How the Dodd-Frank Act Could Impact Your Weekend

On a Friday like today, most folks are looking forward to a relaxing, fun-filled weekend away from work and the myriad of regulations with which we have to comply.  Now, it looks like the new financial reform regulations may have an impact on our leisure time activities.  What you say?  How could that be?  Well, according to an article this week in the Wall Street Journal, the Dodd-Frank Act could force companies who use derivatives to hedge commodity price fluctuations to provide cash collateral on the transactions.  If that happens, then the cost will be transferred to the consumer in the form of higher prices.  One company that anticipates price increases is MillerCoors LLC.  Here's what the head of risk management at MillerCoors had to say according to the Wall Street Journal.

Craig Reiners, director of risk management at beer giant MillerCoors LLC, said the derivatives rules were designed to reduce threats to financial stability, whereas companies such as his "pose no systemic risks." If end users aren't shielded, the rules "would have a very harmful effect on our risk-management of the business and for that matter ultimately the cost of a six-pack of beer." MillerCoors uses over-the-counter derivatives to hedge against price volatility in areas such as aluminum, hops and energy.

So, as you head out to a sporting event or simply plan to kick back with a cold beverage in your back yard this weekend, beware of the possible negative and unintended impact to your wallet as a result of financial reform.

Information Technology is a Core ERM Building Block

As the year nears an end, many folks are looking to 2011 in anticipation of the regulatory impact beset by the Dodd-Frank Act of 2010. One of the primary impacts discussed today in Bank Systems & Technology magazine is the specter of the new Office of Financial Reform. Financial services companies of all shapes and sizes will soon be subject to the requests for data from this new agency to support its mission of reporting emerging risks to the U.S. Congress. Here's an overview of what companies can expect.

The Dodd-Frank legislation establishes the Office of Financial Reform (OFR), a new department within the U.S. Department of the Treasury that is tasked with gathering and reporting to lawmakers information regarding potential risks and threats within the nation's financial industry. To accomplish this, the OFR's director can use his or her subpoena power to gather data from any financial institution.

Simply, says Michael Atkin, director of the Enterprise Data Management Council, a nonprofit trade association focused on managing and leveraging data, the regulation gives banks' corporate leadership a new opportunity to examine the growing problem of managing skyrocketing amounts of data and finally to budget appropriately to meet the challenge. "It kicked the practice of data management into high gear," Atkin says. "We're now set up for addressing the data dilemma that we have because we finally have a reason that is not subject to the whim of a business case. It is a regulatory requirement."

The OFR director, who has not yet been appointed, will make his or her report to Congress in 2012, adds Atkin. But that initial report, he notes, likely will be more on the state of the industry than a detailed analysis of its data, giving financial institutions a window of several years to prepare for potential requirements. "The implications from an infrastructure perspective are about getting the core building blocks of risk management in place," Atkin relates.

Now is the time, as Atkin says, to get your "core building blocks of risk management in place". Wheelhouse Advisors can help. Visit www.WheelhouseAdvisors.com to learn more.