Widespread manual processes leaving capital markets firms exposed, says new survey

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Only 2 per cent of capital markets firms have a fully automated compliance support program, according to an Aite Group and Cordium survey. And this high level of dependence on manual processes is leaving the industry open to errors, gaps in compliance, a lack of agility in reporting during an audit, and ultimately the risk of non-compliance.

‘Regtech Realities: Moving from Reactive to Proactive Compliance’, explores the evolving needs of capital markets firms in the face of continued regulatory changes. The report assesses the strategic direction and practicalities of compliance, including workflow and resource challenges and how firms prioritise investment in automation.
 
Doug Morgan (pictured), Group Chief Executive, Cordium, says: “As the pace of regulatory change continues to accelerate, technology solutions that help firms collaborate, manage expanding stakeholder networks and cut through operating noise have become essential. Legacy, piecemeal and manual approaches cannot scale to meet today’s challenges. The good news is that technology is increasingly available to transform traditional processes, enabling compliance officers to work across the firm to achieve buy-in and gain new insights. Compliance teams can implement a technology-focused approach to enhance the overall business and establish a strong compliance culture.”
 
Virginie O’Shea, Research Director, Aite Group, says: “The industry has been bombarded with a barrage of compliance requirements over the last few years and, as a consequence, must shift from a reactive to a proactive mindset. Firms need to better understand their compliance issues to ensure lessons are learnt for the future. Next generation technologies are rapidly developing to support firms, with cloud deployments proving valuable in the context of increasingly data-intensive regulations, and newer areas such as natural language processing maturing fast. The future of compliance will be characterised by skilled professionals supported by technology at every step.”
 
Despite risks created by manual processes, trends regarding process management and monitoring are particularly telling. Only 8 per cent of respondents use formal metrics to measure the impact of noncompliance and 43 per cent don’t currently measure it at all.
 
Morgan says: “Firms that are failing to take a proactive approach to monitoring and managing compliance are taking a big risk. While it’s entirely understandable that compliance professionals can be consumed managing their day-to-day workloads, firms should look to technology to enhance oversight and future-proof their programs.”
 
The report is based on an online Aite Group and Cordium survey, conducted with capital markets executives with knowledge of compliance technology spending at financial institutions across the globe.
 
During Q4, Aite Group surveyed 120 financial institutions, with the majority hailing from the buy-side (70 per cent work for asset managers or hedge funds), to capture their views on areas of importance for compliance IT investment and interest in next-gen technology. Given the size and structure of the research sample, the data provides a directional indication of conditions in the market.