Cultural Shift Needed To Implement RegTech
Epperson said the biggest gap is in basic processes. There’s the potential to automate simple workflows and decision-making processes, and doing so could free up organizations to focus on addressing other pieces of the regulatory challenge.
But perhaps even more challenging, he said, is the need for a cultural shift within the space. Innovation of products and services is happening faster than ever before, meaning that organizations must also move more nimbly – and that requires them to think differently about meeting the requirements.
Epperson noted that teams must become multi-disciplinary. Risk and compliance teams should not be the last ones to see what the organization is working on, but should be at the table from the beginning. And there should be a dedicated team ready to address new issues as they arise, which he said makes the organization nimbler.
In short, more than technology is needed to solve this complex and ever-growing challenge.
“The technologies are great,” said Epperson, “but something must change to take advantage of RegTech. Strategy, culture, organization and process can be some of the most stifling factors. You need a collaboratively defined strategy that includes business, risk, compliance and regulatory channels.”
Before introducing RegTech, Epperson said organizations must realize they can’t just flip a switch. They must sunset their existing applications and transform into a new one. Dependencies, project management, communication and coordination will all be factors. Thus, a coordinated roadmap is necessary – indeed, Epperson said, it’s the most important function of any RegTech investment.
To draw the roadmap, organizations must first consider the capabilities available to them and the outcomes they hope to achieve – again, thinking beyond just checking off the regulatory and compliance boxes. They must align their specific needs with the available features and the organization’s overall strategy.
Consider, for instance, how RegTech can help to drive customer experience or reduce friction. It could potentially create a competitive advantage, enabling the organization to serve a new market or provide new products and services, either today or tomorrow, that will give it an edge.
Finally, through it all, Epperson said organizations must bear in mind that it’s not just about solving their business issues – they will also have to sell their decisions to regulators, providing more significant justification and documentation than would otherwise be needed.
“This is the second or third most complicated integration your organization can undertake,” Epperson emphasized. “In a traditional technical alignment view, you’ve got scoping and requirements, design and development, installation and testing, and deployment. There’s more than that to RegTech. It takes a strategic view of how you align business tasks with regulatory functions. The more complex the tech, the harder that is to do.” https://www.pymnts.com/bank-regulation/2018/regtech-financial-institutions-compliance/
