Regtech essential for trust, improved culture

24-Apr-2017

By Daniel Paperny

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Addressing the root causes of organisational risk and the drivers of regulatory misconduct is essential for cultivating trust in Australia’s financial services sector and the advent of regulatory technology (regtech) could pave the way for dealing with non-compliance and building better internal cultures, according to a new study by Deloitte.

Deloitte’s “Managing Conduct Risk” global report identified several drivers of non-compliance within financial institutions including disparate subcultures, a lack of accountability from leaders, weak systems for monitoring or surveillance, and a product lifecycle not guided by customer needs and suitability.

Other drivers included poor human resource decisions, manual and complicated processes, a disconnected or “growth at all costs” business model, as well as conflicts of interest not being identified or managed.

“While much has been done to set standards and to restore trust, there is a desire to improve both capabilities and cost-effectiveness in meeting expectations around managing conduct,” the report states.

“Innovation that can help to improve the effectiveness and efficiency of conduct management programs will in turn create better customer and regulatory outcomes.”

Speaking to financialobserver, Regtech Association director and Red Marker chief executive Matt Symons said regtech had a vital role in helping regulators and industry participants better manage conduct by raising awareness of the key training guidelines an individual needed to meet their compliance obligations and perform their job more effectively.

“If you can make culture not just a word, but if you can actually embed the right risk awareness in the organisation as a whole and particularly the customer facing field ports, I think you’ll go a long way to addressing some of the compliance issues that have challenged the industry at this point,” Symons said.

“Regtech’s really arming the people in frontline roles and those engaging with customers with the information to ensure what they’re assisting the customer with is ethically and legally appropriate and in the customers’ best interests.”

On the question of weak surveillance systems as a catalyst behind compliance breaches, Symons noted the potential of regtech in real-time risk mitigation but also said it had wide-reaching applications in an increasingly complex organisational risk environment.

“A lot of people think about monitoring systems in a negative policing context but what we’re moving to is a world where these systems can be helpful for financial services firms in making useful recommendations,” he said.

“It’s moving towards a model where, for instance in an advice practice, the regulatory technology helps an adviser not just be aware of where they’re making mistakes but also identifies client opportunities.”

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