3 reasons why you may not need RegTech solutions

These days everyone is going digital. Whether its retail customers executing cross-border, multi-currency payments at extremely low transaction fees from the comfort of their homes, entire processes for client due diligence now being automated or workflow solutions to automate inefficient business processes gaining increasing prominence — the case for going digital is strong. These advantages apply to risk and compliance management as well — which explains the accelerating rise of RegTech solutions globally. Despite the obvious advantages of going digital, we have heard curious tales of how certain compliance professionals still insist that they can manage just fine going without, despite the growing complexity of risks. This drew our attention and so we asked ourselves ‘How?’; how can they continue to function well today (and tomorrow) without adopting RegTech solutions and here is what we came up with.

1. They have unlimited resources

How do you stay on top of all your risks, reporting requirements and other deliverables WITHOUT a RegTech solution, well, you rely on an army of compliance professionals of course! Our first guess is that these compliance teams are the rarefied few who have been blessed by their senior management teams with unlimited resources. Free to hire any number of compliance professionals for every imaginable task. A few who do nothing but keep track of regulations. A few more who do nothing but read regulations and provide their expert analysis. A few more who do nothing but interact with different business units, keep up to date with their business activities so they can better determine how new regulations may potentially impact the broader business; and we haven’t even accounted for all the other risks that need to be attended to, the training materials that need to be developed and the training that needs to be delivered, the questions, the testing, the reporting and so on. If they are able to afford an army, then they must also have unlimited spending when it comes to engaging external consultants; and if you can afford any number of the very best, then you ought to have a superbly-managed compliance program in place.

2. They have superpowers

How do you do this job well without having access to unlimited resources and without relying on digital solutions (MS Office and emails don’t count)? Well, you hire people with superpowers of course! Are we being flippant? No, bear with us and allow us to illustrate our thinking:

1. We have shown that as a whole, the types of risk that compliance teams are typically tasked with managing are becoming increasingly complex and voluminous.
2. The number of tasks involved in managing any one, let alone all, of these risks is also voluminous.
3. It follows then that the amount of time and effort it would take to perform these tasks will only increase in time.
4. At some critical point, the pace at which compliance risks are evolving will overtake the pace at which compliance teams can respond effectively and the scales will tip in favor of …well, catastrophe.
5. In order to keep the scales tipped in the opposite direction WITHOUT relying on digital solutions or having access to unlimited resources, compliance teams will have to increase their productivity at a rate that’s faster than that at which compliance risks are evolving.
6. The only way to do that (that we can think of) is for those compliance teams to have superpowers.

3. They know something we don’t!

If you encounter compliance professionals who:

• insist that they can do just fine without RegTech solutions
• admit that they don’t have unlimited resources and
• haven’t hired the Avengers as part of their compliance team

in the face of what can (generously) be described as an impending tsunami of compliance risks, then you can’t be faulted for suspecting that they might know something that you and the rest of us don’t. That there is actually no tsunami.

The only other possible reason we can offer up for this anomalous situation is that these compliance professionals have a very good reason to believe that the pace, volume and complexity of compliance risks are actually decreasing in time, not increasing. They may argue that, for their specific business, all major current and future risks are already known and will in fact be decreasing not just in volume but also in complexity in which case it would make little sense to invest in a solution for a disappearing problem.

The thing is…

We know that the odds that any of the 3 scenarios we described is true is about as likely as Batman trouncing Superman in a fist-fight; in other words: extremely unlikely. We know in most (if not every) case compliance teams are lean. We know that compliance professionals are humans like the rest of us (despite expectations) and we know the risks they are responsible for mitigating are increasing. We wrote this piece to illustrate why it’s just plain insensible for anyone to expect compliance teams to be able to perform their job well and protect the reputation of the company, it’s bottom line and even the jobs of their fellow employees without the right tools. The conversation has now moved from one of ‘wants’ to one of ‘needs’ and when it comes to going digital, it’s clear: compliance teams need RegTech solutions.

(and… we can help. Learn how).