In part one of this blog series, we used analysis from a recent JWG report on quantitative regulation to demonstrate how a persistent wave of new legislative initiatives will target financial firms over the next several years. Without technology and process innovation, financial organizations can expect compliance costs as percentage of revenues to more than double.
One of the main takeaways from in-depth interviews conducted by JWG with multiple senior executives at large financial institutions was that a project-based, highly manual, siloed approach to regulatory implementation is painfully typical across the industry. Regulation tends to be addressed in a piecemeal manner, with disparate projects being set up when a new regulatory obligation is defined.”
— Ready for Digital Regulation? JWG Ltd., March 2019
Though it may seem impossible when looking at the current state of data storage and retrieval, gaining a holistic view of data and securely sharing access to that data with regulatory agencies in real time is an attainable goal.
Achieving an always-on, 360-degree view of your data that can be shared with regulators can meet the looming challenge of digital regulation.
In the final post of this three-part blog series, we will lay out the path to digital regulation, discuss its strategic implications and explain the promise of the data hub—a feasible solution to an end-state that will help firms integrate with agencies, curb costs and remain compliant in real time.
The path to digital regulation requires a multi-step process, not a simple IT initiative. Buy-in from humans is key and comes in the form of leadership from senior management. The natural urge to enact short-term fixes, tweaking legacy systems or dedicating more resources to compliance only postpones the inevitable.
We believe developing a long-term strategy for compliance is a necessity, one that requires a fresh view of data, all data. With regulators demanding access to more data types in context, industry leaders should ask, “Are we taking a strategic approach to our risk and compliance data architecture?”
By laying out existing processes and systems, managers should be able to ascertain the current volume of ad hoc regulatory requests and establish a trendline for when their number is more than the current state can bear. Once the inevitable need is established, firms should determine if the right data foundations are in place to assemble the 360-degree views of the operation necessary to meet the challenge of digital regulation.
Moving past a project-based, manual and siloed approach to compliance represents a significant paradigm shift and may be a challenge for many organizations. Traditional database architecture becomes a bottleneck between the source of the data and the target outcomes of both the business and the regulators. It requires an extensive amount of business analysis before data can be modelled and its governing rules defined for processing.
Technology is out there to meet this challenge, allowing firms to change their approach to operationalizing their data. Systems based on AI, machine learning, natural language processing and distributed ledgers will support automation objectives. However, none of these capabilities can be deployed without solid data foundations and governance practices.
Gaining a complete view of all legacy architectures and developing an enterprise-level data strategy are keys for success in the face of expanding compliance conditions. Leading financial services organizations have already taken that critical first step towards development of an operational data hub. A data hub can scale beyond the limitations of existing systems, ingest data from all sources, unify that data, offer advanced search and security and provide an audit trail across private and public clouds.
The MarkLogic Data Hub enables financial organizations to keep pace with the demands of digital regulation because of its flexibility. The traditional data integration processes across relational databases makes them ill-equipped to deal with a rapidly evolving set of business requirements and requests.
With a MarkLogic Data Hub in place, incomplete data no longer prevents effective, real-time compliance. Firms can link and match datasets typically contained within different systems and applications for compliance purposes. In an agile manner, they can bring their data together out of applications and leverage an actionable 360-degree view of that data—integrating it with the similarly automated agency systems in real time.
While critical for compliance in the age of quantitative regulation, a MarkLogic Data Hub offers firms more. Not limited by data in silos, the platform enables compliance data for other business uses, including product and portfolio development, pre-trade insights, enterprise risk management and information security.
Diagram – Example of MarkLogic Data Hub Framework for Regulatory ComplianceBy unifying data out of previously disparate silos, firms not only enable simpler, more agile compliance efforts, but also better service needs of multiple stakeholders both inside and outside the organization—laying the foundation for the future necessity of AI and machine learning in the process .
Achieving today’s goal of removing human touchpoints from compliance processes is just the beginning. Sooner rather than later, systems will have to adapt automatically to new policy initiatives and changes to existing ones.
The enterprise-grade MarkLogic Data Hub enables users to solve some of the biggest challenges with AI by simplifying data integration, removing IT complexity and ensuring data governance.
Horizon scanning, an early warning system for upcoming regulatory and legislative changes, is a good example of how a data hub can be used to enable AI. With this use case, machine learning is employed to read structured and unstructured data from various sources (papers, bulletins, articles, news feeds, blogs, etc.) in order to understand and anticipate where regulations may be heading, and develop appropriate calls to action. Sustaining an effective machine learning program for horizon scanning requires integrated data that has been contextualized through the application of smart mastering and semantic techniques.
By deploying a MarkLogic Data Hub, your firm not only addresses today’s need for always-on compliance in the age of digital regulation, it stands ready for a future that demands a smarter approach to data architecture.
MarkLogic provides the data platform underpinning regtech solutions at leading financial services firms globally. We’ve not only helped our customers address requirements for many of the most complex transparency and privacy regulations, such as MiFID II, BCBS 239 and GDPR, we have also simplified the effort for addressing future obligations.
MarkLogic is being used to both satisfy regulatory obligations and facilitate the operationalization of data across entire organizations for faster insights and more effective compliance. To find out how, please watch Regulatory Compliance and Insight in One Solution.
To find out how we can help your organization simplify integration of your regulatory data, please reach out to your account executive or contact us directly.
Ed Downs is responsible for customer solutions marketing at MarkLogic. He draws on his considerable experience, having delivered large-scale big data projects and operational and analytical solutions for public and private sector organizations, to drive awareness and accelerate adoption of the MarkLogic platform.
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