 70% of records management associated costs.

Data Management Costs

With the changing compliance and regulatory landscape, banks face harsher data privacy compliance regulations and are compelled to enforce privacy rules, legal discovery, and analytics on almost all data across the organization. This has significantly increased the amount of data to be acquired, processed, deleted, or archived. Similarly, this has increased the storage cost because the data needs to be collected in one place for processing.

Therefore, organizations require file management solutions that can reliably govern, locate, and retrieve information from wherever it resides in the company quickly to fulfill these expectations. Furthermore, a solution that can do all of this in place; without having to move the data to a different location can significantly benefit organizations in cost saving on storage. Such a centrally unified in-place data management solution can also help enterprise-wide search with intuitive filters, upfront deduplication, early case evaluation, eDiscovery, and analytics.

Compliance Costs

In the financial services sector, expenses are not the only thing outpacing; the fines imposed by regulatory bodies due to violation of regulations are also overtaking. In fact, according to a report, 198 fines were imposed in 2020, increasing 141% from the previous year, totaling $10.38 billion in penalties. As a result, organizations are compelled to comply with the compliance standards such as FINRA, SEC 17a-4, GDPR, and CCPA for their ever-increasing data.

Therefore, a compliance management software for financial services compliance must meet regulatory compliance standards, decrease false positives, and increase review efficiency by using a unified compliance policy system. Organizations can assess the system for risks related to such regulations with the help of automatic monitoring, communication patterns, internal risks, and non-compliance triggers and, therefore, reduce risks and compliance costs.

eDiscovery Costs

Poor data management and compliance issues can themselves increase the eDiscovery risks and expenses for any organization. Organizations often find it challenging to discover and generate possibly relevant information under urgent litigation demands because data is scattered across various geographic locations, business entities, apps, and outdated repositories. Manually gathering and examining all the electronically stored information (ESI) from so many entities and producing it on time is almost next to impossible today.

This calls for an optimized solution that can do a complex search across all business functions with accuracy and relevancy. With such a centralized eDiscovery and compliance software, early case assessment will become easier for the staff, thus reducing risks and costs. Additionally, legal and compliance departments can benefit from robust self-service controls that alleviate IT burdens and comprehensive and defensible audit trails throughout the chain of custody.

Conclusion

There are several ways an organization can increase profits, but there are only a few how highly regulated companies such as financial services can reduce their expenses. And with the pandemic and several other factors affecting the industry revenue, it is only fair to be good in information governance, compliance, and reducing costs.