In a survey conducted by Kinetic Partners, 48 percent of financial services CEOs stated that senior management should spend 20 to 40 percent of their time on risk management and compliance. However, about one-third acknowledged that their teams weren’t meeting this standard.
Andrew Shrimpton, the study author and regulatory compliance member at Kinetic Partners, says that senior managers sometimes have difficulty conceptualizing how smart regulations can turn into effective business processes.
“In particular, effective non-executive directors need to understand the key regulatory issues and questions they should be raising with their CEOs. The business leaders that participated in our ‘GRO’ (Global Regulatory Outlook) study say that they welcome regulation in this area, understand the need for it and want to work with lawmakers to improve transparency and restore consumer confidence.”
According to a Chicago Booth/Kellogg School Financial Trust Index published in 2012, only 22 percent of Americans actually trust our country’s financial system. Only 23 percent have confidence in banks, and just 17 percent trust big business. And an NBC/Wall Street Journal poll found that 76 percent of Americans believe that our financial system favors the rich over the less wealthy.
Back in 2006, Forbes published an article on “The Economics of Trust.” “Being able to trust people might seem like a pleasant luxury, but economists are starting to believe that it’s rather more important than that,” said Tim Harford. “Trust is about more than whether you can leave your house unlocked; it is responsible for the difference between the richest countries and the poorest.”
World Bank senior economist Steve Knack suggests that trust is worth about $12.4 trillion dollars to the U.S., which translates to 99.5 percent of the country’s income. If perception matters as much as Knack is suggesting, then financial services firms have not only a duty, but a burden to restore consumer confidence.
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Edited by Brooke Neuman