As the speed of regulatory change increases, firms must develop the ability to identify regulatory changes in as close to real-time as possible. This will also require them to adapt their internal processes to suit these evolving requirements. In some cases, regulatory change will move faster than traditional manual processes can manage to keep pace with. This presents a new challenge for financial services firms, which must ensure that their business models are agile enough to ensure ongoing compliance.
Adapting Regulatory Change Management Processes
The internal systems and processes for managing change have to evolve quickly. For firms to stay ahead, they must first understand the core principles of traditional regulatory change management before identifying the differences and distinct benefits of taking an agile approach.
What is Regulatory Change Management?
Traditional Regulatory Change Management (RCM) is a structured and linear process involving the constant monitoring of regulatory updates. Firms adopting this approach will usually observe the following process:
- Continuously monitor key regulators and use horizon scanning to identify changes
- Conduct a formal impact analysis to assess the impact of new regulations
- Implement the necessary changes in an orderly manner and update the necessary action plans as required
- Engage in ongoing compliance and reporting to review the effectiveness of these changes
The key focus with this traditional structure is on ongoing compliance with siloed departments responsible for compliance reporting.
What is Agile Regulatory Change Management?
Agile Regulatory Change Management (ARCM) transforms the process of change management to be more agile, removing the siloed and structured approach. ARCM utilises cross-functional teams working in a dynamic approach through iterative cycles or “sprints”. This has also led to a technical shift away from traditional horizon scanning. ARCM instead incorporates interactive, real-time rule-mapping to continuously assess reporting against evolving regulatory requirements. This transformation allows for a much more fluid approach, allowing firms to react much quicker to regulatory changes.
How Can Firms Transition to an Agile Business Model?
There are several ways that firms can transition to an agile business model involving a unique combination of up-to-date technology, strategic initiatives and cultural changes.
- Leveraging RegTech
- Implementing Collaborative Workflows
- Utilising Real-Time Dashboards and Intelligent Reporting
Leveraging RegTech
Recent advances in regulatory technology, including machine learning and AI, have been the fundamental drivers behind the transition to ARCM. Firms can now use these solutions to help predict reporting errors, identify critical error points in workflows and minimise the risks associated with incomplete reporting. Implementing Collaborative Workflows ARCM overhauls the traditional model of working in siloes and instead implements a system of collaborative workflows, open communication and seamless integration between previously siloed departments. Cross-functional teams are allocated clear responsibilities and form part of a dynamic environment where changes are integrated in near real-time.
Utilising Real-Time Dashboards and Intelligent Reporting
The move toward real-time reporting, coupled with the rapid speed of regulatory change, means that ARCM requires real-time visibility in order to be effective. Intelligent dashboards collect data from multiple sources at once and balance this instantly against the backdrop of real-time regulatory updates. The provision of agile task management also enables senior management oversight of multiple collaborative workflows while accessing up-to-date reporting to assist with decision-making. Firms are currently experiencing an unprecedented level of continuous change in regulatory requirements and must consider adapting their business models to suit this new reality. Agile regulatory change management offers the most innovative and proactive approach to stay ahead of fast-moving regulatory changes. Firms that invest in ARCM with the required RegTech and updated working processes will remain competitive and gain an advantage within complex and evolving regulatory environments. Struggling to keep up with regulatory change?
Contact Novatus Global to implement agile change management and future-proof your compliance processes.
