What Technological Solutions Are Applied To Regulatory & Compliance?
The overall regulatory burden is ever increasing and with it the cost of compliance and penalties for regulatory failure. This means that companies must dedicate a huge amount of capital and human resources to ensure strict compliance. As the World Bank estimates, almost 8% of GDP in advanced economies is allocated to regulatory compliance. This equates to around $10 trillion worth of annual expenditure.
However, despite digital technologies, there is still a lot of manual intervention and administration required and it is in this environment, filled with risks and opportunities, where a new breed of RegTech start-ups and innovators are working to make the process of regulatory compliance cheaper, faster and less error-prone. In this article, we look at how innovative technological solutions are being applied to regulatory and compliance-related challenges.
It’s a mammoth undertaking to sift through the massive amounts of data generated by modern IT systems without access to an automated and intelligent data analytics system. RegTech solutions include sophisticated algorithms which can automate this process and enable learning whilst on the job.
To be most effective, it is important that checks are performed in real-time. Some RegTech solutions can perform all their checks and detect a fraudulent transaction in less than half a second of transaction initiation.
Keeping up to date
A few RegTech start-ups offer solutions that automatically keep track of any new regulations that are likely to affect the customer’s industry and update the rules of the system automatically.
Analytics is increasingly being embedded in the audit function. This is not only increasing the quality of the audit but also provides increased business insights. RegTech providers are deploying optimised and purpose-built solutions for their customers.
There are RegTech firms which are even offering the ability to automatically perform the reporting function. In some cases, this is actually being encouraged by the regulators to improve the quality of reporting.
A big draw of using RegTech tools is the time and money-saving in performing regulatory or internal checks.
Many regulators are themselves using big data analytics and machine learning to determine points of weakness and risks in the industries they regulate. There has also been an increasing focus on the quality of audits or compliance and the scope of these activities which means that companies that do more are being rewarded in one way or another.
These are just some examples of how RegTech companies are providing tangible benefits to businesses by improving the quality and reliability of their compliance systems, while also working to reduce the costs. As more stringent guidelines come into effect each year, businesses are turning to specialised RegTech solution providers to stay ahead of the curve.
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