Build on existing reports

A major challenge is simply to track changes and rejig reports and information to
accommodate changing regulatory needs and senior management requests. Given
the likelihood of unanticipated situations in the future, reports must be built to be
flexible with a variety of key fields or sorting methodologies. Query tools should
make reporting quite flexible. The range of reports frequently requested are market
or credit exposure by instrument, by counterparty, by industry, by country, by
maturity, etc. Depending on where the latest ‘crisis’ occurs, requests will change
accordingly.
In most companies there are official board reports that are prepared for use by the
board of directors. Generally the law department will review them to certify that all
transactions were done in compliance with applicable law and in compliance with
internal policies and authorizations. When a compliance problem occurs, the board
needs to know the nature and scope of the problem. A major pitfall is that board
meetings tend to be heavily scripted and have full agendas and focus on compliance,
other than audit reviews, may not be given high priority.
In order to ensure compliance success, the staff needs to inventory those items
and processes to be monitored. The need here is to cast as wide a net as is
appropriate. To monitor properly, one needs to know who the players are, what
instruments do they use, and how the work is organized. The following is a sample
listing of the types of reports that would be needed:
1 Aggregate volume and profitability numbers
2 Itemized information on all trades
3 VaR and scenarios results
4 Limits violation reports
5 New customer listing
6 Turnover in staff (front and back office)
7 Systems failure reports
8 UOR unusual occurrence reports (catchall)
9 Trend analysis
10 Sample term sheets used
Other relevant reports are error logs, limit violations and revenue reports. Unsigned
document aging reports are also important. These monitoring reports should be
viewed in the context of how they enable the proper timing of regulatory review and
reporting. Given the ease of renaming products for regulatory purposes, compliance
staff are well advised to request risk reports as well. Measurement of economic
exposure in the risk reports might shed more light on the true nature of some
derivative instruments.