Financial services organizations find themselves navigating through a complex ecosystem of evolving supervisory expectations and proposed changes to some bank regulatory requirements, including the Basel III endgame proposals and changes to various capital requirements for regional banks. This is on top of an increased focus on cyber risks and stricter anti-money laundering rules. Achieving compliance with the volume and complexity of major regulatory requirements can be crippling for many organizations looking to innovate and grow in highly competitive markets.
For CIOs at these organizations, the challenge lies in providing the modern tools, systems and analytics capabilities that are required to keep up with current compliance requirements. These solutions need to be flexible enough to adapt to rapidly evolving regulations in 2024 and beyond, and they need to be secure every step of the way.
Amy Gennarini, EY Americas and FSO Risk Technology Leader, offers three points of emphasis for IT leaders looking to help their organizations boost compliance and reduce risk.
1. Improve data integrity and access
CIOs need to get their arms around an evolving and expanding data infrastructure to keep pace with a myriad of compliance requirements. “Understanding what data you need to meet certain regulatory requirements is just the starting point,” Gennarini says. “You need to know the source of the data – are you getting it from the system of record? Is it properly governed and secured? Are the right controls in place to manage and track the transformation of that data from collection through reporting?”
Maintaining high levels of data integrity requires a flexible architecture that enables seamless but secure access to data, regardless of the format or where it is stored. “CIOs are investing heavily in building ‘data platforms’ that allow a single ingestion pattern, consumption pattern, governance tool or framework that can make the most of the latest cloud-based technologies and cloud-native platform-as-a-service offerings,” writes Fredric Cibelli, a principal in the EY Financial Services Consulting practice at Ernst & Young LLP. “They can still meet all of the security and regulatory requirements that weigh down financial institutions but allow easier data consumption for future use.”
EY research, carried out in conjunction with the Institute of International Finance, found that 66% of banking chief risk officers will accelerate their advanced analytics capabilities. Moreover, 52% cited regulatory requirements and supervisory expectations as one of the top factors influencing their data management priorities.
2. Scale automation of controls and processes
Automation is critical to improve the pace and efficiency of compliance tracking and reporting. “Don’t be afraid of automation,” says Gennarini, who advocates for automating controls and processes at scale to provide more consistency and tighter controls.
Automation can be applied to existing solutions to enhance performance. CIOs should explore integrations that can enhance existing governance, risk and compliance (GRC) tools, turning them “from good to great,” Gennarini says.
3. Identify and test new use cases for AI
Artificial intelligence (AI) and generative AI (GenAI) are disrupting a variety of functions across the business, and risk and regulatory are no exception. “Organizations are asking how to use GenAI for their regulatory management processes,” says Gennarini. One emerging use case is intelligent compliance mapping and assessments. Another is using AI to enhance fraud detection and financial crime compliance.
While GenAI represents “a great opportunity” for innovation of compliance practices, Gennarini emphasizes that the technology is still somewhat unproven, so organizations will need to exercise a thoughtful approach in how it’s deployed. “Responsible development of those models is key,” she says.
An increasingly complex regulatory environment continues to present challenges for financial services organizations. CIOs can help leadership teams address these challenges with modern data and technology architecture that leverages automation and AI to augment and accelerate compliance initiatives across the business.
The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
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