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Removing impediments for regulatory technology adoption
A senior panel at the AFR Banking Summit considered how to remove the impediments for regulatory technology (RegTech) adoption. Panel members included:
John Rayment, CEO, Identitii
Deborah Young, CEO, The RegTech Association
Andrew Bragg, Chair, Select Committee on Financial Technology and Regulatory Technology
Matt Symons, Co-Founder, Red Marker
James Eyers, Senior Reporter, The Australian Financial Review
Key messages included:
1. Compliance with existing laws can be enhanced using technology
•RegTech can help lawyers and compliance officers identify non-compliance.
•It was a huge challenge initially to get businesses to understand the benefits of RegTech and to a certain extent this remains the case. Conversations continue to take place on this.
•When identification of non-compliance is automated, more effort can be devoted to analysis, investigation and rectification.
2. Persistence overcomes resistance
•RegTech providers should continue to highlight success stories and keep asking questions that challenge industry in relation to information security.
•Although significant strides have been made - Australia is ranked third for global product development. There is still significant room for improvement, noting Australia is ranked seventh for investment, with funding levels significantly lower than the top five (see BCG report for more details).
3. Solution providers should engage with Government
•RegTech firms should more frequently engage with government to demonstrate what is possible, showcase success and quickly move the needle of regulatory expectation through engagement with key decision makers.
4. Soution providers continue to be challenged to successfully engage with Financial Institutions
Many institutions are large and complex, which presents a range of challenges, including:
•Identifying appropriate advocates
•A lack of budget allocation and resource limitations
•Securing agreement to implement a solution may take 6 to 9 months.
Deborah Young, CEO of The RegTech Association, concluded that the strategy for technology companies should include having robust discussions with the procurement departments of financial institutions to drive change.
Recently #ACCELERATERegTech2021 facilitated a discussion between senior procurement leaders of a financial institution who were suggesting tips for approaching procurement within a large institution, but also inviting challenge from SMEs so that they can improve their ability to onboard small, innovative companies.
Also supporting the development of a RegTech centre of excellence that creates opportunities to build massive numbers of RegTech solutions would be useful.
We at Deloitte note regulatory change is ongoing with both the volume and complexity of change increasing in recent times. Building resilience and increasing profitability means adopting a different approach. Bolting-on people, processes and systems in the 2nd Line is more prone to fail while empowering the 1st Line and utilising existing systems in conjunction with new technology is frequently a better route forward to demonstrate meaningful impact and achieve sustainable outcomes.
With the economy in bounce-back mode from COVID-19, implementing RegTech solutions could be a game-changer to increase speed and accuracy in a constantly changing regulatory landscape.
Areas of focus should include:
•Performing a current state analysis to identify and assess key areas where there are significant risks of non-compliance. For instance, managing third-party risk, automating GRC (Governance, regulation, and compliance) systems, cybersecurity systems, regulatory engagement processes, automating governance around breach reporting, etc.
•Improving data capture and analysis to better inform regulatory compliance and the timely identification of potential failings.
•Using advanced analytics and developing existing data capture applications to deliver outputs that enable risk and compliance professionals to make quality recommendations objectively in significantly less time.
•Streamlining procurement processes to allow for the increasing adoption of new technologies on a test and trial basis to better manage risks and strengthen the control environment.
As part of the GRC team in Audit & Assurance, Heather’s focus is on Compliance operating models - design, implementation and embedding - including the development of RegTech solutions to achieve more with less. Over the last 20 plus years, Heather’s work at the C-suite level in financial services has included reviewing, designing, implementing and testing compliance operating models and advising boards and management on how to develop a positive compliance culture as well as negotiating and interacting with regulators, politicians and industry bodies across Europe, the Americas, Middle East, Africa and Australasia. If organisations plan to build resilience and increase profitability post the requirements flowing from the Royal Commission, they must take a different approach. Bolting-on people, processes and systems in the second line is not an answer but rather empowering the first line and utilising existing and new systems and new technologies (including Regtech) will have impact and sustainable outcomes. Without a cross-organisational approach and a positive compliance culture, change will be ineffective.