Monthly Archives: September 2013

Archived Posts

2013-09-30 by: James Bone Categories: Risk Management CEO Challenge 2013 – The Conference Board

You must be logged in to view this document. Click here to login


In today’s slow-growth global economy, CEOs are taking a hard look at their own
organizations, employees, customers, levels of efficiency, and innovation skills to plot
a winning course in a challenging environment. This is the most important new insight
to emerge from responses to the 2013 edition of The Conference Board CEO Challenge
survey. Compared to last year’s survey, CEOs appear somewhat less concerned than
participants in previous years about external factors in the business environment
that they cannot control (e.g., macro issues of risk and regulation). Instead, they are
focusing on people-driven strategies to counter slow market and economic growth and
improve performance.

Managing in a slow-growth environment presents a unique set of challenges for
business leaders across the globe as they seek to leverage Human Capital, Innovation,
and Operational Excellence to create value. In many ways, meeting these challenges is
about engaging and retaining talent and improving processes and existing customer
relationships to stay neck and neck with competitors—or even an inch or two ahead.

TheGRCBlueBook mission is to become a global risk and compliance community site and resource portal for sharing best practice across all highly regulated industries.  A one stop source for all things risk and compliance related.


2013-09-26 by: James Bone Categories: Risk Management S.E.C. – Deploying the Full Enforcement Arsenal

MaryjowhitepicIn a speech to the Council of Institutional Investors in Chicago this fall Chair of the S.E.C, Mary Jo White, effectively threw down the gauntlet on future enforcement action describing a more aggressive and creative agency.  As a former U.S. Attorney, Chair White does not mince words and is setting a new tone on many enforcement fronts the Commission is taking.  In the nine years as U.S. Attorney for the Southern District of New York, Chair White specialized in prosecuting complex securities and financial institution frauds and international terrorism cases.

Below is a summary of the highlights of White’s speech:

·         Commission Priorities – the S.E.C. will be seeking feedback on an aggressive set of Congressional-mandated rules stemming from Dodd-Frank and JOBS Act.  In addition to Dodd-Frank and JOBS Act, new rules will be proposed to reform money market funds and adopt changes to financial responsibility rules for broker-dealers including, improved capital requirements, customer protection and recordkeeping requirements.  Finally, new proposed Regulation SCI may require new resilient measures for exchanges and large alternative trading systems.

·         Enforcement Principles – instilling a robust enforcement program exemplifies fulfilling the mission of the S.E.C.  Chair White describes the behaviors and actions that demonstrate the principles of being a “effective cop on the beat”.

o   Be aggressive and creative – detect wrongdoing and seek legal avenues to pursue it

o   Settlements with teeth and deterrence – aggressive use of penalty authority, seek additional penalties for repeat offenders, and in egregious cases determine how widespread the conduct and whether the firm cooperated.

o   Settlements involving systems control failures – consider mandating new policies and procedures as well as independent compliance testing of controls

·         Demand Accountability – in 2012 the S.E.C. changed its “no admit; no deny language” in cases where settlements included guilty pleas in related cases with disclosures referenced in these settlements.  Chair White suggests using a tool she first used as U.S. Attorney called a “Deferred Prosecution Agreement (“DPA”) where the Government would file a criminal charge but defer prosecution pending good behavior and terms of an agreement that may include financial penalties, enhanced compliance, outside monitoring, and potentially public admission or confession of wrongdoing. 

·         Pursue Individuals – S.E.C. staff have been instructed to look hard at whether a case against an individual can be brought.  

·         Cover the whole market – implement new technologies to give the impression of being everywhere to detect and pursue violations, encourage tips from whistleblowers, increase use of quantitative data, and conduct sweeps to uncover wrongdoing.

·         Win at trial – recognizing the increased demands for getting admissions Chair White believes that the S.E.C.’s chances of winning in court have been proven. 

The S.E.C.’s new Chair appears to bring the credentials and toughness needed to help restore investor confidence to the markets.  It is clear that “Tone at the Top” must be more than rhetoric with evidence of behavior that dictates robust organizational controls.

Chair White’s speech should be viewed as an opportunity for Compliance professionals to evaluate the impact of new regulations, modernize existing internal controls, and start discussions with its peers in oversight groups and company leadership on ways to better coordinate resources in this new environment.  Audit, risk, HR, compliance, IT, and legal all have a role to play in defining an integrated approach to managing regulatory compliance.  Compliance may lead this discussion but a full team is needed on the field to execute a comprehensive compliance program.

TheGRCBlueBook mission is to become a global risk and compliance community site and resource portal for sharing best practice across all highly regulated industries.  A one stop source for all things risk and compliance related.


2013-09-25 by: James Bone Categories: Risk Management TheGRCBlueBook Editor’s Letter – September, 2013

free_249263  Autumn waterfall

September represents change in New England.  October is the peak of fall foliage season with its brilliant colors, crisp air, fresh apple orchards and the transition from fall to the last remnants of summer fade in distant memory.   Markets also appear to be experiencing a great deal of change as well.  Historically, fall has ushered in volatility in the markets and this year appears to be no different!

 Chairman Ben Bernanke and the Federal Reserve Bank Governors surprised the markets and did not begin to taper the so called “Quantitative Easing” or purchases of mortgage backed and treasury bonds.  Unfortunately, the “Taper” Caper signals that the economy is not improving as much as expected even though we are now half way through the second half of the year. 

