Have a Look At the Risk Management and Rise of Regtech - Shield

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RISK MANAGEMENT AND RISE OF REGTECH
Here are the things that you need to know
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Weve witnessed, via some very high-profile
misconduct cases, the real challenges some
financial services firms are facing in supplying
information to support investigations. A case in
point is the recently completed Australian
Banking Royal Commission (RC). Reporting from
the RC included some rather startling
revelations. And, the implications of some of the
findings are just as relevant to global
financial services firms, as to those named in
the RCs reports.
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The RC initially requested from the 60
Australian financial services firms 10 years
worth of misconduct data, alongside action plans
and the corresponding remediation programs. The
RC concluded that if these firms were unable to
provide the requested information, how could the
firms senior management or indeed, their boards,
be confident that the risk reporting presented
to them was complete and presenting a holistic
view of the extent of compliance failures?
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Data retention requirements permitting, I suspect
that many global financial institutions would
also struggle to easily, quickly, and
comprehensively compile this type of data, and
certainly covering a 10-year time period. But of
broader concern, anyone serving on a Board or
ExCo should feel confident that the risk
reporting presented to them is comprehensive and
complete. And, if the Board or ExCo consider that
they arent getting the complete picture, their
role is to challenge until they are satisfied
they are able to effectively discharge their
oversight duty.
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As those of us who have been actively involved in
supporting investigations will know, they can be
highly labor-intensive drawing resources from
the first and second line, and often working in
partnership with independent and specialist
investigative teams. The amount of data
collected, collated, and then analyzed (in my
experience, sometimes via the ubiquitous Excel
spreadsheet or three) can be overwhelming.
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With regulatory reforms driving an increasing
breadth and variety of controls to be
implemented and data to be collected, analyzed,
and reported upon, the situation will become
still more complicated. There is no doubt that
RegTech solutions are providing very innovative
ways to address growing and increasingly
detailed regulatory requirements. These range
from targeted solutions to address specific
MiFID II Best Execution requirements, to control
tools such as electronic communications
surveillance that detect and capture market
abuse at the very earliest opportunity.
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Firms are continuing to evolve how they measure
and manage conduct risk. This may include
revising metrics in light of changes to the
strategic business model, reviewing the
effectiveness of escalation channels and
governance in the context of the Senior Managers
Regime, alongside reviewing their risk appetite
statements and thresholds.
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What is key is for firms to also have an
architectural vision showing how the various
RegTech solutions fit together and into the
broader infrastructure, alongside how the data
they hold feeds into the overall risk and
control framework. With so many conduct risk data
points complaints, best execution, and
internal breaches to name but a few this is
critical. Without this vision, firms run the
risk as highlighted by the Australian RC of
disjointed reporting. And, at the very worst, the
information presented to the board and ExCos
will be fragmented, and incomplete, presenting an
inaccurate picture of the extent of conduct risk
issues within the firm.
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