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The next generation

The next generation

We have all heard the term Regtech, but what does it really mean and why is it transforming the regulatory ecosystem in the Channel Islands?

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Senior Manager

KPMG Channel Islands Limited

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Simply put, 'Regtech' is a phrase coined from the blend of 'regulatory technology' that was created to describe the practice of using technology to facilitate regulatory requirements.  KPMG Channel Islands’ Chris Thoume discusses how the leveraging of Regtech, digital automation and data analytics is transforming monitoring and testing programmes...

In today’s environment, risk and compliance professionals are increasingly challenged to take on more responsibility, although resourcing and infrastructure often do not keep pace. Irrespective of the size of a business, this is prompting many to pursue sustainable means of becoming more efficient, whilst improving quality and broadening capabilities. One ‘pain’ area with significant opportunity for redesign is monitoring and testing programmes. Digital automation can transform this process: broader, deeper and more frequent coverage; a more dynamic and robust risk assessment process; and more meaningful and streamlined reporting, including data visualisation.  

What should organisations consider when transforming monitoring and testing programmes?

Chris Thoume: Locally we are seeing more and more of our clients seeking to use technology and digital automation to achieve better, faster and more reliable systems for monitoring and testing. In order to maximise the value in such a transformation, it is essential at the outset to consider the whole organisation and all of its various individual monitoring and testing activities. Not only will this be critical in identifying gaps and redundancies in coverage, but also in evaluating and determining an optimal target state ’to-be' model which addresses all business needs and does not simply replace the ‘as-is’ existing model. Analysis should consider the products or services, activities, systems and associated regulatory frameworks  In today’s environment, risk and compliance professionals are increasingly challenged to take on more responsibility, although resourcing and infrastructure often do not keep pace. Irrespective of the size of a business, this is prompting many to pursue sustainable means of becoming more efficient, whilst improving quality and broadening capabilities. One ‘pain’ area with significant opportunity for redesign is monitoring and testing programmes. Digital automation can transform this process: broader, deeper and more frequent coverage; a more dynamic and robust risk assessment process; and more meaningful and streamlined reporting, including data visualisation.  What should organisations consider when transforming monitoring and testing programmes?Chris Thoume: Locally we are seeing more and more of our clients seeking to use technology and digital automation to achieve better, faster and more reliable systems for monitoring and testing.  In order to maximise the value in such a transformation, it is essential at the outset to consider the whole organisation and all of its various individual monitoring and testing activities. Not only will this be critical in identifying gaps and redundancies in coverage, but also in evaluating and determining an optimal target state ’to-be' model which addresses all business needs and does not simply replace the ‘as-is’ existing model. Analysis should consider the products or services, activities, systems and associated regulatory frameworks covered by the respective testing and monitoring plans, as well as the availability and integrity of data. Considering these elements will assist in developing tangible, prioritised automation road maps focused on addressing gaps and/or shifting execution from human capital to digital automation.

The foundation of monitoring and testing programmes is a robust risk assessment. What are the recent trends in this area? 

Chris Thoume: Risk assessment continues to represent an area of heightened attention for my clients in the Channel Islands given our regulators’ risk-based supervision model and increasing international scrutiny. Among the top focus areas are: 

  • breadth and frequency of risk assessments;
  • key variables and drivers, including both qualitative and quantitative factors;
  • mitigating actions or controls; and
  • feedback loops integrating previous testing results.

Risk assessments should be a dynamic exercise in which numerous inputs such as testing results, complaints and external events are considered in ‘real time’. Testing and monitoring plans are then able to address the current risk environment. Many organisations struggle to extract the necessary insights in a timely manner to add real value. It is becoming clear that enhanced automation, leveraging integrated regulatory technology and digital automation, is a ‘must-have’ to assess risk sustainably, in a timely manner, and derive further value for the organisation.

What role is technology playing in monitoring and testing programmes?

Chris Thoume: The industry is evolving to digitalise much more of its data and processes, providing a foundation from which to leverage Regtech and digital automation to transform programmes end-to-end. The way organisations monitor and manage changes to regulatory obligations and how testing is performed, analysed and reported are all under review. The demands are very high, from internal and external stakeholders alike, to demonstrate adequate coverage and provide timely and precise impact and root-cause analysis.  In a nutshell, stakeholders are looking for better, faster and more reliable systems and reporting. To meet these demands, teams are turning to technology to collect, consolidate and map key data elements together – such as risks, regulations, policies, controls, processes and the resulting transaction detail or operational activity –  at a granular level. This capability supports not only dynamic regulatory change management, but also the oversight of business process and technology changes.

© 2018 KPMG Channel Islands Limited, a Channel Islands Limited Liability Company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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