Risk Management

Crowe: Risk Management With RegTech As Strategy

 Can RegTech create strategic advantage?  Can it allow firms to (gulp!) take on more risk?  Marry tech and talent, says Crowe Horwath Principal Clayton Mitchell, and the limits can be lifted on regTech’s potential.   

Marry tech and talent, then risk management can pay dividends, notes an upcoming PYMNTS webinar. However, for many financial services firms, RegTech’s (Regulatory Technology) potential is limited by any number of causes. The technical capabilities can be dizzying and dazzling, of course, spanning the gamut from machine learning to artificial intelligence (AI), to predictive modeling.

To no surprise, the regulatory landscape is becoming ever onerous, with little room for error. Not only is regulatory oversight on the rise, but social media has emerged as a strong watchdog, too, keeping financial institutions (FIs) mindful of unchartered territory, where risks to reputation and revenues abound.

In advance of the upcoming webinar titled “RegTech: Transforming Compliance Through Enabling Technology,” Clayton Mitchell, principal of Crowe Horwath, stated that RegTech’s effectiveness can be limited by internal factors. Among those factors: the cultural hallmarks of the organizations adopting such technologies. Then, there are the limitations inherent, technically, in RegTech itself. The webinar is geared toward a discussion of how firms can align challenges to capabilities, and how strategic clarity can provide an ordered approach to bring advanced technologies on board to grapple with regulatory mandates.

Mitchell told PYMNTS that one headwind comes from collecting data and presenting it in the right format. There’s also the challenge of having “good” data, which must be both accurate and comprehensive.

“Organizations are struggling with getting the data in the right place,” he told PYMNTS. “There’s another factor. People in compliance functions or the folks who would be enabling the technology don’t necessarily own that data. They are consumers and not owners, and so they have some challenges in having some influence” in how that data is presented.

He noted that in the financial services realm, firms are already heavily regulated and they struggle with the looming threat of consequences, should shortcomings arise, when it comes to risk management. At the same time, risk and compliance professionals still are inundated with manual tasks.

As a result, said Mitchell, of risk compliance professionals, “they trust but verify people. They always want to test and monitor.”

Thus, to enable technology effectively (to test, monitor and reap the benefits), Mitchell cautioned that it is important to identify the challenges that must be addressed such as AML or KYC mandates. Companies must align RegTech efforts with the organization’s strategy and overall objectives, ranging from geographic expansion to delivery channels. Then, risk professionals must identify the different technologies or partnerships that can make such efforts efficient and effective.

The benefits of matching challenges to tech’s capabilities, he continued, move beyond the simple ROI that might be deployed with other efforts. But without the marriage of technology and talent, he said, such efforts amount to a farce.

“You can’t enable your talent without a bit of basic technology, and technology is not going to work without somebody analyzing the output and determining ‘so what?’”

Taking on more risk?  Not necessarily anathema for financial services firms, should it be done correctly, said Mitchell.

“Historically we’ve seen we’ve seen compliance functions specifically in tax and regulatory areas focus on risk avoidance versus risk management,” he told PYMNTS. “What we’re saying is technology is going to allow organizations to intelligently address risk. Technology allows firms to bring risk management closer to the customer, in real time. It’s a long term gain in terms of balancing long term capital output with immediate returns on savings. The value of RegTech gets back to better customer experiences, better efficiencies, and it allows you to grow and take on more risk.”

To register for this live PYMNTS discussion taking place Wednesday, June 27,  2018 at 1:00pm (EDT), please complete the registration form below:

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