Integrated Risk Management and Regtech – ‘Risk-Proofing’ the Future of Financial Services

June 26, 2019

From Risk & Compliance Magazine

Paul Johns, CMO at SAI Global, speaks with Risk & Compliance Magazine about how integrated risk management and RegTech can help risk-proof the future of financial services.

 

R&C: How would you characterise the current readiness of companies to cope with the range of regulatory risks they face? In what way has this risk profile changed in recent years?

Johns: In the years since the financial crisis, the financial services sector has faced a torrent of regulatory requirements. After the crisis, regulators were focused on credit and market risks. But now they have shifted their focus towards non-financial risks — cyber and data stewardship and security, in particular. New regulations laid down by supervisory authorities are raising the stakes for data management. And call it a sign of the times; ethical questions around data privacy have gained significant traction thanks to the EU’sGeneral Data Protection Regulation (GDPR), which has armed consumers with a greater understanding of the value of their personal data and protections that have been made available to them. Our recent ‘Global Reputation Trust Index’ (RTI) dug deeper into consumer behaviours and cyber security: financial services data breaches ranked as the highest company crisis concern for those we surveyed. With the risk landscape continuing to be dynamic as other disruptive factors like imperilling regulatory change and an upsurge of informed consumers becoming the norm, this adds pressure on traditional risk management capabilities. To keep pace with the regulatory change, most firms have responded piecemeal to new requirements, often implementing a number of point systems to address specific regulations and quite often relying on one-time fixes. Moreover, these activities often take place in silos, and with software partners overpromising results, making it difficult to gain a comprehensive view of risk across the whole organisation. The challenge and opportunity is how to balance the rapid complexity of existing and emerging risks with cloud-based, data-led technological advancements.

 

R&C: To what extent are integrated risk management (IRM) solutions keeping pace with a changing regulatory landscape?

Johns: Risk management functions are traditionally siloed, divided into compliance, finance, audit, and other risk management functions like fraud, vendor management, IT, business continuity and operational risk. This has merit, but lacks foresight. Integrated risk management (IRM) is more than a three letter acronym. It is about a joined-up approach to risk management, one that facilitates a strategic and comprehensive approach to risk-taking. One of its key principles is connected collaboration; risk is connected and a connected approach to risk allows an organisation to add competitive advantage by rapidly deploying mitigation processes and streamlining monitoring of key risks across the business, so that appropriate action can be taken where needed. After all, operationalising compliance activities is not a one-and-done exercise. Regulations such as anti-money laundering (AML), Know Your Customer (KYC), the Markets in Financial Instruments Directive II (MiFID II), Basel III and IV, the Second Payment Services Directive (PSD2) and GDPR require people, technology, data and process involvement to be sustainable. By implementing an IRM framework, an organisation has the ability to build a rock-solid wall of protection that reduces risks, minimises the overhead costs of governance and compliance, and provides maximum business insight across all operations. In addition, by streamlining compliance functions across silos, businesses can scale down from multiple, disparate teams supporting multiple solution vendors to fewer, more central functions. This enables businesses to reconcile data and results across teams and regions, and can lead to a reduction in costs associated with running multiple functions.

 

To read this article in full click here.

 

To talk to us about your risk management requirements or to learn more about our Financial Services solutions contact us.
Previous Article
Bumper Surge in Cyber Incidents at UK Financial Services Firms Reported
Bumper Surge in Cyber Incidents at UK Financial Services Firms Reported

New data reveals cyber security incidents reported to UK financial regulatory body rocketed in 2018.

Next Article
SAI Global Completes Acquisition of BWise® from Nasdaq
SAI Global Completes Acquisition of BWise® from Nasdaq

Acquisition creates one of the largest risk management software and ethics learning businesses changing the...

Discover how our Compliance Risk solution works in Financial Services

LEARN MORE