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Seven strategic moves for conquering risk and compliance in the banking industry

Doris Torresleon, compliance manager, FIS
Robert Berger, vice president of Sales for 360factors

November 07, 2022

When you think about compliance risk management, it can often feel like everything is jumbled together. You’ve got a lot of information, there’s no clear delineation of what everything means and finding the right path to detangle it all can seem impossible. Compliance, complexity and velocity continue to rise with greater potential for exposure to noncompliance lawsuits and other actions. Regulatory guidance and government agency expectations have a massive impact on financial institutions. And banks struggle to organize the right resources to manage risk effectively.

Today’s bank stakeholders are challenging risk and compliance leaders to provide real-time, data-driven insights to identify and mitigate known and emerging compliance risks. CROs and CCOs must strategically align their teams, tools, processes and budgets to meet this challenge – all while staying several moves ahead of competing forces. What actions can savvy leaders take today to conquer compliance and regulatory risk and deliver actionable business intelligence?

Read on for seven strategic moves leaders can take to conquer compliance and regulatory risk.

Mastering the regulatory compliance process

The regulatory compliance process is made up of four categories: Identify, assess, monitor and report. Identify includes making updates to the risk register and understanding regulatory changes. Assess maps risk to meaningful artifacts and quantifies risk data. Monitor prioritizes testing with integrated assessments and workflows. And, finally, reporting is all about getting the right data to the right audience.

It’s easy for banks and financial institutions to get overwhelmed by risk and compliance, but it’s something that can’t be ignored. To help, here are seven tips and best practices to take into consideration.

  1. Harness additional resources to identify and categorize regulatory risk.

    In addition to internal surveys, brainstorming sessions and reviewing existing risks, external resources can help you compare your compliance risks with peers and industry best practices. You need an excellent process and approach to understanding what's happening in the industry. You also need to know what's most important to regulators and any possible changes to regulations or legal risks that can impact you. If you can't see the interconnections between compliance and other threats across different categories, it is impossible to analyze how compliance risks may affect the business entirely.

  2. Use technology to evaluate regulatory changes more quickly and efficiently.

    Regulatory changes can be streamlined with filtered feeds that provide owners with targeted notifications and action workflows. With the ability to filter notifications, owners can quickly identify and manage exceptions without having to sort through newsletters, bulletins and more to get to the priority faster. From here, your bank can perform ad-hoc risk assessments and create monitoring and testing schedules for critical regulatory changes that impact the business and board strategy.

  3. Map compliance risks and regulatory inventory to meaningful artifacts.

    Mapping the risks and regulatory inventory to meaningful artifacts includes knowing which procedures, controls, regulations and training could be affected if there’s a new emergency. Consider if there are existing resources you can leverage or if you need to supplement support from outside resources. Sometimes it can also be difficult to effectively communicate to the first line to understand how they’re impacted or notify them of changes happening. Additionally, mapping is challenging to maintain with general-purpose business software, so having a sound infrastructure where you can quickly access the information for risk remedy is extremely critical. 

  4. Reduce guesswork by quantifying risks, KRIs and control effectiveness where possible.

    Suppose you don’t have a standard approach or consistent questionnaires and related formulas to calculate the strength of controls and residual risk. In that case, knowing what to prioritize can be challenging. With an interactive risk register, calculations can be performed in real time while evaluations occur to reduce the time required to generate reports. Additionally, risk metrics and the ability to analyze risks, KRIs and controls with greater frequency can enable banks to transition from a more reactive to the proactive transformation of their risk programs.

  5. Tailor compliance risk reports and data analysis to your audience for maximum impact.

    A common challenge is tailoring compliance risk reports and data analysis to the right audience within your organization. The first line, second line, executive committees and board committees require different levels and granularity of information. Technology can enable quick evaluation of the current risk appetite and can give you the ability to adjust as needed. A few best practices for scheduling and performing risk assessments are knowing the local and federal regulations, talking to those who operate the process and reviewing customer complaints to understand the root causes.

  6. Prioritize and streamline monitoring and testing with integrated risk assessments and workflows.

    Having the right data at the right time can provide actionable insight and reduce the burden on the first and second lines of defense. The first line of defense can reduce the load by mapping tests to regulations, providing procedure documents and checklist templates to users and assigning questionnaires for testing and reviews. For the second line, collecting data and documentation associated with the testing activities – including work papers, collaboration notes and an audit log of all activities performed for each compliance test – ensures accountability. Lastly, workflow automation can provide real-time visibility of the status of open and planned compliance monitoring activities.

  7. Leverage technology to accelerate compliance maturity.

    The modernization of risk and compliance management platforms and other technologies has accelerated based on work-from-home needs. Still, banks have an opportunity to benefit from these advancements moving forward. Some sweet spots include matching high-priority initiatives with low time-to-value so your organization can realize positive results quickly. However, a few technology pitfalls to avoid are managing expectations and avoiding scope creep, making sure you have the best industry expertise and knowing when to call in a partner versus a vendor. 
Predict and mitigate operational risks with Compliance Risk Indicator 

Technology can have a massive impact on your ability to manage compliance risk. Compliance Risk Indicator from FIS is an integrated, cloud-based SaaS platform powered by artificial intelligence that augments a customer’s existing compliance and risk management staff to improve productivity, efficiency and effectiveness in an easy-to-use and cost-effective solution. Compliance Risk Indicator’s risk management applications allow organizations to effectively manage risks by tying risk mitigation activities back to the standards, regulations and business requirements that drive them. For more information about Compliance Risk Indicator or the unique advantages of partnering with FIS, email getinfo@fisglobal.com.