Drivers of change in Risk, Finance and Compliance (RFC) Technology

Over the last six years or so banking, financial services, and insurance (BFSI) firms have redoubled focus on RFC technology, data management, flexible IT architecture and accuracy of reports. So far, at large multi-national BFSI firms, the RFC function was local within a country, or within a regulatory jurisdiction, or for a legal entity or within a business unit. Post the financial crisis, regulators have been building an eco-system to:

Remove regulatory arbitrage between different jurisdictions and types of firm
Make the board of directors of the firm responsible for regulatory compliance
Improve the culture of regulatory compliance for each business decision
Measure Systemic Risks in their jurisdiction by continuously monitoring the risk being built-up within the economy through near real time risk reporting.

At a company level, all this requires standardization, simplification, configurability, automation and near real time measurement and reporting of risk, finance and compliance metrics. This necessitates consolidation of applications and enforcement of data quality and data governance.

To support these initiatives, regulators have issued (BCBS 239/ Model Validation/ Report accuracy) guidelines to improve data quality and build data aggregation capabilities. Non-compliance with data quality and IT related requirements will now attract supervisory penalties, additional capital and supervisory actions. Regulators are now insisting BFSI firms not only achieve the required level of data quality and IT, but also continuously monitor and measure the same.

To meet these requirements, BFSI firms are taking the following actions:

Adopting near real time, low latency analytical technology – ETL, EAI and ELT technologies
Synchronizing definitions – data dictionary and automated meta data management
Focusing on a single source of truth - reference data, single data acquisition layer, single data dispensation layer, audit trail, and automation of manual entries
Standardizing computation engines - SOA technology, configurable engines, use of business rule engine technology, big data and parallel processing technologies
Reporting – Result Area Creation, visualization, empowering users and a domain led approach.

All these actions are dramatically changing the RFC technology at BFSI firms. The changes go way beyond technology into the realm of business process, cost structures, efficiencies, team size and team spread. In the coming weeks we will discuss impact on each of these.

I’d like to hear the changes you are seeing in RFC technology at BFSI firms. Please share them as comments below.

About the Author

Mohan Bhatia is the General Manager and Domain Consulting Head for the BFSI Risk and Compliance unit. In his role he is responsible for capability development, thought leadership, developing innovative business and delivery models, engaging CROs, CFOs and CCOs, client satisfaction, engaging the analyst community, and revenues of the unit.

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