Oct 2, 2020

Medicating the compliance and regulatory headache

Joe Woodbury
5 min
Joe Woodbury, Director, Investment Management Solutions (part of IQ-EQ) on the governance, risk & compliance challenges financial services are facing...

In today’s market, Financial Services and Investment Firms are under relentless pressure to maintain Governance, Risk and Compliance adherence in order to avoid the potential pitfall of falling foul of the global industry regulatory and compliance bodies.

The disparate range of practices, processes and people engaged within the disciplines of providing mandatory industry compliance, combined with the scrutinised and regular audit requirements are a huge and onerous burden, both from a fiscal cost, risk and talent resource perspective. The necessity to conform is compulsory, continuous and explicit in nature. It’s non-negotiable.

It is no surprise that many global firms remain struggling with constructing and maintaining their regulatory compliance framework, delivering to timelines, maintaining comprehensive audit trail accountability, recruiting and retaining talent, ring fencing the scope and size of the operation and no less importantly, delivering within budget. These significant and by enlarge, generic, predictable and measurable practices can be almost entirely supported by the implementation of a technology led, largely automated process. 

Consider how it may look if the majority of operational and procedural overhead associated with regulatory compliance could be delivered through predominant software driven automation that has the capability to provide quantifiable and measurable deliverables, reduced processing time, optimised and largely predictable spend, together with the elasticity of expansion and contraction that is dependent upon actual business requirement and moreover, with no substantial sunk costs. Nirvana to most.

Reciprocally, a greatly enhanced and broadly automated approach, delivered through a Managed Software as a Service (MSaaS) or Self Managed Software as a Service (SaaS) range of offers can facilitate hosted services playing a pivotal role towards reducing or mitigating business and operational risk. By effectively selecting to deliver specific elements of the organisational risk play books, as determined by individual finance managers or financial investment firms, these services can become a significant and integrated element of simplifying, streamlining and enhancing conformance to the necessary regulatory and compliance deliverables.

One size does not fit all and by tailoring some or all elements of these service offers firms can fully leverage various elements of automation and hosting. Moreover, firms can tailor a totally bespoke solution fashioned to their exact and specific needs. 

Capitalising on opportunities that MSaaS and SaaS may provide, creates choice for firms and fund managers towards selecting appropriate services. Fully managed, self-managed or even hybrids that bridge and span between the two. 

An example would be where self-managed may be the immediate choice, followed with the gradual migration over time to a fully managed offer, when conditions are seen as favourable to that particular business operation. Broadly speaking, flexibility becomes a key contributor in supporting the strategic intent of firms seeking to introduce greater automation towards the delivery of conforming to their respective compliance and regulatory obligations. Consider viewing the automated RegTech services as part of your extended team is one very simple way of looking at it.

The general scope of compliance and regulatory services offers are both broad and granular. The market leaders currently offer a substantial and varied menu of potential service offers, some of which may include;

Compliance Software (AML and KYC) – predominantly based on flexible, integrated platforms, these services facilitate fully integrated work-flow management. Distinction should be made to providers that fully embrace and support the current directives of the EU and global initiatives around anti money laundering, registering beneficial ownership and taking a risk-based approach to compliance. All global AML regulations should be supported, including CTF and FATCA requirements. 

AIFM Solutions and services: including Marketing and Distribution, Risk and Portfolio Management, Applications and Variations of Permissions and Ongoing Compliance Services

Appointed Representative Services - broadly European targeted with an approach towards market entrants seeking a quick, efficient, cost optimised and capitalised service - constructed with full and robust compliance framework and regulatory adherence. 

Investment Manager Platforms – these are fully serviced offering a comprehensive ‘ready now’ fully compliant infrastructure, facilitating fast market entrance for fund managers and firms. Generally, fully operational in less than one calendar month. 

Seek out a Partner versus just a Provider

When consideration is given towards how increased automated services delivered through managed and outsourced services can support the business, it cannot be stressed enough to seek out recognised leading providers who have the capabilities and capacity to partner - not just to provide - but to create a truly flexible partner focused approach, where mutual engagement creates best conditions for success. 

Engaging with a partner who can offer superior consultancy often distinguishes and highlights the premier market leaders. Having the capability and expertise of fully understanding and interpreting the business requirement, they become far better placed and more able to convert into tailored solutions, positioning services which are best for business adoption and subsequent implementation. Consultancy whilst not always necessary remains at the very least an additional option. In my mind flexible options in today’s environment should always be seen as favourable.

Compliance and Regulatory MSaaS and SaaS is now of age and the imperative for Financial Services is how to embrace the adoption of software services that deliver proven speed, agility, efficiency, simplification and cost optimisation or be left with legacy processes and practices that remain unwieldy, costly, un-adaptive and inherently cumbersome. The choice will be evident to most.  

For more information on business topics in the United States and Canada, please take a look at the latest edition of Business Chief North America.

Follow Business Chief on LinkedIn and Twitter. 

Share article

Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

Share article