Our vision

RegTech as driver for regulatory cost reduction

Our vision

Executive Summary

  • We notice an increasing pressure on our clients to decrease the costs of implementing regulatory changes and compliance monitoring
  • Winners in the financial services industry solve this dilemma by efficiently using technology combined with online support models integrated in their day-to-day operational activities
  • However, the financial services industry is not yet organized to fully benefit from the latest technology and support models available. To optimize the opportunity a pragmatic shift of business consciousness is required to:
    1. Accept Regulation as hygiene factor, not a strategic differentiator
    2. Ensure acceptance of technology as an opportunity by Legal and Compliance
    3. Embed industry best practice solutions instead of in-house (local) built systems which are cost & time intensive and do not incorporate industry-wide knowledge
    4. Adopt a unified, value-chain-based approach, instead of fragmented autonomy of business lines and entities
  • Regulatory technology “RegTech” has emerged to enable a more automated, cost-effective way of meeting compliance and regulatory reporting needs in time
  • Early RegTech adopters will gain a competitive advantage through new insights provided by embedding best practice technology solutions combined with online support models and its competitive pricing models
  • This page describes how our RegTech solutions will drive down the overall cost of compliance and improve the quality of compliance monitoring

Understanding the cost drivers and risks involved

To understand the operational inefficiencies, cost, risk and time, we use a common framework of actors and typical solutions along a generic Regulatory Response Process. Let us investigate:

1. What does a typical regulatory response process look like?

Our vision

2. Who are the actors involved?

Typically, financial institutions manage regulatory compliance and risks along the “3 lines of defense” model. This means that at least Business, Legal, Compliance, Risk, IT & Operations and Audit are involved in Signaling, Implementation and Monitoring activities. In other words, the regulatory response process involves many resources from “Run” and “Change” activities of organizations, often distracting key business resources from their core tasks – servicing the end-client. 

3. What is driving the costs associated and inefficiencies identified?

Central, Value-Chain driven versus Fragmented, Autonomous Governance

Main cost driver is determined by the level of centralization vs. decentralization in executing regulatory response processes. Many financial institutions allow each business line and/or legal entity to interpret the same regulation autonomously. This not only eliminates efficient best-practice sharing (learning) but also introduces (often small) differences in processes leading to additional workload in reconciliation  down the line.

Of course, individual analysis per business line / per country is still required to also meet local specifics (if applicable). However, our experience learns that a significant part of EU driven regulations interpretation dilemmas can be handled on a consolidated level. Only local specifics related to cross-dependencies with other country specific regulations (e.g. MiFID II Record Keeping versus German Data Securities Act) should be solved on a country level.

Furthermore a decentralized approach may result in unclear ownership.

Manual, in-house developed solutions

Often the regulatory response process is supported by various manual or Excel-based solutions. This approach leads not only to cost inefficiencies but is one of the main drivers for the risks described below.

4. What are challenges inherent to the current way of working?

Traceability Concerns

The interlinkage between legislation à gaps à compliance evidencing raises concerns regarding the transparency, traceability and completeness of compliance monitoring.

Enterprise Wide Control and Overview Concerns

Typically, organizations and their various subsidiaries have their own (local) approach for compliance monitoring, creating control and overview challenges for global integral compliance monitoring.

Legal Dynamic Concerns

Updates to legislation and regulations become available during regulatory projects, raising version control concerns between the latest legal obligations and the compliance evidence / gap closure provided.

Interpretation Concerns

Allowing autonomy among business lines and entities result in multiple interpretations, hereby leading to de-harmonization instead of the harmonization purpose of regulations within the EU.

Our approach for enabling control over regulatory impact

Our vision

The essence of our regtech solutions: detailed, not theme based!

Compendor is not another legal database or navigator through directives, regulatory technical requirements and guidance. 

Instead, Compendor provides legally validated business interpretations of regulatory requirements, and structured guidance through the complete processes of compliance assessment, gap closing and compliance monitoring.

How does it work?

  1. Compendor analyzes and structures abstract/complex regulations, and translate these into tangible business rules.
  2. The business rules are then programmed into an easy-to-use decision tree solution, allowing the business to limit its efforts to those sections of the legislation that are relevant for its business lines / legal entity and disregard the sections that do not apply
  3. The pragmatism of the industry defined business rules and the decision tree driven approach, ensures a significant reduction in effort and costs related to interpretation activities across the various business lines and legal entities involved
  4. For the true complexities (e.g. interdependencies with local regulation and internal policies) online support from our various experts can be provided
  5. Optional, a Tier 1 Law Firm partner can provide quality assurance on the legal foundation throughout the process

This RegTech driven process combined with online Business & Legal support pricing models lead to true savings and enhanced traceability

Integrating regtech demands a change in mindset and governance

To fully capture the cost reduction potential a pragmatic shift of business consciousness is required.

Management should ensure that:

  1. Accepting Regulation as hygiene factor, not a strategic differentiator
  2. Ensuring Legal and Compliance departments accept technology as an opportunity
  3. Embedding industry best practice solutions instead of in-house developments which are often cost and time intensive and do not incorporate industry-wide knowledge
  4. Adopting a unified, value-chain based approach, instead of fragmented autonomy of business lines and entities

The direct benefits of integrating our regtech into your organisation

Considering the business consciousness shift is in transition, the adoption of our RegTech solutions will provide the following direct benefits:

Reduced legal cost and improved cost control

Our RegTech solution avoids costs, resources and time resulting from reinventing the wheel: interpretation of Regulation. One annual subscription fee ensures full access to up-to-date legal content and interpretation thereof, industry best practices.

Our decision tree driven solutions also enable improved costs control by avoiding legal budget being spent on generic interpretations and eliminating the same interpretation questions being asked multiple times across your business lines & legal entities.

Finally, the online self-assessment part of the tool with completely up-to-date legislation helps you to focus on only those legal requirements that are relevant to your organization, avoiding time and money spent on topics that should not concern you in the first place.

Reduced and efficient resource involvement

Sourcing external regulatory interpretations allows the Legal and Compliance departments to staff the generic regulatory response process more effectively and efficiently. Utilizing technology and a standardized approach along the full regulatory response process reduces effort spent by Compliance and Audit on collecting, aggregating and structuring the interlinkage between legislation → gaps → compliance evidencing across all your business lines & legal entities.

Legal & Compliance departments can focus on what matters: adding organization specifics, gold-plating or group policies to the minimal requirement s for detailed compliance monitoring.

Future proof and efficient due to a scalable set up

Our decision tree driven approach is capable of interlinking related regulatory topics / regulations, with the benefit of determining your Products, Services and Legal set up once and see the impact over various interdependent regulations (e.g. MiFID II / MiFIR / MAD II / MAR and PRIIPS as part of an ”Investor Protection Suite”).

And the best part: all your reporting is consolidated in one application. Does your organization change? Change the base parameters and immediately find out the impact it has on your compliancy status!

Enables additional quality control

The ease of use of our solution enables the quick identification of regulatory requirements and gives you new insights in the current compliance status of your organization.

Use it for:

  • Scoping & Gap assessments of business lines, legal entities
  • Continuous Compliance Monitoring; check your compliance status directly, even with changing regulatory requirements
  • Business Development of Products / Services which are “compliant by design”
  • Incident Management; quick scan in case of incidents to identify potential non-compliance

About COMPENDOR

Compendor helps financial institutions truly understand the regulations they need to comply with by providing easy to use decisions tools to help take the guess work out of business model impact.

For more information see our solutions or request a demo.

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