1

RiskManagement+Performance:TheBusinessChallengeoftheDay
precedented corporate ethics meltdown of the early years of the new millenium revealed that fastchangeisleavingmanygapsbehind. True,technologicalinnovationhashelpedstream line business processes and lower costs. On the otherhand,however,issuesinareassuchasdata securityremainonlypartiallyaddressed.Astous humans,weseemtohavelearnedhowtoorgan izeourselvesalittlebetter.However,wearestill struggling to work collaboratively across interna tional boundaries, remain creativitychallenged, and keep making bad choices. To make matters worse, we are in the middle of a war that knows noboundariesornationalities. Thisistheconfusedandunstablerealityinwhich we have to do business today. Welcome to the eraofriskmanagement.

RiskManagement +Performance: TheBusiness Challengeofthe Day

byJuanLlanos,CAMS
(OriginallypublishedinTheCaymanIslandsJournal, December,2005)

As the twentyfirst century un folds,newandhigherstakeholder expectations challenge organiza tions to achieve performance goals and increase shareholder value while at the same time meetingincreasedregulatoryand compliancestandards.
ntheeighties,companiesrealizedthestrate gic significance of human resources and a revolution in management development broke out. In the nineties, technology and connectivitytriggeredthephenomenonknownas globalization.Eachwavebroughtaboutenormous opportunities for economic growth and develop ment. However, September Eleven and the un
Sendyourcommentsto:juanbllanos@hotmail.com

Today companies are faced with the double challenge of continuing to perform, that is, providing value and making money, in an increasingly competitive environment, and at the same time complying with a myriad ofregulationswhileactivelyandcon tinuously managing operational, credit, money laundering, market, political, and many other types of risks.

Thechallenge
SOX, HIPAA, Basel II, FISMA, COSO, GLB, CobIT, SAS 94, BSA. No, these are not pharmaceutical
200508JuanLlanos.Allrightsreserved.

RiskManagement+Performance:TheBusinessChallengeoftheDay
products or scifi movie characters. They are someofthenamesoflaws,regulationsandstan dardsthatcompaniesofalltypesandsizesareob ligatedtocomplywithtoday.Mindboggling,isnt it? I will try to make it clearer for you. These rules and standards aim at nothing more and nothing less than creating a safer, sounder, fairer and moresecurebusinessenvironment.Theyattempt toprotecttherights,andenhancethewellbeing of citizens, consumers, employees, organizations, andevenplanetEarth.Asmostlegalnorms,they are intended to curb human impulses, which we humansdonotlikemuch.Especiallywhencoping withthosecheckscostsmoney. Todaybusinessesarefacedwiththedoublechal lenge of continuing to perform, that is, provide value and make money, in an increasingly com petitiveenvironment,andatthesametimecom plywithamyriadofregulationswhileactivelyand continuouslymanagingoperational,credit,money laundering, market, political, and many other typesofrisks.Justaslongasthelistofrisksisthe list of stakeholders: federal and state regulators, legislators, investors, customers, employees, con sumers. While navigating this regulatory maze can seem daunting and costly, these apparent threats should be welcome as an opportunity to slow downandtakeafreshlookatour companysex istingprocesses,andeventoreassessourbusiness strategies. In other words, we have today a uniqueopportunitytolookatourselvesinthemir ror and start finding ways to fill those gaps that changeisleavingbehind. Throughthisselfassessmentopportunitywewill beabletopursueasecondgapfillingopportunity thepossibilitytolearnhowtocommunicateand collaborate more effectively, to engage in joint discoveryandcreativityendeavors,tochangeour mentalhabitsandworkstyles. Thereisyetanotheropportunityherethepossi bility to engage in an enterprisewide integration ofourtechnologicalresources. It is through these three compliancedriven proc essesthatperformancewilleventuallybenotonly maintained,butenhanced,andcostsnotonlycon tained, but reduced. In sum, we have today a grand opportunity to find synergies and efficien cies between compliance and business perform ance. Grandioseandidealistic?Isaycrucial,fundamen tal,andfeasible.

It is only through a combination of explicit commitments and carefully thoughtout and relentlessly executedactionsthatcompanieswill beabletocreateacultureofcompli anceandperformance. Theopportunity
Sendyourcommentsto:juanbllanos@hotmail.com

Thesolution
Thehumanandtechnologicalintegrationthatthe risk management era is demanding cannot oper ateinavacuum.Thatissimplynotpossible.The
200508JuanLlanos.Allrightsreserved.

RiskManagement+Performance:TheBusinessChallengeoftheDay
solutionistocreatethehabitat,theenvironment thatwillfunctionasthecatalystforintegrationa culture that supports both compliance and per formance. A seemingly abstract concept, culture is actually very real and tangible, and can be managed and changedthroughactionsandprocesses.Yetthese changes do not happen magically. They require learning, visioning, planning and, above all, cour age.Leadersandmanagersneedtoworkhardat developingmechanismstoensureawareness,col laboration, integration, implementation, and sus tainability.Itisonlythroughthesemechanismsa combination of explicit commitments and care fully thoughtout and relentlesslyexecuted ac tionsthatcompanieswillbeabletocreateacul tureofcomplianceandperformance. Thekeytothisoptimisticapproachis,inmyopin ion,tofocusonthespiritandnotontheletterof regulations.Whenwedoso,wewillimmediately noticethatwhatthesemanyrulesandregulations pursue safety, soundness, fairness and security are all desirable values. If we are really serious about our professions and business roles, we all haveapurposethattranscendsthepursuitofeco nomicprofit.Now,doesourpurposenotmatchat leastpartiallythosedesirablevalues? Compliance has undoubtedly become a strategic driver.Letusembracethegoldenopportunityto selfassess and search for synergies and efficien cies between compliance and operational per formance.Onlythenwillbeabletomanagerisk, complyandatthesametimedrivebusinessvalue. Good business starts with values and continues with creating value for our stakeholders. Good businessisallaboutvalues.

About the Author. Juan Llanos is Director of Compliance for Unidos Financial Services, Inc., New York Citybased company providing a vari etyoffinancialservicestoAmericasimmigrant communities. A Certified AntiMoney Launder ing Specialist since 2003, he is responsible for the companys regulatory compliance and AML/CFT risk management infrastructure. With sixyearsexperienceofbuildingandmanagingAMLandregulatory complianceprogramsinCanada,Italy,theUnitedStatesandSpain, Mr Llanos is recognized as a leading developer of compliance and risk management best practices for the money remittance industry. His areas of expertise and research include customer relationship management, organizational development, process reengineering, business intelligence, and communication. He writes for various financial services publications and speaks frequently at industry fo rumsandevents. 200508JuanLlanos.Allrightsreserved.

Sendyourcommentsto:juanbllanos@hotmail.com