2. Implementation: a formidable task
In the second edition of our 7 part mini-series, we examine all of the contributing factors that make Regulatory change such an enduring industry wide challenge in implementation.
As those who have tried it know all too well, delivering transformational change in financial service is hard at the best of times. As well as all the usual challenges that such endeavours entail, regulatory-driven change comes packed with a raft of constraining factors that greatly complicate its implementation.
- The relentless volume, pace and reach of often piecemeal requirements can overwhelm organisations’ ability to plan and control change, and to see the big picture.
- Short notice, aggressive compliance deadlines, accompanied by escalating financial penalties.
- Sketchy and ambiguous regulations, with clarifications and internal policy decisions made late in the day.
- Cross-cutting regulations overlap and impact numerous processes, systems, departments, geographies and clients in a way that organisations are not used to managing.
- Regulation can contradict business goals, particularly if seen as driven by Legal and Compliance.
- International inconsistency in rules across US, UK and Eurozone (and beyond).
- Skills gaps: departments that are not used to or skilled at managing change (such as Legal and Compliance) find themselves front and centre of major delivery activity.
The Implementation challenges
- A rapidly moving target: the implementation approach, priorities and work volumes change at short notice, making resource planning, IT build and communication hugely challenging.
- Uncoordinated action by different parts of the organisation, and different banks and counterparties, wasting time and effort and leading to conflicting approaches.
- Business conflict: implementation teams can feel in direct conflict with the business, but still need to find a way to implement.
- Rework of solutions that have to be repeatedly changed, magnified by multiple departments and potentially countries involved.
- Client impacts: clients are hit with numerous, uncoordinated demands for information and changing and conflicting instructions at short notice.
The End Results
- Frustrated clients: increasingly looking to financial institutions for clarity and support, clients can end up very frustrated by their experience.
- Implementation cost: compliance takes far more effort and costs far more than it should.
- Business impacts: solutions which overly compromise the business hit the bottom line.
- Cost to maintain: the aggregation of tactical solutions incurs a substantial and escalating cost to maintain and adds significant complexity to the business.
- Strategic distraction: the effort expended and lost focus impair the organisation’s ability to progress with other strategically important change agendas.
Next the next edition we introduce a tried and tested framework to help in implementing regulatory change in “Practical steps for a sustainable solution”.