In association with Fingerprint Supervision
What does the future look like for compliance functions, and how will technology drive change?
At first glance, the term ‘future-proofing’ can look like a misnomer. Nobody can predict the future, so any attempts must be exercises in speculation. That said, a quick look at the winners and losers in the market will show that those who get ahead and stay ahead are those who are willing to learn and evolve at a faster rate than their competitors.
This is easier said than done. Financial Services is a demanding sector and keeping up to date with the latest technology can seem an unnecessary extra task. Technology can make your life easier, but not if you’re constantly running to keep up. So how can you position your firm to reap the benefits of innovation? We spoke to leading industry experts to find out.
The world has changed, you must change too
The old approach to technology was to employ a fortress-like model. Employees worked in a central location with company-issued equipment that could be updated fairly easily. The shift to remote working has upended that, creating a situation where there are far more risks to business continuity and compliance, and uncertainty around how to manage this new working environment.
“Traditionally in our world we were focused on this firewall approach where you’ve got a perimeter security and a physical office location and you assume that when you bring a device into that controlled environment, you’re safe and secure,” said George Ralph, Global Managing Director of RFA. “Now we’ve got lots of people home working and no longer behind that firewall.”
Of course, it is easy to focus only on the downside and neglect the potentially transformative benefits new technology can bring to a business. For example, many firms found they were able to shift very easily to remote work thanks to the cloud-based systems they had in place already. What’s more, far from a loss of efficiency and motivation, many employees report being happier and more productive thanks to the flexibility remote work offers. Fingerprint CEO and Founder James Hogbin noted the rise of cloud technology has been transformative for many firms.
“Nowadays you can just plug into a service at a very low cost and get a much better, much more comprehensively managed offering than you could by hiring kit and people internally,” he said.
However, new technology always takes some time to filter through to everyone, and different firms are at wildly different levels of adoption. For every organisation that enthusiastically embraces the latest innovations, there are others who prefer to throw people at the problem.
That approach is only going to get harder and harder. As regulators improve their technological capabilities, the expectations they have for firms rise precipitously. Every firm now generates an enormous amount of data and could quickly find themselves facing difficult questions if they are unable to stand up to questioning on it.
“The FCA has invested heavily on systems and are now ingest and interrogate trade data,” said Marc Salter, Senior Director at ACA Compliance, “their ability to investigate a firm’s trading and come back with pinpoint questions about a particular trade on a particular day regarding a particular trader or client account”.
How to get your firm up to speed
The biggest challenge can be knowing where to start. You need to know what technology can do for you before implementing anything. Firms usually don’t think in terms of their technology needs, they think in terms of the problems they have. And technology can help solve those problems.
Jon Carp, founder of Finceler8, said the starting point for firms should be to look at the problems they are facing and try to decide on what their ideal would look like in terms of automation and technology:
“What they should do is have an idea of what utopia looks like. Once they do that, often what they find is that there’s a number of solutions that offer a high percentage of that utopia,” he said.
Building this unified vision for your technology strategy helps to prevent siloed thinking. It’s all too easy to simply focus on buying a narrow solution for a very specific problem and miss the wider benefits that can come from integrating technology across the board.
Another approach is to start by thinking about your firm’s data and the ways it can be used. As the amount of data each firm holds proliferates, so too does the opportunity to use it to improve all sorts of business processes. We have seen this approach pay off. Some clients have begun to use the data that our supervisory solution collects, to break down the most effective sales approaches, breaking down their biggest sales and using the data to train staff.
Before you get to that stage though, you first need to be able to bring people on board with new technology internally. This can be a difficult task, but the best way to do it, says George Ralph, is to stop focusing on technology and begin speaking about it in terms of risk.
“Strategies and technologies are changing all the time,” he said. “And the people running these businesses are not technologists, nor should they be. They’ve got their own jobs to do, so we have to translate it. Risk is something that every single person leading a business understands.”
He added that educating people on risks was often the key to driving adoption of technology, but making sure people kept using it was a different issue. For that, it’s crucial not to force it onto people, instead focusing on finding something that fits their needs and that they like using.
Prepare for further change
Even once you’ve brought your firm up-to-date in terms of technology, you can’t afford to sit still. The sector is constantly evolving, and this is something you need to keep in mind when you’re researching which solutions to implement.
This requires a delicate balance. The large platforms might offer the most pedigree and stability, but by definition the best-established technology is highly unlikely to be the cutting edge. On the other hand, firms can rarely afford to take a punt on an unproven upstart that may go out of business before long.
The key, said James Hogbin, is interoperability. Solutions that can easily integrate with one another, give you the flexibility to constantly evolve as new technology emerges.
“I think the future looks like a whole small federation of things that integrate through an open API. These big trading monoliths just can’t keep up. The marketplace is too broad,” he said. “You can’t expect a single firm to be able to do compliance, automation, TCA, pre-trade compliance, trade reconstruction, analytics, visualization, order management and so on, it’s too much. What you want is a partner that can move at the speed of innovation, and if they can’t, you should be looking for a new partner.”
Future-proofing your firm requires a shift in perspective more than any particular solution. The rate of innovation is accelerating, and those who can get in front of the wave will be able to ride it to far greater levels of effectiveness, risk management, and profit. Those that can’t however, will quickly find themselves outmatched.