New Year Focus For CIOs: Risk And Compliance

Turbulence, recession, uncertainty, crisis, liquidity crunch, the list of such not-so-bright terms that ruled the business news sphere in the calendar year 2008 is endless. However, India was partially insulated due to its traditional regulatory framework in place for banks. Having said that, there is still time before the dark clouds dissipate completely making way for the sun’s rays. Information Technology has been at the forefront of navigating banks in the midst of the current crisis. After the first phase of technology adoption in the form of Core Banking Solutions (CBS), banks can’t wait to jump on to the second phase to leverage IT for cost efficiencies.

Need for ‘Maintaining A Long-Term View’ in uncertain times

Reeling under the shadow of uncertainty, Yes Bank, a fairly new player in the space, has planned
many IT initiatives for 2009. The bank started its operations in 2004 and with an advantage of ’no legacy solutions’, it is in the process of gearing up its IT infrastructure to make it flexible and scalable to meet the business needs of the future.

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“We have gone through troubled times globally; however; India has been sheltered in may ways,” says Umesh Jain, CIO, Yes Bank. “Expense pressure is one of the major challenges before enterprises today. This can be divided into two categories – how can enterprises optimise or decrease technology costs and secondly how they leverage IT to reduce business expenses. The second challenge is to keep pace with the changing business environment. The strategy and roadmap charted out a year back may not hold true in recent times. They need to be fine tuned with the changing reality. As a consequence, IT needs to realign itself with the changing needs of the business.”

Broadly, CIOs need to follow the mantra of ‘Balancing the long term versus the short term’. Jain says, “Enterprises should not go so far with the cost cutting measures that they end up impairing their long term capabilities”.
CIOs should list ‘Risk and Compliance’ on top of their agenda

One of the important priorities for CIOs in 2009 will be strict adherence to risk and compliance policies. The root of the current slowdown lies in the lack of stringent risk and compliance practices. Especially, after the Satyam episode, technology will have to take a lead role in enterprise adherence to the right practices for mitigating risk and exposure.

To add to these challenges, the RBI this year is planning to come up with two new regulatory norms and banking CIOs will have to keep the IT architecture ready for the same. Jain says, “I believe that from a risk perspective, the RBI may push Extensible Business Reporting Language (XBRL) where businesses have to engage and the second norm will be about Basel II compliance”.

Business challenges and regulatory mandates will certainly change the way banks employ customer-facing technologies and accordingly, the IT strategies of banks will be charted out. In light of these developments, Yes Bank will be taking a host of IT initiatives to build the bank’s long-term capabilities.

Yes Bank’s IT Initiatives for 2009

There are four to five specific areas selected by the bank. Jain Informs, “We will implement information-centric Business Process Management (BPM) or application mashups. There are a lot of applications lacking end-to-end connectivity and thus they are not utilised to their maximum capabilities. The bank can improve operational effectiveness by integrating these standalone applications with a BPM solution.”

The benefit yielded will improve turnaround time for processing information, enhance customer service, eliminate redundancy, improve Straight Through Processing (STP) and reduce quality issues. The second initiative will be supportive to the BPM solution. “The bank will roll out a technology architecture equipped with a Services Oriented Architecture (SOA) enabled middleware,” says Jain. The implementation will be in small doses beginning with core requirements of SOA and provide services that can be used across the organisation.

The SOA-enabled solution will ultimately unfold into a unified front end irrespective of the core applications or product processes running at the back end. Another important area is leveraging of ‘Collaboration tools’. It will enable the bank’s employees to work more effectively.

Negotiating with the Management

Certainly, these technologies might also be on your wishlist; however, it is easier said than done. In order to convince the management (especially due to scarcity of funds across sectors) about the benefits form these technologies, one has to play a major role in charting out a business strategy jointly with the management and convince them on how the technologies will be an exact fit.

Jain concludes, “Everything that is proposed has to have a rationale behind it and the CIO should be capable enough to articulate the business rationale”. For example, a proposal put before the management for buying infrastructure for ‘Capacity Planning’ should be packed with the current business volume, which the existing infrastructure is struggling to withhold. The proposal should also be prepared keeping in mind the potential revenue generation, return on assets, RoI. So in changing times, IT must align itself with the business for its projects to see the light of the day.