IBM’s acquisition of Promontory Financial Group will help Big Blue advance its compliance offerings.
IBM is acquiring risk management and regulatory compliance consulting company Promontory Financial Group, and will be adapting the IBM Watson cognitive capabilities — the natural language processing and machine learning — to regulatory compliance.
In fact, IBM hopes to replicate for compliance the IBM Watson capabilities that have been applied to clinical medical data, research, and guidelines training. Essentially, the Watson system helps uncover insights from large amounts of unstructured data. This could prove useful when applied to “directly address the massive operational effort and manual cost of escalating regulation and risk management requirements,” IBM officials say.
Promontory will accelerate IBM’s development and machine training of cognitive solutions for risk and compliance, officials say.
“This includes solutions for tracking constantly changing regulatory obligations, expectations and control requirements, as well as solutions that address specific compliance needs, such as financial risk modeling, surveillance, anti-money laundering (AML) and Know Your Customer (KYC),” IBM officials add.
The Promontory-IBM-Watson collaboration will extend IBM’s consulting and services offerings to “help clients dramatically reduce the cost of regulatory compliance.”
IBM plans to have the “nearly 600” Promontory employees “apply their expertise to train Watson as part of our first major offering of Watson Financial Services,” a spokesperson says in response to questions from FTF News. “The fact is more than 20,000 new regulatory requirements were created last year alone, and the complete catalog of regulations is projected to exceed 300 million pages by 2020. The savings could be significant if we applied Watson to the problem, given the cost of managing the regulatory environment represents today more than 10 percent of all operational spending of major banks – or more than $270 billion per year.”
The machine-learning aspects of Watson will enable the system to “continuously” take in regulatory information “as it is created and through interaction in real-world applications,” IBM officials say. “And knowing more means the professionals will be able to see markets more clearly and remove risk.”
What Watson is doing to transform oncology by working with the world’s leading oncologists, we will now do for regulation, risk and compliance,” says Bridget van Kralingen, senior vice president, IBM Industry Platforms, in a prepared statement. “Promontory’s experts … will teach Watson and Watson, in turn, will extend and enhance their expertise.”
Promontory’s staff of 600 professionals are based in North America, Europe, the Middle East and Asia Pacific, and no layoffs are planned, IBM officials say. “This acquisition is about expanding capabilities in this area,” the spokesperson tells FTF News. The target audience for the IBM-Watson-Promontory efforts will be “any financial institutions that face large scale regulatory/compliance issues,” the spokesperson adds.
Promontory, which will operate as a wholly owned subsidiary, is the first example of new capability from IBM’s Industry Platforms business, launched in August, officials say. The new business was formed to build open vertical platforms that will integrate IBM Cloud, Watson and capabilities from across digital ecosystems of specialized providers, and serve multiple clients in an industry – delivering dramatically reduced costs for outcomes spanning speed, quality, audit-ability, security and transparency.
Headquartered in Washington, D.C., Promontory has 19 offices in North America, Europe, Asia, Australia, and the Middle East, officials say. The planned acquisition is expected to close later this year and is subject to regulatory review and customary closing conditions. IBM declines to disclose the financial details of the transaction.