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It’s a common observation that change is constant and accelerating, and this is certainly true in the regulatory space, and amplified by the disruptions of Covid and Brexit. Significant new regulations (e.g. MiFIR, FinIA, FinSA, AIFMD, and MiFID to name just a few) flow alongside ongoing adjustments, clarifications, and enforcements and add up to substantial changes across financial service.
Alongside this ongoing change, regulators are continually adapting their supervisory and surveillance activities, and expecting firms to act proactively rather than in hindsight.
Risk and compliance departments are growing to accommodate these changes, but the solution cannot simply rely on hiring more people given the cost and limitations of manual work, especially when set against some of the value now stemming from judicious use of technology solutions.
Increasingly, digital transformation and the adoption of RegTech is one of the only ways to ensure efficient compliance management. Here are some of the main benefits driving returns on investment in this area:
Expense Savings
With the sheer number of new laws being implemented directly affecting the financial industry, not just “a helping hand” is required, but rather, many of them. Regulatory technology negates the need for firms to rely on their internal resources and traditional methods of ensuring compliance. In many cases the benefit of an investment in the use of regulatory technology far outweighs the initial expense.
Efficiency & Time Saving
Regulatory technology can guarantee increased efficiency. The efficiency gains from continuous monitoring of developments in legislation is essential and one that RegTech can assist firms in accomplishing. With these solutions, the amount of time needed to research and retrieve pertinent data, and the time required to complete compliance checks, is drastically reduced. The burden of responding to regulatory changes as well as making operational amendments to processes is similarly eased.
Operational Risk Reduction
Operational risk in firms is par for the course. However, implementation of RegTech solutions helps in decreasing the amount of repetitive and mundane tasks for staff and can therefore reduce the risk of error. The regulatory landscape is a quickly changing one – new directives are numerous and happen at speed. Human error is unfortunately unavoidable, but with the adoption of RegTech solutions, firms can reduce their exposure to this operational risk.
Optimisation of Data
Thanks to regulatory technology, data optimisation can be managed within firms organically, thereby providing a more thorough view of activities. Automating and standardising procedures creates for a more transparent environment. With the implementation of RegTech, combined with Artificial Intelligence and Natural Language Processing to intelligently automate processes (such as with Waymark’s proprietary technology), already established digital infrastructures can also be made more adaptable, flexible, and efficient.
The regulatory landscape is a quickly shifting one. During the period 2009 to 2012, approximately 50,000 new regulations were implemented. Over the following three-year period, it almost doubled – a massive 100,000 new regulations that firms are obligated to keep up to date with. This brief list of the benefits of adopting RegTech solutions and how firms can use RegTech to their advantage paints a clear picture as to why compliance investments need to move quickly up the pecking order of investment opportunities faced by firms.
Credit: Mark Holmes
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