1. Introduction

In the wake of the largest financial crisis in a century, the global financial services industry has faced an avalanche of new regulation. The increasing pace and breadth of this regulation, combined with its relentless and unpredictable nature, have made implementing regulatory changes extremely challenging. The result has often been reactive and frenetic responses which can be costly and frustrating for all parties involved.

In this seven part series we will focus on the task of actually making the changes needed to become compliant; it has become clear that implementing regulatory change is a strategic issue in its own right. We’ll look at the formidable task of implementation and define nine practical steps to complement existing implementation and IT delivery approaches.

The increasing pace and breadth of regulation, combined with its relentless and unpredictable nature and a litany of complicating factors, mean that identifying and making the necessary changes in an orderly manner has become an almost impossible undertaking.

Despite best intentions, regulatory implementation initiatives can often end up as a reactive and internally focused mad dash simply to ‘get over the line’ and achieve minimum compliance. This can have important long term side effects. It can drive high costs, place great strain on the business and risks leaving organisations with a multitude of uncoordinated tactical compliance solutions and frustrated internal stakeholders and clients.

The complex, compound challenges mean that perfection, or anything close to it, is unattainable. However, we have seen some organisations develop innovative approaches to help navigate the complexities.

We have found that those that have coped best have:

  • put in place the strategic management and governance arrangements to allow rapid joined-up decision making;
  • invested in strategic flexible delivery capabilities to manage unpredictable workloads and changes in direction whilst driving cost efficiencies; and
  • taken proactive steps to drive a long term sustainable approach to compliance.

These techniques have helped them make major strides to ‘Be More Swan’: outwardly appearing to serenely glide through new regulation despite paddling furiously ‘under the surface’, by delivering in a more controlled, compliant and cost effective manner. As well as leaving operations and technology in better shape and reducing short and longer term costs, they have been able to provide a smoother experience for their clients.

“Identifying and making the necessary changes in an orderly manner has become an almost impossible undertaking.”

Regulatory change: and enduring industry wide challenge

The recent financial crisis has led to the intense focus of regulators on the financial services industry. The regulatory landscape has undergone major changes and regulatory commitments still continue to take effect across financial markets on a global basis. The scale, scope and pace of reform across all asset classes are far reaching and continual.

This has driven some fundamental and wide-ranging structural changes to the marketplace. Market participants have been forced to manage down noncore assets and reassess their product offerings, market strategies and customer bases. Much thought, commentary and debate has been devoted to these strategic impacts and the optimal corresponding responses different organisations should take.

Two wide-ranging regulatory requirements – Dodd Frank in the US and EMIR in Europe – are now both well into implementation. However, a significant set of new regulations are lining up over the next 3 years. These stem both from new jurisdictions (primarily across G20 members, including Russia, Australia and Japan) and due to further legislation in the US and Europe, including MiFID2, Basel III, FATCA, and margin collateral requirements.

Much of the plans are yet to be finalised and the exact timelines are uncertain. However, it is certain that the compound effect of these regulations will be a substantial set of implementation initiatives. Based on the lessons from implementation efforts to date, the scale and complexity of this implementation challenge cannot be overestimated. It is clear that the implementation issue is likely only to get harder and more complex.

In the next edition we look at the challenge of implementing regulatory-driven change in “Implementation: A formidable task”



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