EY has published its 2020 Regulatory Inventory Survey, providing fascinating industry insights into the regulatory mapping landscape. The survey endeavours to provide an in-depth analysis of how financial services (FS) firms are structuring and managing the vast swathes of laws, rules and regulations that affect their business. CUBE explores the report to pick out the key takeaways.
The survey suggests that, while there has been progress in the “maturity” of approaches used to address regulation mapping, some firms continue to struggle with the volume and complexity of regulatory change and so many firms have started turning to technology to help manage their inventories. The initial focus of technological solutions was horizon scanning, however, EY’s Survey finds that this has now evolved into a technology that is used to maintain inventories of regulation, analyse those publications, and map relevant regulations to different business functions. While the technology is developing at pace, some firms continue to use manual processes and legacy systems.
EY’s Survey unveils a list of key findings that give a general overview of how financial institutions look to manage their regulatory inventories:
- Jurisdiction. Most banks maintain inventories that span across every jurisdiction in which they operate but select “priority jurisdictions” to monitor.
- Mapping. Every bank that took part in the survey maps their regulatory inventory to their business information, though the level of granularity used in this mapping varies depending on jurisdiction and perceived risk.
- Granularity across borders. US banks tend to opt for more granular detail within their inventories, while APAC generally adopt a “summary” approach. EMEIA trails only slightly behind the US in terms of granularity.
- Risk-based approach. For most banks, risk is the primary consideration when building out their inventories. Most opt for a risk-based approach and map to priority publications, with priority based on regulatory body or jurisdiction.
- Translation. Only 60% of participants prepare plain English summaries within their inventories, despite automated translation solutions being readily available.
- Summaries. While 100% of banks include the name of the publication within their inventories, 60% of those include a summary of the clauses within the regulation and only 40% break the data down to specific rules within clauses or a summary of the overall regulation.
Spreadsheets aren’t a thing of the past…yet
The report unveiled a host of insights, many of which are often overlooked. Of particular interest to CUBE, is the chapter that covers “maintaining and automating inventory”. This chapter analyses the way in which firms are attempting to implement new technologies to manage their inventories; the findings are striking.
EY’s survey found that financial institutions are “hoping – but struggling – to use the growing capability of machine intelligence”. All respondents admitted that they found maintaining a regulatory inventory “challenging”, owing to the velocity, volume and complexity of regulatory and business change. While a number of those surveyed are using AI, the report found that “most currently have no defined plans for using AI”.
Perhaps the most surprising finding of the survey, is that “there are still some banks using Microsoft Excel to manage their regulatory inventory”. While 70% are using other platforms, it is striking to see that there are still a number of firms using truly manual methods to manage regulatory change. In fact, EY’s Survey suggests that “regulatory inventory is one area where the benefit of AI has yet to be realized”. At CUBE, naturally, we disagree.
CUBE’s Digital Regulation Platform utilises AI, including natural language processing (NLP), to automate the processes set out in EY’s Survey. CUBE scans the length and breadth of regulatory change in 180 jurisdictions and will translate those regulations from 60 languages to English. CUBE provides a tailored RegBook, allowing customers to pick the risks, topics and jurisdiction that are relevant to their business.
When technology such as CUBE exists, compliance programmes rooted in manual data entry and Microsoft Excel are not only outdated – but leave businesses open to innumerable risks. As 70% of financial institutions turn to AI-based platforms, the 30% that do not will undoubtedly catch the attention of the regulators. With CUBE, machine intelligence doesn’t have to be a ‘hope’ or a ‘struggle’ – it’s a reality.