Many financial institutions are faced with the challenge of attaining minimum compliance while keeping the cost of the regulatory cycle at a minimum. There are many things that stand in the way of achieving this precarious balance, such as poor data quality, data governance issues, and the lack of capacity to come up with strategic initiatives that aim to make the regulatory process more efficient.
One of the first steps to minimizing the cost of regulatory reporting is setting up a robust yet highly versatile data foundation within the financial institution. Currently, many traditional financial entities still depend on data silos, wherein fixed data is put under the control of one department and remains inaccessible to other components and teams within the same company. In some organizations, departments naturally come up with data silos in order to efficiently fulfill their responsibilities and meet their goals. There are also times when departments are inclined to withhold data from other teams due to internal competition. However, data silos have received increasing criticism over the years. It has been proven that this data management method is neither conducive to increasing collaboration nor does it improve accessibility and efficiency within the entire organization. At the same time, keeping data in silos may also negatively impact data integrity.
Investing in a data governance system that effectively and efficiently addresses the needs of modern financial institutions is essential to automating regulatory reporting. Unfortunately, upgrading data management systems can be a costly and resource-intensive process, and many companies have second thoughts about undertaking this demanding task. However, taking steps to improve data governance and automate regulatory reporting early on offers the following long-term benefits to the members of the financial industry:
Enhanced Data Quality, Accessibility, and Integrity
Consolidating data in a centralized management system offers plenty of benefits that the organization will continue to reap for years to come. Establishing a single source of data truth makes it possible for the company to standardize, clean, and reconcile data from different departments within the organization, for one.
In addition, such an arrangement will make it much easier for the financial crime and compliance team to assess customer risk, detect suspicious transactions, investigate possible criminal activities, and substantiate the cases that they are building. Unobstructed by data silos, the team will be able to view the information available to their members with greater accuracy and completeness. At the same time, they’ll be able to compile the data they need in a matter of minutes, in comparison to the hours or even days that it may take to request access to data that has been siloed off for other departments.
Execution of Manual Tasks with Minimal Human Intervention
Standardized and centralized data is much easier to analyze and understand, so much so that it’s possible to run programs that are capable of flagging suspicious transactions on their own. A system of data governance with this capability can also be tasked with handling repetitive processes instead of having these responsibilities managed manually by specialized personnel. Once the flagging process is automated, the system can sift through information and parse it independent of human intervention 24/7, marking activities that are deemed suspicious according to its programming.
The specialists in the compliance team only need to look at the data compiled by the system. Compared to a more traditional process, this system will only need the expertise of a small number of skilled personnel, thereby reducing the manpower needed to attain a minimum level of compliance.
Capability to Come Up with Strategies to Streamline Processes
An automated regulatory reporting process is not only capable of flagging and tracking suspicious activity; it can also provide reports about the system’s performance. The numbers will clearly show the pain points in the process, giving the organization every chance to get to the root of the issue, address it, and find new opportunities to optimize their system.
Now that repetitive tasks are no longer the responsibility of the compliance team members, specialists can focus their attention on activities and issues that would require human intervention and judgment. This includes improving the policies that the system uses to flag suspicious activities, detecting the new techniques that financial criminals use to accomplish illegal activities within a financial institution, and improving their security system, as well as making their internal processes faster, simpler, and more cost-effective.
There are still companies that see regulatory reporting as a significant expense that’s only needed to avoid hefty fines from concerned authorities, but this specific task can be more than that. Allocating resources for automating regulatory reports not only allows financial entities to steer clear of fines and PR crises due to being involved in criminal activity. This can also allow companies to detect and dissect larger trends within their institution. This, in turn, can empower financial institutions to make business decisions that will be more advantageous to their organization’s bottom line.