 Most analysts concluded that the Fed would begin to taper its purchases and many had predicted a reduction in the range of $10 – $20 billion.   The assumption was that the economy was improving enough to begin to taper but was not strong enough to pull back too quickly. 

 To Taper or Not to Taper!  The process of making decisions is complex and includes many variables.  Ben Bernanke has been consistent in his speeches that the decision to taper will be based on the “data”.   It appears that the markets misread which metrics would be most influential in the decision making process to taper.

 What lessons can be learned from Ben Bernanke about risk management and dealing with uncertainty?  First, let’s look at decision-making under uncertain conditions.  The Federal Reserve has a range of data points at its disposal which inform its decision making process.   Chairman Bernanke does not make decisions in a vacuum as he chairs and guides the Board of Governors.  Building consensus on key risk decisions is critical to the operation of the Federal Open Market Committee in directing monetary policy. 

Consensus building does not mean that everyone on the committee agrees.  Reasonable people disagree that data considered from their perspective may point out risks containing multiple variables that play into how outcomes unfold or materialize.  The uncertainty of outcomes leaves room for disagreement.  In fact, the discipline of the process may be more important than the actual decision itself.

 What are the important strategic lessons learned from the decision by Ben Bernanke to continue quantitative easing?

 First, the process is time-constrained.  The FOMC meets 8 times per year and must make a decision each meeting.  Markets wait for the Fed decision on monetary policy and reacts accordingly.   People need the certainty of a decision, good or bad, to guide their actions.

 Secondly, data is used as a guide to inform decision making yet the interpretation of the analysis and final conclusions are based on objective and subjective analysis of  perceived outcomes.   Data facilitates but does not govern decision making.

 Third, the markets and members of the FOMC monitor their decisions in real-time and make adjustments along the way as circumstances change.   Build in and anticipate corrective action steps as conditions dictate.

 The final lesson may be that risk management is a process that is responsive to change.  The processes used by Ben Bernanke and the Board of Governors are the result of lessons learned over many years through various market and business cycles.   

Not everyone agrees with Bernanke’s candid disclosures of Fed policy or the decisions made by the FOMC but the process has worked arguably well through the financial crisis.  The FOMC is one example of a live demonstration of effective risk management replete with its successes and failures. 

 Going forward TheGRCBlueBook will highlight additional examples of the art and science of decision-making under uncertain conditions.  I hope that you find the articles informative.

Executive Director, TheGRCBlueBook

TheGRCBlueBook mission is to become a global risk and compliance community site and resource portal for sharing best practice across all highly regulated industries.  A one stop source for all things risk and compliance related.

2013-09-20 by: James Bone Categories: Risk Management Relationships Matter more than ever in a Data Driven World by Keith Lynn

Keith LynnToday, we are inundated with data and it drives most management decisions.  Due to the quantity of data available from a myriad of sources many managers and companies have discarded traditional relationship management and make decisions wholly on data driven statistics.  “If your numbers don’t add up, you might, and probably will be replaced, given a bad review or fail to receive a promotion.”  How can there be an argument against managing with data?  Statistics bear out the validity of the decisions.

However, there can be negative consequences:

Management decisions based wholly on data can cause disenfranchisement among your key employees.  When they determine they are not valued beyond the numbers they produce the work environment quickly can become toxic with interpersonal relationships and company loyalty quickly disappearing; especially if the change is sudden and made without proper preparation and orientation of employees.

In this data only environment, local market conditions are often ignored as the data from the larger market fosters the decisions made locally.  The ignoring of this local information often creates false goals, either high or low; damaging the relationships between the local producers, management and “corporate.”

A second byproduct that is even more disturbing is a quickly learned lesson: “If numbers are the only thing that matter, then it does not matter how they are obtained.”  In the sales world, this can lead to questionable sales practices and eventually damage to the company’s reputation as the sales force struggles to remain relevant.   In a team environment it can and often does destroy cooperation as each participant tries to obtain the credit in order to survive.

So, if these are the dangers, how can they be avoided?  

First: don’t bury your head in the sand and ignore the data.  This will lead to failure quickly. 

Second: Don’t make long term decisions on short term data.  I have found that many managers wake up in a new world at the beginning of each week or month, often reacting to the numbers instead of looking at what caused them.  I have found that measuring positive activity rather than short term sales results is a much more effective way of determining successful results and one which all participants can agree.

Third: Trust your producers and listen to them.  Decisions made do not have to agree with all of the ideas presented, but listening and gathering input will foster respect both for the producer and for the manager.  Each will understand they have been heard and the final decision will most times be better because of this interaction.

Fourth:  There is still time in this fast paced data driven world to stop and appreciate your employees.  Just a few words of encouragement, without a hidden agenda, can go far in making a positive work environment.

Data is not going away nor should it.  Better and quicker decisions are made because of the availability of information.  Yet, time proven relationship management techniques can be used to maximize your results and ensure team loyalty.

Keith Lynn is a retired senior sales executive with expertise managing high performing sales professionals.

TheGRCBlueBook mission is to become a global risk and compliance community site and resource portal for sharing best practice across all highly regulated industries.  A one stop source for all things risk and compliance related.

2013-09-16 by: James Bone Categories: Risk Events Opal Financial Group’s Conference Schedule

You must be logged in to view this document. Click here to login

2013-09-08 by: James Bone Categories: Risk Events Hedge Connection

You must be logged in to view this document. Click here to login

by: James Bone Categories: Risk Events Hedge Fund conference calendar

You must be logged in to view this document. Click here to login