In the second part of their podcast, Neil Vernon, CTO for Gresham Technologies, and Philip Flood, chief commercial officer at Inforalgo, focus on the bottom-line and operational impacts of the pandemic upon regulatory reporting.
The global COVID-19 pandemic is driving up the costs related to regulatory compliance for new and incumbent regimes at financial services firms, but cutting-edge technologies may help with this burden next year.
That is one of the main takeaways from a recent two-part podcast with Neil Vernon, chief technology officer (CTO) at Gresham Technologies, and Philip Flood, chief commercial officer at Inforalgo, a Gresham Tech company. In the second part of the podcast, Flood and Vernon touch on the impacts of the pandemic on regulatory reporting.
The pandemic-induced lockdowns and related consequences have caused firms to reevaluate more of their regulatory reporting solutions “quicker than they potentially would have done without the pandemic,” Flood says.
In fact, the many ripple effects from the pandemic will be impacting the bottom line for many firms, Flood says, citing industry reports that spending for regulatory reporting will hit $6.3 billion for 2020 and will grow to $16 billion by 2025.
“I think that, obviously with the lockdown and the pandemic, that spend has increased as operational efficiency has reduced,” Flood says. “I think that perhaps that’s the first trend to note. So, the second trend is outsourcing the regulatory reporting solution to vendors, and it’s a continuing trend from this year as firms realize that internally developed solutions do not provide a competitive edge.”
In line with the push to outsourcing, firms prefer “to save precious development resources for strategic front office innovation and use repeatable vendor technology that can address multiple requirements, regulations, asset classes. More importantly, it helps firms control cost as well,” Flood says.
Despite all the complications caused by the pandemic lockdown, the world did not come to a halt, Vernon says.
“The world didn’t cave in. It all largely works, and regulatory reporting continues to happen, reconciliation continues to happen,” Vernon says. “Trading, of course, continues to happen.”
What also continues to happen are transaction reporting problems — many trades are reported incorrectly, particularly for some of Gresham’s largest clients, Vernon says.
“It’s not unusual for their transaction reporting clogs to have to deal with 100,000, 200,000, half a million breaks — half a million problems they need categorizing and help with,” Vernon says. “On a fast office network, that’s problematic. On a slower home network, that can actually be problematic.”
For next year, as the pandemic eases into the next chapter, firms will be looking for new ways to battle the clogs of trade breaks, Vernon says. He says that there will be more of a focus on “AI and machine learning and categorization of data to enable people to deal with these very large amounts of problems.”
The second part of this podcast also covers:
- Major regulatory reporting deadlines and trends for 2021;
- How firms should firms set their priorities;
- Budgetary issues for operations and compliance teams;
- And the areas of overlap for Ops and Compliance teams.