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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.
