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The Impact of Instant Messaging in the Financial Services Industry: Benefits, Challenges and Recommendations

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The Impact of Instant Messaging in the Financial Services Industry: Benefits, Challenges and Recommendations
January 2009 Executive Summary Unfortunately, while Instant Messaging (IM) systems have the ability to change the way financial service companies interact for the better, many of today’s implementations pose problems and challenges to address. IM technology has the benefits of gathering input from many different people in dispersed locations. This adds speed and ease to workplace communication, and presence detection eliminates the time typically lost to missed telephone calls and wasted trips to see colleagues. Speed and efficiency are increased from knowing the status of financial transactions in real-time. A main challenge in financial compliance is the regulatory financial framework, which forces financial service companies to archive IM conversations. Poor management in security and retention controls increases the legal risk and personal accountability to corporate officers. Consumer-grade IM has potential for security breach and the leak of corporate data which can be particularly devastating to financial service companies. IM is widely used to distribute research, negotiate prices, execute orders, and stay in touch with clients and colleagues. It provides a direct mode of communication with co-workers, clients and other broker-dealers that enables far closer and more personal relationships. Imposing an IM ban could result in the loss of clients and valuable employees to competitors who are more tolerant of the use of IM in the financial markets. Key recommendations include: Installing an enterprise-grade IM system for all employees in the firm. The addition of consumer-grade IM for client facing employees to keep client loyalty. Educating employees on a company IM policy including regulatory guidelines and using IM for personal use. Enforcing rules through software that monitors and records IM conversations, and also through disciplinary action. Forming a management team to coordinate a strategic IM plan that meets all


References: Bird, D. (2003) Choosing an Instant Messaging System [online]. Available from: http://www.instantmessagingplanet.com/enterprise/article.php/11208_2236051_3 [Accessed 15 December 2008]. Nehra Shapiro, D. (2004) Instant messaging and compliance issues: What you need to know [online]. CTO. Available from: http://searchcio.techtarget.com/news/article/0,289142,sid182_gci967281,00.html [Accessed 05 January 2008]. Shiu, E Kontzer, T. (2002) Instant Messaging Makes A Splash On Wall Street [online]. InformationWeek. Available from: http://www.banktech.com/showArticle.jhtml;jsessionid=JSS5QIMRHNZZKQSNDLPCKHSCJUNN2JVN?articleID=14701121 [Accessed 19 November 2008] Saunders, C. (2003) Case Study: How a Multi-Office Brokerage Uses IM [online]. Available from: http://www.instantmessagingplanet.com/enterprise/article.php/3292741 [Accessed 9 January 2009] Hasking, D McDowall, B. (2006) Instant Messaging (IM) services for transmitting securities orders? [online] IE4C. Available from: http://www.it-analysis.com/business/content.php?cid=8522 [Accessed 3 January 2009] Bowen, G. (2007) Hosted Instant Messaging Provider Improves Financial Firms ' Real-Time Communications [online]. Business Writer. Available from: http://www.outsourcing-information-technology.com/hosted.html [Accessed 12 January 2009] Robo, R Osterman Research (2006) A Short & Simple Guide to Managing Instant Messaging in the Workplace [online]. Available from: http://www.imbrellasoftware.com/Osterman.pdf [Accessed 11 January 2009] Stamer, T Robinson, K. (2005) Instant Messaging: Risky to Productivity [online]. Available from: http://www.to-done.com/2005/11/instant-messaging-risky-to-productivity [Accessed 28 November 2008]. De Hovos, B Schwartz, M. (2005) Case Study: Choosing Hosted Enterprise IM [online]. Available from: http://esj.com/security/article.aspx?EditorialsID=1441 [Accessed 12 January 2009] Marson, I. (2004) IM Virus [online]. Available from: http://software.silicon.com/malware/0,3800003100,39121779,00.htm. [Accessed 6 January 2009] Newspapers Ilett, D. (2007) Instant messaging poses a big risk. Financial Times. 13 June. Pritchard, S Pritchard, S. (2006) Instant Messaging. Financial Times. 8 September. Sherwood, B
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