On Jan 22, the US Government Accounting Office (GAO) released the biennial update to its list of federal programs, policies, and operations that are at "high risk" for waste, fraud, abuse, and mismanagement, or in need of broad-based transformation. This list is updated every two years and released at the start of each new Congress to help in setting oversight agendas. This list generally receives a lot of attention from the Congress and the Administration, and it has been used to help create or modify specific services from governmental agencies.
You can read
the press release here, and view more details about this
program here.
The first item on the list this year is: "THE OUTDATED U.S. FINANCIAL REGULATORY SYSTEM" and is described as follows:
The worst financial crisis since the Great Depression has revealed major weaknesses in the U.S. financial regulatory system, which failed to keep pace with recent market trends, such as the emergence of large, interconnected financial conglomerates, and the development of new, often complex, investment products. In the near term, strong oversight is needed to ensure that the huge sums being deployed by the Treasury Department and other government entities are achieving their goals and are being used efficiently. Long term, GAO believes that modernizing the U.S. financial regulatory system and aligning it to current conditions is an essential step to reducing the likelihood that our nation will experience another financial crisis similar to the current one.
The exact details of new regulations that might result from this are obviously unclear at this point, but what is clear is that more regulations are on the way. This means that the compliance and risk management challenges that financial services firms must overcome may only get worse.
In addition, firms that were not catastrophically impacted by the financial meltdown are very likely to strengthen their overall risk management initiatives, in the hope of avoiding a similar fate that many financial institutions were faced with.
The GAO update report reinforces two clear market trends:
- Compliance isn't going away"¦.more regulations are on the way, and this problem will only get worse for most companies.
- Effective risk management is becoming much more of Board-level issue than it was before.
When the viability of an enterprise can be wiped out as quickly as has occurred to many companies involved in the current crisis, managing the totality of corporate risks becomes an absolutely vital element of corporate governance.