Five-Part Series on Compliance Technology

Corporate compliance and risk officers work under tremendous pressure today — not necessarily to do more with less, but to do better with what the compliance function has, amid increasingly complex regulatory and business environments.

Clearly technology is the answer to that call, but astute use of technology remains challenging. How can risk and compliance officers understand the operational and regulatory dynamics they face, and design a technology system fit for modern risk management purposes?

To answer that question, Radical Compliance and Refinitiv (the successor company to Thomson Reuters) have just dropped a five-part series titled, “Can compliance achieve integrated risk management with modern technology ecosystems?”

Each episode in the series has two parts. First is a white paper written by me, diving deeply into the issues facing compliance officers at large financial firms. Second, each paper is also accompanied by a podcast on the same topic, where I interview subject matter experts at Refinitiv.  

For the record: yes, this is content sponsored by Refinitiv. That doesn’t mean the issues we raise are any less valid to explore. The line-up is as follows:

Addressing regulatory change. In our first episode, we look at the rapid pace of regulatory change, and the challenges that poses for risk management and compliance functions — especially for businesses working in a highly fragmented IT or operational environment, which is typically the environment large financial firms find themselves in.

Overcoming fragmented frameworks. In our second episode we address the use of frameworks to manage compliance. That includes the possibility of “framework overload,” where different parts of the enterprise use too many frameworks in a disjointed fashion, leaving senior executives with an imprecise understanding of all the risk management activity that is (or is not) happening across the firm.

Clarifying compliance roles & responsibilities. Financial firms continue to gyrate through mergers and acquisitions, and restructurings to cut costs or to keep pace with nimble, digital-only competitors, and more. In this episode we discuss how compliance officers can manage roles and responsibilities for risk management in that fluid environment, and assess some of the more challenging relationships compliance might have with first line of defense executives, internal audit, and others.

Governing risk models. Financial firms need strong governance over risk models, so that  the compliance function can maintain a current and correct view of risk across the entire firm. This episode explores how to develop governance rules for risk models, how to connect those rules to shifting external risk environments, and what technology capabilities  are critical to keeping model governance effective.

Defining ROI and KRIs. Our last episode addresses the most important point for compliance officers: how to identify and prove the benefits that come from better governance, risk and compliance technology. CFOs want practical arguments focusing on the bottom line; boards want evidence of better insights and decision-making. Compliance officers also need to select the right risk indicators, which ultimately inform whether or not the firm’s risk posture is improving.

Why the Urgency; Why Now?

The origins of this project trace back to a Celent report commissioned by Refinitiv in 2018 that identified several pressures affecting financial firms:

• Regulatory change, as regulators around the world constantly revise an already large and complex set of rules for firms to follow;
• Organizational change, as firms acquire each other or restructure, seeking competitive advantage;
• Technology change, as firms implement new technologies either to offer new services, improve internal operations, or stay competitive with rivals;
• Reputation change, as consumers and business partners’ shifting ethical standards pressure firms to be better corporate citizens — or risk fierce, sudden backlash for misconduct.

The challenge for firms is to build a compliance function that lets them keep pace with those fast-moving forces. Clearly a compliance officer can’t achieve that goal without better use of technology; but the risk of embracing technology the wrong way — resulting in squandered budgets, unfulfilled regulatory duties, tarnished reputations — is painfully high.

Instead, compliance officers need to harness technology that builds a resilient, agile compliance program: one that can monitor and manage risk successfully, and fulfill reporting obligations promptly, all while keeping changes to business procedure or IT infrastructure to a minimum.

And compliance officers need to do all that while laboring under new regulations, holding them more accountable for a successful program; or the unblinking eye of social media — so the simple urgency of getting this right is much higher.

This series will help compliance officers untangle that knot.