When CUBE teamed up with Burnmark to investigate the regulatory challenges faced by financial institutions, we unveiled some remarkable facts – some more surprising the others, but all leading to the same conclusion (more on that later).
So here goes – 6 remarkable facts we discovered, and my take on them…
75% admit that current processes and technology are hindering efforts to manage regulatory change effectively! That's a pretty high number but is anyone really surprised, given that most financial institutions are still relying on people-centric, spreadsheet-oriented processes to manage regulatory change? Add to that the fact that underlying technology infrastructure is often ageing, inadequate or lacking the quality or scope to do the job right, and it's not difficult to see how the current modus operandi is unsustainable. What is truly surprising is how any global financial institution can manage regulatory change manually, given the relentless onslaught of 200 regulatory changes every day.
33% say their processes are too manual; 25% say they are too time consuming! Too much time and money is spent on routine compliance tasks, rather than assessing the impact of regulatory change and updating policies and controls, which can now be automated.
25% admit that it is 'extremely challenging' to meet new regulatory obligations! No Chief Executive or Regulator wants to hear this. And without doubt it cannot be used as a defense. Nevertheless, it is a stark reality, especially now that the intersections between records management, data privacy and protection, records retention and security have grown so complex. Discover more in Burnmark's full research report RegTech for Information Governance.
100% of respondents say they are actively investigating RegTech to solve compliance challenges! Hallelujah :) At its very core, regulatory change management is a process that can be automated (like many others) to yield enormous cost and efficiency savings. And AI adds intelligence at enterprise scale, which is a critical technology breakthrough. It is encouraging to note that 75% of financial institutions surveyed have already replaced some manual processes with RegTech solutions, and of those yet to implement, 100% are reviewing RegTech alternatives.
RegTech procurement is still slow, despite evidence that there are no commercial or technological reasons for delay! The majority of RegTech procurements involve multiple stakeholders and complex decision-making processes. In the US, Compliance and Innovation teams are leading the charge, in equal measures. In Europe, multi-disciplinary teams are emerging. But the longer it takes to act, the greater the compliance risk and costs, which explains why enforcement fines continue to rise. Firms must act faster to mitigate risk.
75% cite enforcement fines and reputational risk as the greatest financial impacts of poor regulatory change management! Taking into consideration that the technology exists today to manage regulatory change effectively, at vastly reduced cost, this figure is startling. It is difficult to understand why firms are delaying deployment and taking unnecessary risks.
The good news is that financial institutions are at the "Let's GO!" stage of the RegTech lifecycle, as depicted in a recent blog by Capco Managing Principal Olus Kayacan.
Even so, Capco forecasts that it will be eleven years before RegTech becomes "The New Norm."
Can financial institutions really justify burning unnecessary cash for so long, throwing good money after bad on people-centric processes, outsourcing and outdated technology.
That conclusion I mentioned earlier? Regulatory compliance is costing financial institutions a fortune. The Regulators are circling. Penalties for compliance breaches are severe. Regulatory change management technology is established. Why are financial institutions increasing their own risk, by delaying automation?