The growing importance of regulation and accountability in corporate life has contributed to an explosion in data volumes and has increased the operating costs of Irish banks, experts say. It has also been revealed that accounting standards such as Sarbanes-Oxley can actually triple the data volumes stored by financial institutions.
In the aftermath of major financial scandals such as Enron and WorldCom, the government and corporate world moved to roll out strict compliance regulations to cut down on corporate fraud and ensure accountability in firms. For example, in the finance sector international accounting regulations such as Sarbanes-Oxley and Basel II are dominating IT spend in the same way as the Y2K time bomb in 1999 and the lead up to the introduction of the euro in 2002.
However, increasing regulation in the finance sector has served also to increase costs and place heavy demands on banks and businesses to establish strategies for retaining and retrieving data.
“Though studies indicate 90pc of data is seldom accessed more than 90 days after its creation, the financial sector will have to bear the increased cost of storing data in compliance with such directives,” commented Tony Lock, chief analyst at Bloor Research, speaking at a seminar hosted by BT on operational risk and compliance.
Lock warned that such accounting standards as Sarbanes-Oxley can triple the data volumes stored by financial institutions. The US Securities Exchange Commission rules, for example, dictate that certain data be retained for six years. Irish companies were also warned that they may even have to adopt US standards to trade with US-based organisations.
Tony Gandy, adviser to the UK’s Institute of Financial Services, presented the findings of a UK and Ireland survey that looked at the regulatory challenges facing the financial sector. “Some 30pc of banks admitted both human and financial resources have been put under ‘considerable strain’ by the volume of regulatory change, while more than 35pc of respondents admitted a poor understanding of the key regulatory changes coming out of the EU,” said Gandy.
Robin Findlay, messaging specialist for financial services at BT, highlighted that email has become a critical business enabler, storing a high proportion of an organisation’s knowledge capital. “The absence of an email management strategy exposes financial institutions to a major but preventable source of risk,” said Findlay. “Flouting new regulations on retaining and retrieving data could ultimately lead to large fines and even imprisonment.”
By John Kennedy