Entrepreneur Manish Bharucha is one of the co-founders and currently the CEO of Kyzer Software, a leading banking and financial organization, established in 2016. It creates niche products in trade finance, automation,lending, compliance, and regulatory reporting with various Indian as well as multinational banks.
Regulatory reporting refers to the process of submitting relevant data to aid the assessment of the overall working and functioning of the bank by the regulators. The process of regulatory reporting is notorious for being complex as it is tedious and comprehensive. Some prominent challenges that are commonly faced by people while filing regulatory reports are discussed briefly below-
Poor use of Technology
The process that is currently being followed to consolidate and submit the regulatory reports is mostly manual and is thus time-consuming. Additionally, manual processes, as opposed to automated ones, are more likely to make errors which in turn adds to the time consumed in finalizing the report.
Even the processes that do use technology to some extent are mostly conducted from siloed applications which often causes discrepancies while aggregating the data.
While the most efficient way of consolidating the data would be through the use of advanced technology via an integrated platform, that has not been possible yet due to the absence of such a system.
Establishing proper control and understanding of Data
Comprehensive understanding of and control over the regulatory data is critical for all organizations. However, this factor is often missing in practical things. There is a pressing need for organizations to be able to establish the fact that they truly know and understand the data as recorded in the reports. It is also crucial that organizations are in a position to file accurate and timely reports. Thus, financial institutions should work to improve their ability to explain and demonstrate compliance with regulations.
Lack of automation
Even though tools like Excel and Macros serve the purpose, they are decidedly not the most efficient tools that can be used to consolidate and audit regulatory reports’ data. There is an acute need for automating regulatory reporting. This is because the report is as good as the data it furnishes. Thus, the data has to be absolutely accurate, precise, and error-free. Manual working and non-automated tools often act as a hindrance in the path of achieving the desired level of quality of the data inputs. If the processes of data extraction and amalgamation were to be automated, it would serve to enhance the precision of the data of the entire report. Automation would also drastically alter the time consumed in finalizing the report and thus add to the efficiency.
It is typical of regulatory reporting to have lengthy and comprehensive audit trails. The reason behind this is two-fold- firstly to identify and rectify the errors in reports and secondly, to present the strong control regime of the organization to externals auditors and regulators. It is important to make and maintain this process to be transparent and streamlined. This can be done by centralizing the process.
The risk of misinterpretation
The rules are seldom laid out in an organized and clear manner. Thus, they are usually up to the interpretation of the reader. Since interpretation is at the discretion of an individual, it usually differs from person to person. This leads to gaps in the uniformity of information. Further, the regulations and procedures are laid out in a lengthy and complex manner which adds to the lack of proper understanding.
Oftentimes, this confusion leads to the need of appointing Subject matter experts or SMEs who aid the understanding of concepts. This adds to the cost of compliance. To add to that, finding competent and experienced SMEs is a tough task. Thus, it is essential for organizations to intimate regulations in an easy and comprehensive manner, even if it is not mandatory compliance as it will work to enhance the overall efficiency and cut costs.
Regtech Software: The need of the hour
Regtech refers to a category of firms that make use of technologies like cloud computing to enable businesses to automate their regulatory processes and thereby fulfill the regulations efficiently and economically. It seeks to deliver sustainable enhancements in the fields of financial data accuracy, process control, operational efficiency, and regulatory reporting, all of which are central to meeting regulatory expectations. The some of the many benefits of Regtech software are as follows-
- The fully automated solution is scalable and replicable across multiple financial institutions.
- Automation works to lessen the time consumed in completing reconciliations.
- Integrated risk and control framework.
- Significant reduction in costs incurred on ongoing operations and lower investment expense as operations scale.
- The ability to amplify and scale current processes along with regulatory requirements.
- Improved communications – Real-time interface for financial institutions and their customers, allowing oversight teams to monitor KPIs, breaks, and workflows via configurable dashboards.
- Ability to interact with multiple cores, non-core systems, and data sources simultaneously as required with improved operational efficiency.
Things a good Regtech software should offer
- Use of a single reconciliation engine to integrate data from multiple sources.
- Enrichment and segregation of data points based on business needs.
- Complex multipoint matching framework generating true and accurate data.
- Easily adaptable to incremental changes due to new regulations, new data sources, and ongoing process refinements.
- Full operational control to map changes on data points.
- Systematic change management with lite touch IT dependency
- Robust control functionality, including maker-checker rules and use of workflow management.
- Fully recordable and auditable workflows.
- Proper and mechanized report generation and data extraction.
- Ability to amalgamate data across ranges accurately.
- Outbound scheduled communication using email and messaging.
- Secure and active archiving for the desired duration.
- Rapid implementation timeframe supporting a swift ROI.
Consolidating and submitting regulatory reports is a tough task in today’s date but it does not necessarily have to be. Recent times have seen rapid technological advancements and provided several quick and easy ways out of the challenges posed by regulatory reporting. A great option is that of Regtech software that automates the processes of data extraction and amalgamation, thereby enhancing the efficiency of the overall process and minimizing the threat of challenges.