Regulatory Spending - Can we manage it more effectively?
Regulatory compliance takes one of the largest share of IT spend in Financial Institutions (FIs). Regulatory spending is seen as a necessarily evil and with increasing frequency and diversity of regulatory changes it makes sense to relook at the way we plan regulatory compliance budget. Here are few ideas FIs can explore to effectively manage the regulatory compliance budget:
1. Start early, think long term and plan proactively- Most FIs follow a wait-and-see approach till it is very late to effectively manage the regulatory compliance. Leaders and Subject Matter Experts (SMEs) should be involved very early to plan the migration approach so that it does not become a pain to meet the deadline. Our SEPA experience shows that late start increases risk and eventually cost of quality.
2. Involve all key stakeholders and Exploit synergy - We are seeing overlapping regulations in local, regional and global level. Unfortunately many FIs are addressing them in silos without exploiting the synergies to reduce Total Cost of Ownership. Our suggestion will be to categorize the regulations in key themes and whenever possible address them collectively in terms of Enterprise Architecture, Program Governance etc. One example can be AML/KYC regulations which can be better managed if we address the global and country specific compliance needs in a collective manner. We also feel FIs should create Program Management Office/Center of Excellence involving all stakeholders (Tech, Business, and Legal etc.)for addressing key regulation themes so that it becomes easier to address any resourcing bottlenecks and conflict of interests.
3. Monetize the opportunity - All regulations try to solve specific market problems. FIs need to think beyond compliance and try to exploit any opportunity it offers. Case in point SEPA - SEPA offers huge benefits of market expansion, standardization, rationalization and process simplification. But unfortunately very few FIs/Corporates have monetized those opportunities as their solutioning were only confined to addressing the compliance.