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FinTech Global: How Has RegTech Changed the Role of the Risk Manager?

FinTech Global: How Has RegTech Changed the Role of the Risk Manager?

Originally Published by FinTech Global

 

The role of risk manager is not a new position. For as long as challenges around regulation, compliance and other security risks have existed, so has been the role of trying to manage them.

In a world where financial crime continues to evolve and become harder to catch, the role of risk manager continues to change – and become ever more complicated for the risk manager.

Rob Anderson, subject matter expert at Acuminor, said, “As financial crime regulations, threats and risks continually evolve it is by no surprise, that financial institutions and those accountable and responsible for managing risks, have struggled to keep pace with the complexity and level of change.

“When considered carefully, and implemented effectively, regulatory technology can become a key strategic partner and enabler for firms and risk managers to improve their effectiveness in managing financial crime compliance, threats and risks, whilst also helping them too to demonstrate pragmatism and proportionality in their risk-based approach.

“Moreover, this can even help them to evolve and expand safely, improve efficiencies in their resource requirements and ultimately demonstrate their valuable contribution to a firms bottom line – a key factor in these current economic headwinds.”

Anderson added that in this sense, RegTech solutions are similar to a ‘fourth’ line of defence. Acuminor remarked that business-wide risk assessment is a key founding pillar to enable the design, scoping and application of a control framework proportionate to the risks an organisation faces, without which it is hard to demonstrate effectiveness.

Anderson commented, “It is difficult to expect risk managers to know, or memorise all the potential risks the organisation may be exposed to, but now they don’t have to. An effective BWRA can also help identify situations of unnecessary over control, which may impact customer experience, an area of critical importance in a highly competitive financial services environment.

“Alternatively, it could identify needs and provide supporting intelligence rationale, for the adoption of wider reg-tech applications, for example, more robust monitoring or identity verification solutions.”

While the evolution of financial crime over time has brought new challenges, it has also brought opportunities – an opinion echoed by David Griffiths, director of regulatory affairs for Eventus.

He said, “RegTech has widely expanded the options for risk and compliance managers, from both specialization and best-of-breed solutions to providing a healthy TCO through cost-effective hosted and SaaS solutions. They now have access to more time-critical information and can leverage a wide array of technology to address their needs. Risk managers can now focus solely on strategies for managing risk rather than being part-time solution designers and builders.”

Griffiths remarked that as demand for better FinTech has ramped up across asset classes and geographies, so has the need to remain current with regulatory mandates.

He went on, “This is a heavy lift for risk and compliance managers given the breadth of multiple assets trading on different markets in different jurisdictions. Partnering with a solution provider to deliver, manage and support the business and technology solution allows the manager to focus on their core responsibilities.”

The growing presence and interest in digital assets is also offering food for thought for risk managers. Griffiths remarked, “With the advent of widespread institutional interest in digital assets, and as regulation in digital assets continues to evolve and grow, so will the responsibilities within risk and compliance. Technology has been a game changer throughout the financial services industry.

“So, whether it is dealing with cross-venue trading risk, the 24/7 ‘always open’ crypto markets or the increased volume and diversity of trading data, RegTech delivers the flexibility needed to manage the scope and scale of business and data needs.”

The role of RegTech within risk management now has not only become important, but almost mandatory. In a world where financial criminals and threat actors are finding new ways to use technology for cases of financial skulduggery, the presence of RegTech offers, as Acuminor suggests, a fourth line of defence.

Anthony Quinn – founder and CEO of Arctic Intelligence – said, “When RegTech first emerged many risk managers felt threatened by the possible impact on their jobs but in reality regulatory technology serves to augment and assist risk managers in performing their jobs so less time is spent gathering and analysing data and more time spent on understanding insights and improving risk management frameworks, that the attitude towards RegTech is overall very positive among risk managers

“It is simply not possible for most risk managers to process the amount of complex and ever-evolving regulatory landscape and technology provides a significant role in equipping risk managers with the tools they need to do their jobs in a fast-changing world”.

In a similar sentiment, Cathy Vasilev – co-founder and COO of Red Oak Compliance Solutions – commented, “The role of the Risk Manager has forever changed with the introduction of RegTech. Risk Managers now have tools to help them assess their firm’s entire risk ecosystem and access more data, allowing them to perform detailed analyses.

“RegTech can also help them to connect the different areas of a firm and work to find and establish a common standard. This enables risk managers to manage risk more holistically, helping their firm grow and become more efficient.”

 

About Eventus

Eventus is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit  www.eventus.com.