Gaining Transparency With Changing Regulations

Thomson Reuters recently released a report on compliance challenges in the financial services industry, Cost of Compliance 2016, that affirmed what anyone who works in governance, risk management, and compliance (GRC) within the industry has been experiencing for what seems like forever: the pace of regulatory change will only increase, as will the risk associated with noncompliance.

At the same time, firms are faced with resource constraints — time and money — in not only remaining compliant with today’s regulations, but also being ready to adapt to increasing change. “Doing more with less” isn’t an option because of an increased risk of liability and fines. Financial services companies must make investments in compliance to become nimble enough to stay abreast of change, and those investments must ease compliance woes now and in the future.

“If regulated firms are to thrive in the medium and longer term, they will need to make appropriate investment in their risk, compliance and control functions. A skilled, high-quality compliance function is expensive to build, but it will be one of the best investments (if not insurance policies) for firms and their senior managers.” — Thomson Reuters, Cost of Compliance 2016

The Accelerating Pace of Change in Compliance

As the Thomson Reuters report reveals, compliance teams faced an average 200 daily regulatory changes, alerts, and publications tracked in 2015-2016. Over half of compliance teams spent more than four hours each week tracking and analyzing changes.

While the Thomson Reuters report found that many organizations are expecting the volume of regulatory change to slow slightly, 69 percent of the compliance professionals surveyed expect an increase in the volume of information that regulators will publish in the next year. And though some regulations, like European Markets in Financial Instruments Directive II (MiFID II), are moving into the implementation phase, the work required for implementation is immense.

Beyond tracking, analyzing, and implementing new regulations, compliance teams face an increasing need to report on compliance — both to internal parties and to regulators. Over half of global systemically important financial institutions (G-SIFIs) spend more than 4 hours a week creating and amending reports, Thomson Reuters found. By contrast, only 29% of the total population of financial institutions spent that much time on reporting, signaling that that resource constraints may prevent them from doing more frequent and better reporting.

Figure 1 – The Impact of Compliance Changes

Challenges of Adapting to Ever-Changing Compliance Needs

How do you adapt to increasing demands, increasing change, and increasing uncertainty? The challenge is not only to address today’s compliance demands, but also to be ready for tomorrow’s requirements. Because of the specialized expertise required to help ensure compliance for financial services organizations, challenges can’t be met through growth alone.

“At some point, however, creativity needs to give way to innovation, if not revolution, in terms of how limited compliance resources are deployed. Firms cannot rely on simply hiring more compliance staff as the solution to all problems.” — Thomson Reuters, Cost of Compliance 2016

Limited technological resources have always been a challenge to financial services organizations. Changing regulations, changing requirements, mergers and acquisitions, as well as the evolution of new lines of business have created a vast array of information silos for many companies. Different applications with different sets of data are everywhere, and many companies try to handle new compliance challenges with complex, slow ETL processes to bring data together. When changes occur again — and they will — the ETL processes must be redesigned again, creating a time-consuming, expensive ETL treadmill.

Figure 2 – The ETL TreadmillInvestments in new technology must spur innovation and enable compliance teams bring in data from multiple sources faster, improve reporting capabilities and increase transparency. Data silos and the ETL treadmill can’t keep up.

MarkLogic’s NoSQL platform, optimized on industry-leading Intel® Xeon® processors, provides a single, unified platform with a database, built-in search capabilities, and application services. This reduces the up-front work needed, speeds data integration, and enables sustainable evolution of your data – without complex ETL or data normalization processes – and gets you off the ETL treadmill.

Building a GRC Architecture on Multi-Model Platform

Eliminating ETL requires a flexible database platform that can ingest all shapes of data to handle rapid change. In a multi-model database you can keep the data in its original source form. By storing all entities (customers, financial instruments) as documents and wrapping the entity in an “envelope” we can add metadata, semantic triples, standardization of names (harmonization), lineage, provenance — and anything else we may want to capture along in the envelope sibling to the source.

A multi-model database platform that is also fully transactional allows you to roll-up both real-time (run-the-business) data with analytic (observe-the-business) data. A multi-model database platform like MarkLogic Enterprise NoSQL helps bring together information silos and gets organizations off the ETL treadmill. It can give you a 360-degree view of data throughout your company, increase transparency and agility, and decrease the time required to ingest and integrate new data as it flows into the organization.

A GRC architecture built on MarkLogic’s multi-model database and powered by Intel Xeon processors, has helped financial services organizations integrate data silos, adapt quickly to changing regulatory and reporting requirements, and make compliance teams more efficient with scalability to handle even the most demanding environments.

There are answers to the compliance challenges. If you would like to learn more, download Intel and MarkLogic paper Gaining Transparency with Changing Regulations. We discuss the ETL treadmill experience and introduce how to prepare a financial services company for the ongoing shifts in GRC requirements.

For more information

Intel in Financial Services, for more information about Intel in Financial Services.

Governance, Risk & Compliance, for more information about how MarkLogic can enable your GRC strategy.