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First 100 Days at Klaros: Looking at Risk and Compliance from an Operational Perspective


Despite almost 20 years working on the operational side of financial services, I stick out like a sore thumb at Klaros Group. Surrounded by colleagues with decades of regulatory risk and compliance experience, my operations background in technology and product implementation is certainly a differentiator, but also puts me in a position of having a lot to learn. And in my first 100 days at Klaros, I’ve learned a lot.

Prior to joining Klaros, I worked with several leaders of financial institutions who were weary of risk and compliance leaders. And they still are - there’s a constant tug of war between innovation and balancing risk. Risk and compliance teams are often the last to be invited to the table because the perception is they tend to slow down the decision-making process during innovation. Others complain that risk and compliance leaders will say “no” in an attempt to eliminate risk, instead of managing it. Because of these perceptions, they tend to want to engage with risk and compliance teams as little as possible - during the annual audit season, say, or when a regulatory body announces a new policy mandate.

Here’s what I’ve learned from my first 100 days at Klaros about why business leaders should invite risk and compliance to the table first when designing new products or partnering with fintechs to offer new services.

  1. Engage with regulators early in the innovation process. In the highly competitive world of financial services, the need to innovate faster has never been more important. When launching a new product or service, it is always a good idea to have an open dialogue with the regulators during the process. The more you include them, the more successful you’ll be in getting the product to market without taking undue regulatory risk. The odds of success improves drastically when regulators are a part of your stakeholder group instead of alienating them.

  2. Manage risk effectively as you scale up operations and technology. An easier way for financial institutions to compete in the marketplace is to form partnerships with fintechs. That's when third party risk management becomes even more crucial. Federal bank regulators expect a bank to practice effective risk management regardless of whether the bank performs the activity internally or through a third party. Third party risk management covers risks from all sides of the business, including cybersecurity, operational, legal, regulatory and compliance, reputational, and financial. As financial institutions scale up operations and technology, they need to ensure that they manage third party risks effectively.

  3. Understand both the old and the new. There is an advantage in understanding the old and the new when it comes to regulations. Particularly in the partner bank model, understanding the legal and operational implications of regulations for both banks (old) and fintechs (new), is key to understanding the viability of all kinds of partnerships and product offerings. The Klaros team has both subject-matter expertise and operational experience in implementing new rules and guidance in banks and fintechs alike. Especially with some of the latest financial services innovations, like crypto, we’re navigating territories the regulators haven’t yet fully charted. That’s why it’s crucial to have a deep understanding of the existing models, regulations, and operations so you can leverage them to predict regulatory outcomes.

In the last several weeks, we’ve seen an eruption of new risk and compliance issues in financial services. Crypto companies are fielding new regulatory questions after weeks of extreme market volatility. The Consumer Financial Protection Bureau (CFPB) announced its intention to examine fintechs that pose risks to consumers, exercising previously little-used legal authority. Not to mention the macroeconomic effects of higher interest rates and the threat of recession. With all of these concerns converging, it’s never been more important to evaluate risk in your organization before the regulators force you to.

Photo by Sean Pollock on Unsplash.


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