Three ways out of the minimal viable compliance trap


Three ways out of the minimal viable compliance trap

When major regulatory deadlines are around the corner, the financial industry inevitably tends to respond by scrambling for minimum viable compliance. Put simply, this means doing whatever it takes, regardless of the expense, just to keep the regulator at bay. The trouble is, while this approach may work in the short term, it’s unlikely to stand the test of time when future requirements appear as costs will inevitably shoot up.

This is why, as two months on from the implementation of MiFID II, financial institutions need to take steps to quickly adjust to ensure their data is in line with all recent regulatory changes. This boils down to three categories: consistency, quality, and cooperation.

1. Consistency

The first step should be an obvious one. In order to adapt to achieve sustainable long-term compliance, it's not affordable to keep adding to a vast array of information, already housed across multiple systems, every time a new rule is enforced. If firms try to address each data challenge with a new approach this will only cause more compliance headaches. They need a consistent form of information housed in one easy to access location.

Having your data housed in one central hub means that if and when further regulatory changes come into play, you’ll not only have an accessible and clear source of data, but you’ll also be able to cross-reference the data in that hub. The latter can be a crucial time saver – especially given the crossovers between many of the regulations. For firms, getting rid of siloed information scattered across the business and consolidating their approach will streamline compliance easier, and free up time for compliance officers to add value to other important areas of the business. 

2. Quality

Once local regulators have established a level of data consistency from industry players, their focus will inevitably shift to the quality of the data they are receiving, and firms who are sending data which contains mistakes such as inaccurate pricing will be penalised.

As a result, once the noise has died down around consistency of data, we can expect firms to be evaluating what more can be done with their reference and market data. This means that firms who are ahead of the game on providing or finding quality sources of information are likely to have a competitive advantage.

3. Cooperation

January’s regulatory changes have completely transformed the way in which information needs to be exchanged between market players. For example, manufacturers of financial products need to think in much more detail about how they will send out data and documents to their distributors. Both manufacturers and distributors also need to look at how they share information related to sales outside of target market.

Those finding it hard to adjust need to remember that this will likely be the case for those around you. With this in mind, the natural next step is to look at the role for mutualised approaches to the challenge, through which key industry players can bring the required information together. In the face of this, firms dealing with regulatory onslaught should be challenging their data partners to provide exactly what they need right across the business, in the form they need it. After all, as ready-to-consume data is arriving across the board in global businesses, is it not the turn of financial institutions to follow suit?