Financial Institutions - Essay Example

As financial institution involves services of many people, it is hard to manage everything appropriately. Sometimes, due to some human errors, wrong data is stored in the records which then create problems for the managers and regulators of the institutions. Due to the increasing use of computer and technology, data is sometimes hacked or corrupted which then results in wrong approximation of assets and capital. Unfortunately, financial institutions also face troubles due to the disloyalty of their employees.

In some cases, these employees reveal the private data of the institutions or get involved in stealing or bribery. Due to the lack of skills, sometimes employees make mistakes in even entering the details of the customer in the records, which then create huge problems for the institution (Operational Risk, 2008). Financial institutions are amongst the most regulated sectors in the world. They operate in an extremely regulated environment and follows laws and regulations very strongly.

The reasons behind regulating financial institutions are: The operations of financial institution involve money transactions and valuable possessions of its clients and thus they need to be highly protected. The regulators of financial institution ensure its customers for the security of their belongings as any harm to these things would not only result in the financial loss of the institution but would also adversely affect its image in the world market. As technology is improving day by day, regulators of financial institutions need to monitor it closely so that they would be able to adopt it accordingly and become the trend setters.

This can have a positive impact on their business and would also help in efficient storage of data and information. Financial institutions require very efficient ways of storing data as the operations of financial institutions rely mainly on the information of the