November 12, 2018
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How to unlock abundant opportunities to cut the cost of compliance
CUBE CEO Ben Richmond stresses the importance of senior level sponsorship for banks wanting to digitize compliance.
The single biggest challenge for RegTech adoption is reluctance to change culture, says Ben Richmond, founder and CEO of CUBE, the compliance firm.
“It comes down to the fundamentals of sponsorship, and senior level leadership to drive transformation programs to look at the 15-20% of operating cost that is currently still on the rise around regulatory risk and compliance, and look at where they are going to take significant savings from that – both in savings on legal counsel, savings on internal legal compliance risk resource – all of which there is an abundance of opportunity to do so,” says Richmond.
“Couple that with the fact they are spending fortunes on third party advisory consulting legal firms, and a lot of what’s being done is duplication of effort and frankly inefficient processes that are producing a less that desirable result in terms of the exposure to regulatory compliance issues.”
According to a Thomson Reuters report published in 2017, the top three areas in firms that were most likely to be impacted by RegTech shifted from 2016 to 2017. In 2017, the top three were interpreting regulations and their impact (21%), implementation of regulatory change (16%) and capturing regulatory change (16%). In contrast, in 2016 the top three were: compliance monitoring (47%), regulatory reporting (40%) and capturing regulatory change (35%).
The report went on to state that the budget available for RegTech continues to vary widely. Over a third (38%) of respondents expected their budget for RegTech solutions to grow in 2017 (35% in 2016). At the other end of the spectrum, the number of firms that reported having no budget for RegTech dropped significantly to 9% in 2017 (24% in 2016).
There is no lack of appetite from the banks, says Richmond, however, the transformation that the banks are bringing about today is not scratching the surface of the opportunity that exists.
“That transformation has to be strategically led from the top. It means that the CCO office, the CRO office, CTO office have to come together and drive that transformation. That is what we are not seeing happen in the way that will enable the banks to fully embrace and adopt the opportunities that regtech brings.
“We have seen a lot of initiatives kicked off by the large financial firms around RegTech, saying, ‘right we are going to drive this programme of work, we’re going look to automate our particular space, our regulatory intelligence and change capabilities.’ And then you can spend six months working with the firm, and at the end of the six months, they have not been able to get the senior level sponsorship to drive the necessary change. And that’s the bit that’s got to happen.”
Banks must unpick legacy processes, pools and techniques, says Richmond, and only then can they work out how they are really going to achieve the opportunities presented to them through RegTech.
“What a number of RegTechs are realising is that these customers are highly complex. They have big enterprise needs, legacy is a challenge in terms of systems, and so not all the RegTechs are going to successful.”
The UK’s Financial Conduct Authority recognises that there is a risk of some RegTechs not delivering, says Richmond, but ultimately, it is beginning to understand that the other part of the challenge is the sheer complexity with the regulators themselves.
“Regulators right now, today, all have their own rules, their own guidelines, and their own principles that are all created for their own purpose. Globally the interoperability of those is a long way off, and so that creates a challenge. For the likes of the FCA and the other big regulators, recognise that their transformation is as important as the banks transformation to be able to truly enable this RegTech opportunity to be realised.”
This article by Rebekah Tunstead was first published here on 8 November 2018, on Bobsguide