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Technology trends in financial risk and compliance

Due to recent global economic turmoil, the regulatory landscape for financial institutions has rapidly changed in past few years, driving the technology landscape to advance along with it in order to ensure effective compliance. During this timeframe, expectations from these technology solutions have amplified radically and the list of critical success factors for a compliance solution has accordingly emerged. The factors, which used to be considered the most important ones in a solution, are today considered to be mere qualifiers. On the other hand, criteria that were considered merely desirable--like time-to-market, automation, etc.--have now occupied the front seat in view of heavy penalties being levied upon institutions for non-compliance.

As a system integrator, we have partnered many global financial organizations through their compliance journey and worked closely, not only with client business and IT teams but also with product vendors who provide the technology solutions. Our partnerships with clients and product vendors have enabled us to experience this emergence in regulatory landscape and technology solutions first hand. Through this blog, I would like to throw some light on the top 3 trends in this emerging landscape:

  1. Adoption of industry-leading compliance products
    Financial institutions across the globe are increasingly adopting product-based solutions to fulfil their increasing demand of compliance solutions and support. In the current regulatory landscape, change is always imminent and institutions are constantly looking for ways to keep pace. Product-based solutions like Nice Actimize, Detica, Mantas, etc. in the compliance space, and MetricStream, OpenPages, RSA Archer, etc. in the risk space, have multiple advantages over traditional custom developed in-house applications. A few of those advantages are worth mentioning here.
    • Shorter time to production
    • Greater automation
    • Ease of change
    • Reduced cost of ownership
    • Advanced in-built reporting and analytics
  2. Unified compliance approach
    Over a period of time and as a result of mergers and acquisitions, most financial institutions end up having multiple products and solutions that cater to a logically similar function of the bank. Though the resulting technology landscape is a result of unavoidable events, it introduces inefficiency and inaccuracy into the bank's operations.With the availability of product-based solutions for risk and compliance in the market, banks are unifying multiple legacy applications into a single enterprise-wide compliance application. This ensures better control of compliance status since all the information is available at one place. The key advantages of having a unified compliance platform include:
    • Operational efficiency of compliance users
    • Effective due diligence
    • Easy entity resolution across LOBs
    • Reduced operational costs
    • Consistent predefined workflows across the enterprise
  3. Segregation of decision-making and workflows
    Any governance, risk and compliance (GRC) platform primarily requires two core capabilities for optimal business use - decision-making and workflows. These two are fairly dissimilar in nature and require different technical capabilities from the platform offering them. The decision-making capability is required to intake a lot of raw data, process it using defined business rules and identify "black swans". This huge data intake and processing is typically better served using a two-tier architectural model, similar to that of a client-server set up.

On the other hand, the workflow capability is expected to provide a pre-defined lifestyle to the issues identified. This requires assignment at every step of the workflow and integration with other organizational processes, like email, document management, etc. A web-based architecture is normally a good fit for this type of process management capabilities.

Product vendors in the risk and compliance space are acknowledging the different nature of requirements and aligning their platform components accordingly to offer a comprehensive solution to clients.

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