Regulatory challenges in 2022

With the global pandemic forcing many companies to rely on the digital world and its innovative technology, it is crucial that regulated businesses stay ahead of the criminals. The last 2 years have seen a record number of data breaches as the world shifted to the online space. So, it’s even more important that businesses adjust and enhance their compliance and risk management strategies to maintain resilience. In this blog we look at the challenges facing regulated business in 2022; and how digital transformation and new technology solutions can deliver corporate governance and compliant risk management operations.

Posted on January 17, 2022
Written by Adam Holden

regulatory challenges

Digital transformation for compliance

Much has been spoken of digital transformation for compliance. Those businesses that have implemented change are already reaping the rewards. With an immediate impact on reducing manual processes, human error and improved time to revenue, digital transformation is certainly a fundamental enabler for regulated businesses. Those who choose to opt out and not adopt technological solutions, could find themselves at a strategic and economic disadvantage. But, how can digital transformation be achieved? To help, we’ve highlighted the key areas of opportunity below:

Compliance data as an asset

On realising the importance of data as an asset, regulated businesses should develop a business-wide culture for data aggregation, management and analysis, and use it as a tool to increase opportunity.

Regulated businesses often find themselves trawling through data that is not useful, as well as reaching out to clients for information that may be easily accessible via partners. Third parties are crucial to the development of compliance processes, with better use of data, and should be a part of regulated businesses risk management infrastructure.

Using an experienced provider, such as NorthRow, for compliance processes such as KYC onboarding, AML and remediation projects, will benefit your business by improving the customer experience, increasing operational efficiencies and accuracy, and achieving compliance.

Investing in a strong compliance function

A well-resourced compliance function that implements digital transformation, to successfully navigate the numerous regulatory requirements (that are subject to change), with the use of digital solutions, will be worth its weight in gold. It is recognised that this will require investment across technology, infrastructure and skillset, but there is proven ROI.

Knowing that the world produced twice as much data in 2021 as it did in 2019, and with this level predicted to increase exponentially over the next five to 10 years, technology is the way forward. Recruiting additional staff is not the answer – instead, automation will drive operational efficiency.

It is vital for companies to understand the importance of keeping up-to-date with emerging compliance trends. One of the most pressing issues for regulated businesses, is the time-consuming, inefficient, manual compliance processes that inevitably prevent businesses from delivering effective compliance management.

An inevitable by-product of advancement in technology, is even further development in the field of Artificial Intelligence (AI). Each year there is greater adoption of AI to deliver manual tasks and in 2022 we can expect to see further innovation. Robotic Process Automation RPA, for instance, is an advancement in technology that can undertake repetitive tasks, reducing manual effort and simplifying workflows. Making use of RPA tools in the compliance sector, allows for organisations to benefit from the digital automation that’s occurring, without creating extra work, wasting employees’ valuable time and resources, as well as eradicating human error. Many regulated firms are now using RPA solutions to improve KYC onboarding, compliance monitoring, (AML)/sanctions checking, regulatory reporting and regulatory change management.

Risk Complacency and the Regulator

Thankfully, the relationship between firms and regulators received a higher profile in 2021 with the publication of the ‘Kalifa Review of UK FinTech’. The hallmark of good regulation is the regular interaction between all parties; regulated business, the regulators, as well as FinTech and RegTech providers.  Whilst a greater international coherence, in terms of the regulatory approach to both regtech and fintech, is required, it is pleasing to see the regulators’ realisation that technology is a support to the industry and they should encourage regulated businesses on the path to adoption.

 

In addition to the above there are ongoing challenges for AML. We are also keeping a close eye on the situation with Russia and how the Russian sanctions will play out. Visit our news page to learn more on these additional subjects.