Increasing pressure on regulatory change for financial institutions
Despite an increased focus on regulatory change over the last years, the complexity thereof is also growing at an increasing rate, leading to major challenges throughout the organisation. Executive boards struggle to steer proactively, and are typically in a cycle of watching and waiting, instead of being able to proactively provide guidance.
Although there has been a growing focus on regulatory themes, they are often not prioritised at the same level as business initiatives, leading to a lack of structural attention and consequent lack of embedding in the business-as-usual processes. Awareness of the importance of regulatory change is not consistently in place across the organisation. This is a key requirement for a sustainable approach towards regulatory change.
We find that the implementation of large, impactful laws and regulations is often suboptimal in a lot of organisations, which results in untimely, incomplete and inaccurate compliance to laws and regulations. This leads to a lot of time and resources required for remediation. In turn, this can result in capital add-ons, negative interaction and rework through Q&As with regulators, high external contracting costs, negative reporting in the media and possible reputational damage, ultimately leading to limited realisation of strategic objectives and being unable to properly perform the core tasks of the organisation.
What is effective regulatory change management?
As regulatory requirements continue to evolve and broaden, organisations must go beyond merely reacting to changes. Proactive and well-structured approaches are essential to avoid costly remediation efforts. A comprehensive approach to regulatory change management is key to ensuring timely, accurate, and sustainable compliance to laws and regulations. Therefore, an effective, efficient and ‘fit-for-purpose’ regulatory change management framework and associated function must be set up in the organisation. In order to be able to achieve this, a couple of questions need to be answered:
- What is an effective regulatory change management framework?
- Does the current maturity of our regulatory change management function match our regulatory strategy and ambition?
- What capabilities need to be in place to enable a fit-for-purpose regulatory change management function?
At ACE, we can help you answer these questions
Streamline regulatory change management with ACE REG-COMPASS
At ACE, we have developed a framework to assess the regulatory change management function of financial institutions. The ACE REG-COMPASS framework identifies six key domains that are preconditions for effective regulatory change management.
By using the ACE Regulatory Change Management Maturity Model, the current maturity level of the organisation can be determined for each of the domains of the ACE REG-COMPASS framework. This enables the organisation to compare its ambition with the current state of its regulatory change management function.
The insight gained in the ambition and current maturity of the organization must then be aligned with the appetite for change and the risk appetite. Subsequently, an implementation approach can be drawn up with specific actions, which is tailored to the strategic drivers, ambition, maturity, change appetite and risk appetite.
Our approach focuses on building and embedding capabilities across all domains for our clients, such as data-driven insight, governance, processes and ways of working. The practical benefit of this approach is that improvements can be planned on a specific/modular basis, to address the right priorities at the right time.
Reap the benefits of effective regulatory change management
Setting up effective regulatory change management can achieve important benefits, including:
Room for focus on strategy execution to reach business ambitions
Freeing up people and resources towards the realisation of strategic objectives and the execution of the core tasks of a financial institution, due to, amongst others, first-time-right implementations and reduced (negative) interaction with regulators.
Motivated employees and a positive culture
Predictably achieving results increases trust in the organization and motivation among employees. Regulatory change becomes fun again, because requirements can be proactively anticipated and integration into existing processes and ways of working is completed in a timely manner.
Sharp drop in cost of regulatory change
Avoidance of fines imposed by regulators, and thereby avoiding increased costs due to the implementation of high-pressure change or inefficient processes, consultancy costs and ad-hoc activities.
Preventing reputational damage
Reduced risk of non-compliance with regulatory requirements leads to lower risk of disciplinary measures imposed by the regulator, for example fines, an order subject to a penalty, or as a last resort, the revocation of the license.
In control and compliant
Clear approach and insight into compliance with laws and regulations, which provides comfort to key internal and external stakeholders.
If you would like to know more, please contact Pieter Vrieleman or Arthur Willigenburg. We are happy to help make your organisation more resilient towards regulatory change.