Strategies to help financial services deal with changes in regulatory compliance
The regulatory landscape in financial services has been undergoing a re-evaluation, and now approaches and focuses are being shifted to suit today’s societal priorities accordingly. In this piece we explore some of the most important issues that are gaining prominence in the industry and will likely affect how organisations must manage their individual regulatory compliance.
Individual regulatory compliance themes
Individual regulatory compliance has several themes changing how the performance, accountability, and behaviour of your organisation’s individuals is managed. These include:
1. Individual accountability
Regulators are putting the onus on organisations to strengthen individual accountability, through workflows, hierarchies and clarity in roles and responsibilities. This necessitates greater training, assessments and, for many organisations, a fundamental culture shift, amongst other operational changes.
2. Lack of resource for digital transformation
More than ever, organisations are feeling the cost of compliance – from operational investment to regulatory fines. Technology and digitisation will play a pivotal role in reducing costs long-term and helping to manage increasingly complicated regulation, but with little resource at their disposal, some firms may struggle to embrace digital transformation.
3. Renewed focus and rigour
Along with the various changes in focus, regulators are increasing their oversight over how organisations monitor and evidence their compliance. Firms will need to assess their current processes and ensure they’re equipped (culturally, operationally, and most importantly, digitally) to meet these new demands.
4. Global governance and reporting
This theme calls for a perspective change. A data point or piece of evidence in isolation no longer qualifies for much. Organisations are being encouraged to look at the implications of an action, data point, or other, for all considerations that fall under your purview of accountability. It will also be expected that governance is looked at on a global scale.
5. Focus on regulated entities
International firms will need to disentangle their reporting and processes to meet the requirements for each individual entity based on the regional regulations. As more regions release new regulation, including Ireland, Australia, and Singapore, this will create serious challenges that should prompt firms to look for a specialised solution.
What new strategies will be important in future?
Alongside changes in the actual regulatory requirements as discussed above, organisations should look at the big picture and rethink their overarching compliance strategies. The changes happening to the financial regulatory markets, especially for individual compliance, is far deeper than surface level. While the nuances changes will absolutely need to happen, they should be guided by a more all-encompassing change of approach and mindset.
Here are several big-picture strategies that organisations should consider for the future of their regulatory compliance:
Climate & sustainability strategies
Climate action, sustainability and green finance strategies are being adopted by businesses across industries and the globe. These concerns have been present in the investment sector for a while, but are now starting to proliferate other finance areas, most recently the insurance sector.
Organisations should look at creating new taxonomies, standards and processes that integrate these considerations because, although regulators will not implement their own policies overnight, they will be bringing out both requirements and incentivisation in the near future, so it’s best to be prepared.
It’s clearer than ever that organisations need to take long-term approaches when building their regulatory compliance strategies. As themes such as climate-related risk and digital transformation become more prevalent, organisations will need to demonstrate that both short-term plans are in place and long-term frameworks are in development.
Data has proven to be a considerable challenge during financial compliance processes, from difficulties in integrating data to poor data quality. These issues have mainly arisen from the use of disparate solutions where data has been collected, cleaned, and stored in different ways and over time. This will inevitably result in reporting errors and worse, so it’s essential that organisations develop new, data-first compliance processes, especially as the market experiences increased scrutiny.
Digital transformation will be an essential tool for organisations looking to scale their individual regulatory compliance processes and evolve to new policies. This is the only manageable way for organisations to remain resilient throughout changing regulatory landscapes. Robust technology solutions will support organisations to manage their compliance with efficiency, resilience and security. In these, they can build frameworks and workflows that will support the above themes, making a technology-centric strategy the essential foundation to any regulatory compliance approach.
How can you prepare?
In short, overwhelming change is already happening, but this is only the beginning of a tidal wave of regulatory re-evaluation and redesign. Most importantly, these changes will need to be deeply embedded into the heart of an organisation, not just moved around on a superficial level.
Although much of this is slow-moving, implementing these changes will take an equally long time, so we would recommend organisations make a head start and begin to assess where their gaps lie. In particular, finding digital solutions that both meet and streamline your frameworks, while also working well with your existing digital infrastructure and team processes will be an invaluable tool for the future.
Read more about the current and predicted trends for Individual Regulatory Compliance, as well as potential challenges and their best solutions, in our whitepaper below.
Individual Regulatory Compliance for Financial Services
The regulatory environment is undergoing its latest stage of shift, this time, towards individual regulatory compliance. In this whitepaper, we explore the key themes financial services should be aware of and practical guides for how to adapt.