Financial risk and regulatory compliance pros struggling with collaboration

After several months of working from home, with no clear end in sight, financial risk and regulatory compliance professionals are struggling when it comes to collaborating with their teams – particularly as they manage increasingly complex global risk and regulatory reporting requirements.

According to a survey of major financial institutions conducted by AxiomSL, 41% of respondents said collaborating with teams remains a challenge while working remotely.

“During the pandemic, financial firms quickly adapted to major changes, although not without some operational and technology weaknesses emerging,” said Alex Tsigutkin, CEO AxiomSL.

“Indeed, businesses might never return to the ‘old normal’, and that has made building data- and technology-driven resilience much more pressing than before the crisis. Our clients have been experiencing heightened regulatory pressures,” he continued.

“Throughout the crisis, we enabled them to respond rapidly to changes in reporting criteria, the onset of daily liquidity reporting, and the Federal Reserve’s emerging risk data collection (ERDC) initiative – that required FR Y­–14 data on a weekly/monthly basis instead of quarterly.”

These data-intensive, high-frequency regulatory reporting requirements will continue in the ‘new normal.’ “To future-proof, organizations should continue to establish sustainable data architectures and analytics that enable connection and transparency between critical datasets,” Tsigutkin commented.

“And, as a priority, they should transition to our secure RegCloud to handle regulatory intensity efficiently, bolster business continuity, and strengthen their ability to collaborate remotely,” he concluded.

Key research findings

Remote collaboration is a top operational challenge for financial risk and regulatory pros: For all the talk of work-from-anywhere policies becoming the future of financial services, 41% of the risk and compliance professionals surveyed said collaborating with colleagues while working remotely has been their biggest challenge during the COVID-19 crisis.

This was the most frequently cited challenge, followed by accessing data from dispersed systems (18%), reliance on offshore resources (15%), and reliance on locally installed technology (15%).

Liquidity reporting expected to get harder: New capital and liquidity stress testing requirements are expected to present a much heavier burden on financial firms, with 18% of respondents citing increased capital and liquidity risk reporting as a major challenge they will face over the next two years.

Cloud adoption gets its catalyst: After years of resisting cloud adoption, many North American financial institutions are finally gearing up to make the move. When it comes to regulatory technology spending over the next two years, enhanced data analytics is the top area of focus among 29% of survey respondents. But cloud deployment rose to second place (23%) followed by data lakes (22%) and artificial intelligence and machine learning (20%).

Reduction of manual processes is an operational focus for the next two years: The top risk and regulatory compliance challenge firms see on the road ahead is continuing to eliminate manual processes (29%), followed by improving the transparency of data and processes (21%), and fully transitioning to a secure cloud (13%).

RegTech budgets largely intact heading into 2021: A total of 83% indicated their near-term projects as virtually unimpacted or mostly going forward. And similarly, 81% said their budgets for 2021 remain intact (70%) or will increase (11%).