Opinion – More regulatory change to come

04-Dec-2017

By Andrew Walsh

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When the new owner of Formula One recently announced substantial rule changes designed to level the playing field and reduce the cost of execution for teams, not everyone was happy about it. Ferrari, the most successful team in F1 history, threatened to pull out of the sport entirely if the ‘regressive’ regulations, which they said would prevent them from winning, went ahead.

It’s not the first time we’ve seen big changes and controversy in F1 and it won’t be the last. The regulations governing F1 have changed countless times throughout the history of the sport to improve safety, and more recently, to reduce costs.

Sound familiar?

You’re not imagining it, regulation is getting more complex. It’s a reflection of our embedded use of technology and an increasingly data-driven world.

The growing threat of global cyberattacks and high risk of security data breaches means the need to protect consumers has never been greater and is why we’re seeing global changes in cybersecurity and privacy legislation.

The new benchmark is the European Union’s (EU) General Data Protection Regulation (GDPR), which recognises how much of our personal data is now held online and consumers’ rights to it.

GDPR aims to standardise data processing regulations for businesses throughout the EU and for Australian companies with EU links. Could it become a best practice in other parts of the world too?

In Australia, it’s predicted that the mandatory data breach notifications laws coming into effect next year will be followed by other laws similar to GDPR.

Where traditionally enterprises might have relied on hindsight and ad hoc systems to approach regulatory compliance, with the costs of compliance escalating by more than 10 per cent a year, this approach is no longer enough.

In F1, technology is constantly evolving, pushing speed and efficiency to its absolute limits, and it’s the same in financial services. The growth in regulation combined with significant developments in global fintech has led to the creation of a new breed of agile regulatory technology and tools.

Regtech is answering a massive need to control costs and introduce efficiencies, and its application in financial services is accelerating.

As levels of regulation rise and the global focus on data and reporting increases, regtech is enabling firms to transform compliance through automation and better use of data. It’s also creating opportunities to think beyond compliance.

Taking an ongoing and proactive approach to compliance means businesses must think strategically about how their partners and their technology can support their needs not only now but in the future.

This will be a challenge particularly for those already undergoing major changes to meet regulatory requirements elsewhere. But a word of caution, don’t build your next legacy system.

Just as high performance technology is integral to F1 team strategies, many wealth and investment managers are choosing to simplify and unify their technology stack in favour of a robust, scalable and integrated system. It’s a growing global trend and one that’s giving financial firms greater flexibility and capability to adapt to the increasing level of market and regulatory change.

In response to the new F1 changes, Ferrari president Sergio Marchionne apparently told analysts on a conference call that ‘if the sandbox changes to the point it becomes an unrecognisable sandbox, I don’t want to play any more’.

Those who are grappling with MiFID II and GDPR may well empathise with Sergio, but while we can expect more regulation and change to come our way, with the right mindset and the right technology, financial services can be in a better position to embrace it when it does.

Andrew Walsh is chief executive of IRESS

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