What is Regulatory Change Management & Why Does it Matter?

Financial institutions face an overwhelming number of regulations within different regions and from various regulators. Regulatory change management (RCM) is one way to bring order to the chaos.

It is estimated that over 300 million pages of regulatory documents will be published by 2020, and over 600 legislative initiatives will need to be sourced, reviewed, aligned, and monitored by financial institutions..1

This article dives into regulatory change management from 10,000 feet: What is it? Why does it matter? What do you need to know? Keep reading to learn more.

What is Regulatory Change Management (RCM) & Why Does it Matter?

If executed properly, governance risk compliance (GRC) can help financial service firms become more successful. In a nutshell, regulatory change management—a component of GRC—is the management of policy, regulatory, and/or procedural changes that apply to your organization.

Data within contracts and agreements is unstructured by nature. To ensure they remain up to date and compliant, banks and insurance companies must constantly analyze, review, and adjust their contractual language and processes. Leading financial institutions are leveraging automation and AI to augment their internal human expertise in this regard. In doing so, they can more efficiently find, manage, improve, and/or address the following:

    1. Sector exposures and jurisdictional change
    2. Impacts related to forbearance and force majeure clauses
    3. Ongoing regulatory change
    4. Client lifecycle management
    5. New international standards, such as the replacement of LIBOR
    6. GDPR/privacy regulations and the upcoming IFRS 17 impact

Identifying these regulatory changes and potential risks within a mountain of contracts and agreements, however, is easier said than done.

Risk and exposures are embedded in large unstructured datasets: legal documents and contracts. Efforts have been made to digitize this information. However, new information sources and needs pop up daily, making it nearly impossible to stay on top of. 

How Do Organizations Handle “In Effect” Regulation? What Role Do GRC Platforms Play?

Further complicating matters is the frequency of change and published guidelines that relate to “in effect/published” regulation. Teams within financial service firms struggle to identify changes to in-effect regulation. Additionally, many organizations struggle to link guidance/findings and penalties to regulations within their purview.

To deal with these challenges, organizations have staffed up large centralized teams to “hunt and peck” and distribute materials to the right stakeholders within their organization. This is achieved by using workflow capabilities typically found in GRC platforms. However, the adoption of GRC and other related solutions is inconsistent at best.

Even when done properly, there are gaps and blind spots with GRC platforms, especially when it comes to managing the volumes of unstructured (and often unmanaged) content within contracts.

What Challenges Do Financial Service Firms Face? How Can Contract Intelligence Software Help?

When it comes to staying on top of current and emerging compliance regulations, financial service firms face several challenges, including:  

      1. Massive volumes of active and legacy contracts that are not intelligently digitized
      2. The inability to scale to (manually) deal with the changing landscape of regulation
      3. The use of separate, siloed systems that make it difficult to get a clear view of all critical documents impacted by regulations
      4. The risk, expense, and inconsistency of using third-party or offshore resources
      5. The need for ongoing review of contracts, agreements, and legal documents (which increases expenses, delays decisions, and negatively impacts customer experience)
      6. Generating meaningful ROI from digital transformation initiatives that fall short of expectations

Most financial service firms have built solutions or, more often, manual-intensive processes to address the need. But that often means asking your team to review and re-review document sets, which is a waste of precious human resources. By any definition, these makeshift solutions only create new problems. Adopting a robust contract intelligence solution means taking a more deliberate approach to regulatory change management.

By leveraging automation and AI, you can:

      • Accelerate the process of discovery and review as new regulatory change challenges arise and the volume of complex unstructured data continues to grow.

        Reduce manual busywork
        associated with reviewing contracts by hand to find the relevant data

      • Deliver powerful data insights
        from any document to the platforms and individuals who need it. 

The Final Verdict

When it comes to dealing with ongoing regulatory change and the associated risk identification and mitigation, technology is key. With the right contract intelligence software, you can automate processes and perform human-like operations at scale. On the regulatory change management front, financial service firms must find a way to do more with less. Adopting a robust contract intelligence solution is one way to streamline the process. The right contract intelligence software brings structure to unstructured data and provides real-time insights, without requiring you to overhaul your current investments and architecture. Simply stated, the right contract intelligence solution is a powerful weapon in your RCM arsenal.

 

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