Scanning the Regulatory Horizon
Scanning the Regulatory Horizon
November 2020
By Mariano Giralt and Colin Ware
The pace and volume of new regulations requires a more accurate, scalable approach to tracking and managing regulatory change than the majority of financial services firms currently take.
According to Thomson Reuters,1 there are on average 220 new financial services regulatory updates every day. That is the equivalent of a new regulatory update issued every seven minutes. Market pressures are changing, and regulatory authorities around the world are prioritizing the regulation of evolving business models. A consequence is that firms are struggling to understand, prioritize and comply with the growing volume of regulations and reporting requirements.
It is critical that financial firms enhance their ability to not only track complex regulations, updates and interpretations globally, but to categorize and prioritize regulatory changes based on factors specific to their business. They also need the capability to assess the overall impact of regulatory changes on their business to ensure a holistic, cross-organizational view.
To address these challenges, many firms currently employ processes primarily based on manual research, often involving large teams of consultants. Unfortunately, this approach is not only inefficient and unscalable, it risks underestimating the impact of a regulation — for example, with messages not targeted to the relevant stakeholders, and complex questions managed by sending emails to potentially hundreds of stakeholders.
BNY Mellon is piloting tools to help clients prepare for regulatory change in a more efficient and effective manner, directly addressing the inherent weaknesses of manual processes. We are currently exploring the creation of a tool scanning the regulatory horizon to help clients monitor and score upcoming regulatory changes based on factors such as timing and the potential impact on their business. We are actively collaborating with a number of clients to pilot a regulatory horizon-scanning solution to ensure that what we design meets their needs.
The horizon-scanning tool is designed for compliance, capital-planning and client-facing teams, giving them access to the relevant information they need to identify, prioritize and assess these changes. It will monitor regulatory news, providing alerts and regulatory updates on emerging issues. Using machine learning models and client-specific data, it will score upcoming regulations according to factors such as their potential impact to the business, the cost of compliance and the time to implementation.
It is an approach that creates efficiencies, allowing for the streamlining of external and internal monitoring teams, and a single portal for all stakeholders. It is also more effective, with alerts focused on individual stakeholders’ roles, ensuring that the right people get the regulatory updates they need to make decisions, without being burdened with those not relevant to them.
We are keen to engage more clients during the pilot, development and prototype stages of the regulatory horizon-scanning tool. If you are interested in getting involved, please contact your BNY Mellon relationship manager.
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