Medicating the compliance and regulatory headache

By Joe Woodbury
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.

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