In the news: How a holistic approach to compliance can produce strategic opportunities.

A recent survey from Duff & Phelps of 240 senior executives in financial services found that 33% of firms spend 5% of their annual budgets on compliance. The hefty amount of capital organisations are spending on their compliance is not being taken well, with 20% of respondents stating the cost of compliance was their biggest challenge. This negativity towards compliance is a matter of perspective and if firms change their strategies they could start to see the benefits of implementing RegTech solutions that go beyond simply meeting regulatory requirements.

Thomas Verlaet, the founder and principal consultant of RegCentric, said, “Regulatory programs are still too often seen as a cost of running the business; while it is our view that regulatory initiatives can provide strategic opportunities when you look beyond the “tick-the-box” approach. Unfortunately too many organisations address their regulatory obligations in isolation – duplicating effort across the enterprise and introducing inconsistencies between the external and internal view of what is essentially the same data.”

It was through this vision that Verlaet went about creating RegCentric, with the goal of making sure organisations align their regulatory and corporate objectives, and that all regulatory investments provide business outcomes beyond compliance.

Originally, RegCentric began life as a consultancy firm with the aim of helping financial institutions sift their way through the torrent of impending regulations. It is this rapid introduction of legislation that has forced many firms to have the high annual budgets previously mentioned. Due to the scale of the task, many firms only have time to focus on meeting compliance in order to avoid fines. This has prevented any real sustainable outcomes for them. Verlaet pointed out that there are a number of other hurdles contributing to the funds siphon that is compliance, including tactical approaches, organisational and project silos and legacy technology stacks. To combat this, RegCentric support organisations to take a holistic approach and leverage innovative technology solutions.

In 2017, RegCentric set out to combine subject matter expertise and technical acumen to help businesses turn compliance into a positive. Verlaet added, “The ideals of the company are held in the belief that, to bring to life the benefits of RegTech investment, organisations need to take a strategic approach. This would be to align regulatory objectives with the corporate strategy whilst continually leveraging the latest advances in technology where possible.”

The reason a holistic approach is so important to firms is because everything in the business is connected. By examining regulatory obligations firms can see there is huge overlap in risk management, reporting, AML, KYC and other wider functions within finance, performance and portfolio management. It all uses the same data. The problem is that siloed organisational and project structures and legacy architectures are hurdles many organisations are struggling to overcome. By creating a holistic approach and connecting these areas, firms can improve their data capabilities and boost efficiency.

“Our large clients rely on our innovative services and solutions to support their complex regulatory projects. But compliance challenges are not unique to large entities”. Verlaet said, “Smaller institutions are in addition also constrained by their scale. They often lack the internal resources and capabilities to implement complex projects, both from a subject matter expertise and from a technology implementation side. We support a growing client base in that mid to lower Tier segment of the market by providing them access to our pool of highly experienced consultants who help fill the gaps.”
RegCentric, which is headquartered in Australia, is able to help businesses of all size, because it puts the customer at the centre of its strategy. Instead of just creating the solutions it thinks the industry needs, it listens to the market and finds out what they actually need. “Our philosophy has always been to put the client at the core of everything we do and support them in leveraging the best technology solutions out there in the market,” he added.

The company’s own platform enables organisations to increase efficiency, generate insights, reduce risks and ensure regulatory compliance. Its Reg360 solution is an API management platform that changes how regulators and firms exchange critical compliance information. Instead of having a periodic reporting model, Reg360 employs an on-demand data mining tool that allows regulators to automatically codify the reporting information they need. Its other flagship tool is RegConnect, which automates regulatory reporting processes for financial institutions.

Verlaet said, “Our solutions are built on a number of foundational principles that support our vision of an eco-system approach. We heavily focus on ease of, a low implementation foot-print, a user centric interface and hyper-scalable processing performance. To support the industry in being more efficient, reduce risk and gain meaningful insights and lower the cost of compliance our solutions are infused with our subject matter expertise. Our solutions are also designed with change in mind. In our view, regulatory changes and business driven change should be part of the fabric of the solution, so we design our solutions in the knowledge that requirements will change over time.”

The company’s ability to build solutions that meet the specific needs of clients has helped it see rapid growth over the past three years. “The uptake of our solutions has been beyond our expectations and we are very grateful to our clients for their trust.” This growth has meant the company is looking to expand the size of its team so it can continue to enhance its platform and build new products. Due to the quantity of regulations entering the market showing no signs of stopping, RegCentric is looking to ensure it is ready to help firms with impending legislation. This is not exclusive to Australia and New Zealand, and the RegTech has set its sights on launching its platform in Asia Pacific, the US and European markets.

Verlaet and the team are firm believers of collaboration and working together to find the best result. Its own product roadmap is comprised of common problem areas it has observed in the industry. It is not just the collaboration of companies that should be encouraged, but the sector as a whole. He explained that regulators are starting to become more involved within the ecosystem and how they can work alongside RegTechs and the industry to foster growth. The main goal of compliance is to ensure a safe environment for everyone and to prevent crime, so collaboration is a best way forward.

“At the end of the day, the best outcomes for all will be achieved through industry collaboration,” Verlaet said. “Everyone in the eco-system is better served by an efficient, fit-for-purpose regulatory framework and the best solutions are achieved when regulators take into account the concerns and constraints of the regulated industry in their policy-setting. It is encouraging to see how new initiatives such as Open Banking in Australia are really being driven by collaboration of regulators, banks and RegTechs.” Initiatives like open banking have started to take form around the world, and the world is beginning to work together, rather than against.

Copyright © 2020 FinTech Global. Republished with permission.