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A new COO/CCO playbook for financial regulation in 2021

Financial markets and the activities that drive them are growing increasingly complex. Both the volume and velocity of data continues to increase, while jurisdictions around the world enact strict data protection and trade reporting requirements.

While data must remain secure and compliant, it must also travel at breakneck speed through a constellation of global financial institutions, intermediaries and data repositories.

As a result, many organizations are allocating more resources to operations and compliance. But how are those resources best deployed? Here are some key questions and decision points facing Chief Operating Officers and Chief Compliance Officers.

Outsourcing vs. staying in-house

The most urgent decision facing financial services organizations is whether to continue adding to in-house staff, equipment and infrastructure or find a service partner with specialized expertise in compliance, data, technology and other managed services.

As compliance becomes more specialized and resource-intensive, outsourcing key functions such as diligence, monitoring, accredited assessments, contract and vendor management, and data management can offer a more practical and cost-effective solution.

Leveraging Know Your Customer (KYC), vendor and third-party technology

Tracking the potential risks posed by customers, vendors and supply chain partners has become increasingly challenging—and increasingly essential. Today's financial services organizations must meet anti-money-laundering requirements, understand the broader risks their customers may pose to the business, and carefully select and monitor the third-party vendors whose services and technologies have become more and more integral to business success.

To manage the complexity and ensure the level of visibility and oversight required, financial organizations may consider managing the evaluation and monitoring of all parties—including customers, vendors and third parties—on an integrated platform that drives onboarding, oversight, and the monitoring of data security and third-party software.

Rethinking regulatory trade and transaction reporting

In addition to the ever-growing list of global data protection rules, financial services organizations must stay in step with trade reporting regulations. But this is increasingly difficult, especially when customers or partners reside in multiple countries. In many cases, a single transaction will fall under the jurisdiction of several regulatory entities and be subject to several different reporting standards. Fully or partially outsourcing various trade reporting ensures the applicable expertise is always on hand when you need it (and not on the payroll when you don't).

Refocusing on core data management capabilities

When data is siloed within different organizational functions, it leads to misinterpretation and bad business decisions based on incomplete information. The solution is to standardize data management and integration practices to create a single source of truth, but most firms lack the data management expertise required to lay this vital groundwork. Outsourcing this function to dedicated experts can improve decision-making, enable economies of scale, limit redundancy, improve data quality, and add value for the firm.

Finalizing your playbook for 2021 (and beyond)

For many organizations, continuing to tackle regulatory and compliance challenges internally has the potential to incur high costs, yield disappointing results and, in some cases, lead to staff attrition as frustration and overwhelm set in. Comparing the costs and capabilities for both in-house and outsourced solutions can help financial services organizations make a more informed choice about the best way to meet increasingly complex financial markets.

For more insights into how financial services organizations can prepare for and adapt to the new rules of compliance, download IHS Markit's latest white paper, Financial Regulation: A Playbook for COOs and CCOs.

Posted 19 January 2021 by Darren Thomas, Managing Director, Platforms and Regulatory Compliance, IHS Markit and

Gerard Bermingham, Managing Director, Securities Processing and Corporate Actions

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.


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