President Obama today outlined his long-anticipated proposal for massive reform of the financial markets regulatory structure.  Some changes, like the abolishment of the Office of Thrift Supervision and increased powers for the Fed, were well telegraphed and surprised no one; others, like the extent to which Treasury would be able to seize large, “systemically important” companies and the fact that Fannie Mae and Freddie Mac are not part of the initial plan, raised a few eyebrows although none were truly shocking to most.  More than a few pundits and industry experts have noted that the proposal made no mention of the role of government policy in creating and exacerbating the current economic crisis; alas, such analysis is well beyond the purview of this blog anyway.  And we have a long way to go on this topic, as Congress has yet to truly weigh in – which you know they will do early and often before all is said and done.

For our purposes, this proposal is highly relevant to the matter of information risk management (IRM) for several reasons.  First, as we have been saying for almost a year now the breadth of industries covered by the proposed regulations is huge, and includes not just the “obvious” targets like hedge funds and credit card companies but any institution – including foreign affiliates – that has a banking charter known as an “industrial loan company”, which would include heretofore unregulated entities like Target, Harley-Davidson, BMW, GE and any venture capital or private equity firm with assets over $30 million (which is essentially all of them).  Second and more fundamentally, any increased regulatory oversight is by definition likely to result in more investigations, prosecutions and fines – especially when such outcomes are being overtly mandated by the administration.  As we have repeatedly noted, this process has already begun.  Add these elements together and you have a recipe for a significant spike in information risk. 

Stay tuned – this is one story which will only get more interesting as it unfolds.