Managing Regulatory Change in 2016

In recently speaking with clients, industry collaborators and professional friends who are responsible for or involved with regulatory change management, there is a strong sense of finding ourselves truly down the rabbit hole, and for now at least, having tea with the Mad Hatter! (from Lewis Carroll’s Alice’s Adventures in Wonderland).

Our combined efforts to understand, interpret, distil and codify relevant regulations leaves us feeling as if we are trying to answer the Mad Hatter’s answer-less riddle. (Why is a raven like a writing desk?) For literary context, the Mad Hatter’s riddle has no answer and exists solely to perpetuate confusion and disorder for Alice. In Wonderland, chaos is the ruling principle!

What does our Wonderland Tea Party look like? Industry commentators have recently noted that the Financial Services regulation will continue to dominate the agenda in 2016. In the US the focus will be on Basel III compliance and SEC version of swaps reform (substantially different from the already deployed CFTC swaps reform). In Europe, EMIR’s implementation will continue to gain momentum while the MiFID II rules are in final stages of approval (or agreed delay). Basically, with Europe two to three years behind the US in terms of financial reform, the region has entered the critical phase of rule finalisation, deployment and understanding of the reality of new requirements’ impact on the market.

For professionals whose functional roles require them to work in this chaos, it is imperative that we define and then utilise a framework that provides a guideline to / or pathway for strategic regulatory change management. The model should, in the vein of all good capability maturity models, provide a framework depicting what progress looks like across stages of regulatory change management, and offer a calibrated path to improvement, which is readily tailored to an organisation’s business strategies, strengths and specific priorities.

A governance, risk management and compliance think tank stresses that fit-for-purpose regulatory change management requires any organisation to be aligned with what regulatory risk means for the firm. It therefore must involve participation across the organisation at all levels; so that uncertainty and the impact of regulatory change can be identified and monitored. In order to assist with conceptualising the reality of the new requirements’ impact, the think tank has developed a Regulatory Change Management Maturity Model that can be used to determine an organisation’s capability maturity in the specific domain of regulatory change management processes, which must also include relevant information and technology architecture. The five levels of maturity range from Ad Hoc(unstructured) through to Agile (fully deployed regulatory intelligence architecture).

This is exactly the type of capability that needs to be utilised in the prevailing circumstances. As I noted previously, in the context of Data Governance, get the right help if you need it; subject matter experts and skilled practitioners exist, and in my experience have proven to be invaluable for firms facing a dizzying array of disruptive regulatory demands that need to be responded to against a backdrop of manual processes, legacy data and sub-optimal technologies. Firms clearly require recourse to practical and applicable guidance and solutions across data connectivity, workflow, data management and regulatory rules deployment.

In my last post we spoke of data provenance and lineage. This post extends the “provenance” context to the need for an audit trail of the sourcing of and application of regulatory policy, specific to a multitude of jurisdictions and different regulation types. At iMeta we believe that systems like the Assassin Client Lifecycle Management platform go a long way to providing a technological environment, where policy can be deployed onto a configurable rules engine, providing for the industrialised, standardised, deployed and enforced codification of policy. The platform and its capabilities aligns with the proficiency levels described at the “Agile” end of regulatory change management maturity, i.e. deployed in conjunction with feeds from regulatory knowledge providers, Assassin would be a composite part of a fully organised regulatory intelligence architecture that allows responsible teams and individuals to track adherence to policy and provide demonstrable audit of both regulatory (content) lineage and policy application.

Getting back to the Alice in Wonderland analogy; the book ends with a final scene where Alice’s sister changes the tone of Alice’s journey from harrowing quest to childhood fantasy. Explanation of the story tells us that the sister’s interpretation reduces Alice’s experience of trauma and trivialises the journey as little more than a “strange tale” that Alice may eventually recount to her own children. My desire for 2016 is that we (end users, consultants, data providers, software vendors etc.) will work together to manage regulatory change strategically, thereby mitigating our own trauma and trivialising this incredible period in the markets to little more than a “strange tale” that we may or may not tell our grandchildren about.

Mark Bands, Head of Product Strategy & Regulatory Intellignece