Data is the fuel for compliance. For effective compliance management, data management is critical. As per independent Banker, banks have spent more than $321 Billion on compliance management and more than $340 Billion on fines. In today’s ever-changing data and compliance world, chief executives are seeking better ways to manage, document and report. This can be achieved by investing in capabilities that automate and streamline data management processes.
Benefits of Data-Driven Compliance:
As a traditional rule of thumb, if you go back maybe 10-15 years, the term compliance was associated with regulatory reports. The trend has changed recently. The regulators have explicitly been asking for supporting data for the reports submitted. Data quality and auditability are critical. The compliance teams need to know and trace how the data reach the reports submitted to regulators right from the original loan, payment, mortgage, or deposit systems.
The time has come when the compliance team needs to have a basic background of data. That doesn’t mean they need to be data experts, data engineers, or data scientists, but perhaps need to know
- What are the data elements that are being received and reported?
- How are things being calculated?
Compliance teams cannot just depend on or blame the CIO or Chief Data Officer or CTO teams anymore for data. The regulators have changed the mindset and that’s why data-driven compliance is important. The technology, people, process, and management of data from data sources to reporting combined is what makes data-driven compliance.
What are the right questions to consider before moving towards data-driven compliance management?
To begin with:
- Are we as “people”, ready? This means that is the compliance team ready to be open-minded and ready to understand how data functions and flows. Are they ready to take ownership of some of the data components? Hence, the people aspect of it is very important.
- Process Ownership: When you say data-driven compliance, essentially, you’re combining traditionally two workflows- a workflow that is being managed traditionally by the CIOs or CDOs, which focuses on data, and the other one is compliance, which is managed by the chief financial officer or chief compliance officers. Thus, when it comes to submissions of reports while taking a data-driven approach to compliance, one must think holistically as both the teams are going to work with each other to make data-driven compliance an objective and to some extent, most likely the owner will fall on the compliance head.
- Leadership: Compliance chief compliance officers nowadays are getting penalized or punished in some or another way for not being able to explain how a particular report is being built and the supporting data. Thus, blaming the process which is not under them and cannot be digested by the regulators anymore. The process starts with compliance leadership, then it starts with the people within compliance teams and the data teams. Because they now have to sit together in a synchronized agenda and function together.
Now that the team is aligned, what are the technologies that are going to be used?
Faster, Better & Cheaper: Each organization must set some objectives of why they want to do data-driven compliance. Typically, organizations want things regarding compliance:
There are a lot of self-service AI-driven technologies that now compliance teams can use to control and manage their data and they don’t necessarily need to know programming to understand the data.
- Faster
- Better
- Cheaper
If you have data-driven compliance, then your reports will go timely, you will need fewer manual interventions and as a result, your compliance reporting will be better with better data quality and better traceability, which is what the regulators and the leaders in financial institutions expect. Compliance is a big burden on community banks, credit unions, and even large banks and these automated technologies are extremely important to make it faster, better, and cheaper. Data-driven compliance, supported by the latest and greatest technologies such as artificial intelligence and self-service utilities should be adopted and implemented. Data is growing, institutions are merging, and they are becoming bigger so unless you automate this function, you will not be able to focus on customers. This makes data-driven compliance critical in today’s marketplace.
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