Putting the Consistency in the Inconsistency: The Importance of a Global Regulatory Framework

Date: March 26, 2018

Deloitte’s 2018 Regulatory Outlook states that even with all of the regulatory discussions and progress toward regulatory transparency both in Europe and in the United States in 2018, the uncertainty from a global regulatory perspective will remain. 

The Outlook specifically points out that “[f]inancial services firms need to be prepared to deal with the challenges of diverging regulatory frameworks. They will need globally coordinated approaches to understand overlaps, incompatibilities and potential synergies.” This could not ring more true as we move further into 2018. As organizations continue to expand on their global approach to operations, business processes, and communications, it is critical that these frameworks and solutions are in concert with one another to provide the ”consistency in the inconsistency”.

With the market volatility and the looming specter of rising interest rates casting somewhat of a shadow over the U.S. and other world markets, investors, regulators, and other industry stakeholders will continue to aim for increased transparency. As the roles of risk committees take a stronger position in the day-to-day local and global organizational decisions, Deloitte states that it is imperative that these firms take a coordinated approach. Assessment of risk and its impact on day-to-day decisions has become imperative to any organization. The ability to assess that risk in various global jurisdictions means that a focused framework is critical to that mission.

Having a global regulatory framework allows financial services organizations and administrators the ability to stay ahead of the fast pace of regulatory change, integrate those changes, and adapt to new regulatory requirements. The consistency within a regulatory framework will help firms better adapt and react to the increased inconsistency that is occurring throughout the world and needs to focus on three key areas:

  1. Technology –The adoption of cloud-based platforms can provide a consistent approach and framework that enables firms to quickly adapt to the fast pace of regulatory change. Technology can provide the consistent backbone that organizations in divergent markets can lean on in ever-changing landscapes.
  2. Regulatory Analysis Framework – Maintaining a team and organizational process with regulatory expertise is critical for staying up-to-date on regulatory movements and challenges that the market may face. This framework provides a critical communication channel and feedback loop between the regulators, financial services industry, clients and even technology providers to ensure consistency in analysis, interpretation and capabilities to meet the needs of the applicable jurisdiction.
  3. Data Stewardship – A consistent and global data stewardship approach is necessary for an agile and efficient response to regulatory change. This can encompass strictly the centralization of data across an organization or provide a single client portal to ensure consistency in approach and experience regardless of client size, need, regulatory jurisdiction, etc. The focus on data and having ‘consistency in the inconsistency’ allows for a more measured and predictable approach not only where synergies may lie, as Deloitte mentioned, but also where incompatibilities may exist, thereby necessitating process changes.

Looking at this from a technology and operations perspective, a global regulatory solution, and in parallel with that, a global regulatory framework is critical to these organizations to evolve and respond in today’s turbulent and less predictable landscape. These operational landscapes can vary from region to region and department to department within a single organization depending on which jurisdiction is at the forefront at any given time. Many have discussed having a more pan-European approach to allow for a consistent view and experience across Europe regardless of jurisdiction. This approach also allows financial services organizations to meet the regulators’ continually changing requirements along with the confidence to meet their increased scrutiny.

With the level of effort required to coordinate collectively across departments, jurisdictions, and operations, it is critical that the technology used and integrated into these organizations provides a level of consistency, flexibility, and efficiency to allow the mechanics of data integration, review, and filing to be easily assimilated as requirements change. Having a global regulatory technology framework allows organizations to focus on their operational connectivity, responsiveness, and service to their clients.

As we see regulation across the globe move at different paces and with varying requirements, it is critical that a global regulatory framework that allows for the ”consistency in the inconsistency” is adopted within large global organizations. Flexibility, adaptability, and agility, all of which should be part of a global regulatory framework, are key to provide the services clients need to adapt to changing regulations across the globe.