How your organization can truly achieve regulatory compliance
In the current business scenario, increasing regulatory compliance regime has become a major burden for financial institutions. Under new regulations like UMR (Uncleared Margin Rules), CFPB-Consumer Financial Protection Bureau, Dodd-Frank Act, etc., it is becoming increasingly difficult for FIs to operationalize their new risk & compliance management eco-system, right from policy to reporting, and continue to be compliant within specific timelines.
When it comes to regulatory compliance, there are typically three main objectives that organizations hope to achieve:
- Achieve and maintain compliance effectiveness – This means meeting the expectations of the regulator in terms of preventing, detecting and correcting non-compliance.
- Minimize costs associated with regulatory compliance – Includes time & effort spent on compliance as well as money spent.
- Pursue opportunities to create value – This is the third objective and it’s just as important as the other two. While many organizations focus on compliance management after a regulatory requirement has been set, some are now taking a more proactive approach by looking at how they can meet regulatory standards while also creating business growth opportunities.
In order to achieve all three of the above objectives, organizations must first comprehend what is required and how they apply to their unique situation.
Experts at Quinnox recommend the below steps:
- Discover & Understand Your Regulatory Requirements – This step involves understanding all relevant regulations such as UMR- Uncleared Margin rules, CFPB-Consumer Financial Protection Bureau, Dodd-Frank Act, etc. as well as the specific expectations of the regulator. It is also quintessential to understand the implications of specific regulations on your organization and how compliance can be realistically achieved. All stakeholders including executives, compliance officers, operations, and technology groups who are likely to be affected by a new regulation should partake in understanding and assessing the impact of regulatory requirements.
- Assess Your Compliance Risk – This step looks at what could go wrong and how likely it is to occur. It also includes an assessment of current controls in place and their effectiveness. It also includes defining a business behavior in response to the regulation which can consist of internal policies which include business products, and operational and technology guardrails that need to be put in place.
- Identify Gaps & Prioritize – This step involves identifying gaps between current practices and what is required. It also requires prioritizing these gaps based on timelines defined by regulators, risks based on the current book of business, the severity of impact, and the feasibility of implementing controls to close the gap. Developing a proof of concept and then implementing the changes in operations and software technology.
- Create Action Plan & Implementation Steps – This step includes developing an action plan to close the gaps identified in Step 3. The implementation steps should be prioritized based on timelines, risks, the severity of impact, and the feasibility of implementing controls and reporting.
- Monitor & Maintain – This step is all about maintaining compliance with regulatory requirements by monitoring any changes that may occur. This includes changes related to regulation as well as business activities. It also involves monitoring controls and testing their effectiveness. Keep auditing the reports, updating documentation, and making necessary adjustments or improvements.
The above steps provide a framework for achieving regulatory compliance, but it’s important to note that the above-mentioned steps will vary from organization to organization.
Every business is fraught with its own unique risks. What works for one company may not work for another. That’s why it’s so important to have a comprehensive and tailored regulatory compliance solution in place.
For example, if your company needs to report on UMR (Uncleared Margin Rules), it requisites a comprehensive understanding of the current book of business, all new data points that need to be captured, the underlying analytical model for margin calculations, and reporting framework associated with the regulatory needs.
Quinnox has actively worked with multiple clients and provided the best in class regulatory compliance solutions across all the stages of the regulatory framework.
Contact us for a discussion on your challenges with regulatory compliance implementation.