Author: James Phillips, Head of Regulatory Strategy at Lombard Risk
As a major RegTech provider and leader in regulatory reporting, Lombard Risk is participating in RegTech Rising, the major European RegTech conference. The conference has the biggest concentration of RegTechies I have seen, with cross-industry participants: regulators, regulated, vendors, consultancies and investors. There have been some fantastic insights and debates around how the digitisation of everything from identity management to horizon management to regulatory reporting will be transformed, and faster than you may think. All this makes for the onset of friction-less regulation (not no friction, just less friction!), and will embrace artificial intelligence, machine learning, distributed ledger technology, machine readable rules, for their best outcomes. Most importantly however, irrespective of the specific technology set that underpins the delivery of the solution, RegTech is providing the opportunity for firms to experience being regulated differently. Regulators themselves also see significant upside to applying regulation differently; indeed for all parties to embrace RegTech innovations it’s a win-win.
This is becoming so pronounced that the clearly emerging conference consensus is that firms that do not proactively engage with emerging technologies, now, to define a RegTech engagement strategy are likely to be left behind, with competitive disadvantage. Digital transformation is creating a new way of doing business, and redefining the relationship between the regulator and the regulated, in all aspects – the provision of rules, the interpretation of these and their ongoing implementation.
Advantages to regulated firms are many and included these:
- Very significant cost reduction
- More automation and multiple use of data
- Much improved forward visibility from better analytics
- Reduction in many facets of risk, from risk identification to risk mitigation
- Improved quality and continuous process improvement
Indeed, what’s interesting is that the advantages to the regulator are significant too, and read just like the above bullet list.
So, significant strategic advantage is available to regulated firms that deliberately engage. The conference Q&A on this subject was clear: proactively figure how to make use of innovations across the board. Work out how to handle, filter and route the incoming calls from innovators. These changes are happening and firms that push back or are slow to adopt or uncoordinated in respect of RegTech strategy can expect a clunkier outcome, with more expense, less automation, less visibility and analytics, less risk reduction and less quality and process improvement – the opposites to the advantages list I have set out above.