Ways to optimise the compliance and regulatory processes for businesses

Ritesh Jain, COO- HSBC

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Compliance with standard rules and regulations is essential for any industry, more so in the banking industry. The banking industry has to conform to multiple regulations by the government, failing which can lead to major monetary as well as reputation loss. Let's first understand why compliance is crucial!



Governments all around the world are not only monitoring compliance aggressively, they are also imposing huge penalties on banks and financial institutions for non-compliance. In case of severe non-compliance, they may even face suspension and eventually close. If the non-compliance of the institutions becomes public, they can lose face among their customers, which can hurt the bottom line.



Financial Institutions are moving beyond their native geographies into new territories. History of compliance makes it easier to launch in new places because it is easier to establish credibility.



To beat the competition and take advantage of new market segments, banks are no longer the conservative Institution of the past. Like any other organisation, they are always looking to introduce new products. However, they must take approval from regulatory bodies before launching them. Compliant banks find it easier to get approval for the new products quickly.



Customers are always sensitive to brand reputation, especially when it comes to banks and other Financial Institutions. They find it easier to trust them with their money when they are compliant with the government as well as industry regulations. And it directly reflects on the bottom line.



As discussed, banks have to conform to compliance of multiple regulatory bodies. Take for example the UK regulations. As set out in the Financial Services and Markets Act 2000 (FSMA), financial services and products in the UK must follow the regulatory processes of the Financial Conduct Authority (FCA), the Prudential Regulatory Authority (PRA) and the Bank of England's Financial Policy Committee (FPC).


The scope of each regulatory body is different but they have their own processes. This can amount to a plethora of processes that must be followed at every level to ensure compliance.


These compliance and regulatory processes must be optimised to reduce costs, increase efficiency and ensure faster expansion. Otherwise, the organisation will become a behemoth breaking under its own burden.


Technology can come to the rescue of organisations that need to optimise compliance and regulatory processes.



The main advantage of using cloud computing is access to cost-effective and long-term data storage, and affordable analytics.


To ensure compliance, banks need to collect, store, process, and report across multiple products and asset classes. This becomes even more challenging if the organisation is trying to expand into new geography or provide more over the counter (OTC) derivatives.


At a large bank or financial services organization, roughly over 100 mandated controls are required to put an application or service live in production. This includes multiple frameworks, governance, committee approvals and manual sign offs. This can use up to 25% of the total effort/cost of a project. To minimise this, an accelerated and streamlined path to live approach must be put in place, which should include:


?      A single efficient consistent path to live process

?      Pre-approved patterns that guarantee controls by default

?      Automation wherever possible


Changing regulations and sophisticated instruments require event storage for a longer time period, which can become very cost-prohibitive as more and more data gets accumulated. Data that has to be stored for a long period of time. Cloud can provide cheaper, more efficient and flexible data storage solutions. 


The data volume that needs to be handled cannot actually be predicted for banks because they are directly proportional to the market activity at any given point of time. And anyone tuned to the markets knows that its activity depends on so many factors that it can unpredictable.


Players in the market need to be competitive, without compromising on regulatory compliances.


Embracing cloud for all their data storage and analytics need can help in the following ways:

1.     Setting up in-house IT infrastructure needs lots of resources in terms of finances and IT expertise. This can especially be cost prohibitive for smaller organizations. Cloud computing can cut down costs due to shared cost of licensing, infrastructure setup and technical support.

2.     Sharing information with other stakeholders can be done without incurring additional cost. It is also easier for them to log into their own dashboards, provided by the cloud service provider, and look at the reports as well as provide the missing information.

3.     Faster deployments are possible because cloud service providers are experts in both finance and IT services.

4.     Especially beneficial for small and mid-sized organisations, where financial constraints are higher than the rest but regulatory compliances are no less.

5.     Reduces effort needed to achieve compliance because most of the processes and reports are automated.

6.     Everyone has accurate and faster access to reports as and when required. The dependence on people and processes to generate reports is completely eliminated.

7.     Processes have integrated checks and balances, so there is no need for periodic updating and validation manually. The mandatory audits can take care of the manual intervention required.


For the past couple of years, since cloud computing started being adopted by major industries, the one obstacle to adopting cloud for core banking processes was about the security of data with cloud service providers. However, cloud services have matured and can easily take up banking processes and optimise them for better regulations and compliance.


What do you think? How are you using cloud to optimise your compliance and regulatory processes?


Ritesh Jain will be in attendance at our CIO Event at Said Business School, Oxford University on Thursday 26th March 2020. To learn more about this event, click here.

Global CIO Institute

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