12.22.2021

RegTech Predictions for 2022

By Matt Smith, CEO, SteelEye

There will be little respite for compliance in 2022 as the financial ecosystem continues to rapidly change and regulatory enforcement accelerates to make up for lost time. While gazing into a crystal ball in such a fast-changing environment is difficult – the recent resurgence of a new Covid-19 strain is a good example of just how swiftly things can shift – I always like to make a few predictions for the year ahead. This time I have highlighted five compliance areas where I think we will see some clear changes over the coming year.

 1. Financial firms will fully embrace the cloud

Traditionally, the financial services industry has been conservative around moving to the Cloud. However, the Covid-19 pandemic and the rise of hybrid working has demonstrated to firms how valuable the flexibility of the Cloud is. In 2021, financial firms were already moving more data and compliance processes to the cloud, and this trend is set to accelerate in 2022. By the end of the year, it will be archaic to favour on-premise deployments to cloud based alternatives.

 2. Holistic compliance will be a priority to ease the burden of regulatory change

It is ironic that a constant for the financial services industry is regulatory change. There has been a plethora of new and revived regulatory regimes over the past decade and this is certain to continue. However, what is changing is how firms approach change. Traditionally, financial firms have tackled different regulations and implementation deadlines as separate projects – creating different teams, solutions, and data sets for each obligation. This is an inefficient approach to compliance which is finally being addressed as many financial firms have audited their data and compliance needs and determined that they can use a single data set to power multiple obligations. In the last year, there has been much talk about the value of holistic compliance in managing existing and future obligations. 2022 will be the year where this will turn into action and firms really start to invest in holistic or integrated data capabilities.

3. Enforcement action will intensify

Regulators globally are intensifying their search for negligent practices and market abuse through enhanced Supervisory Technology or SupTech programs. This is a real and true risk for firms that do not have robust operational oversight programs in place or that think that regulators are still being lenient because of the Covid pandemic. Because of data-driven approach that the SupTech applies, there are no longer any firms that are “too small to get noticed.” In 2022, compliance teams can expect regulators to take a much harder line on areas like data quality, communications monitoring, and market abuse surveillance.

4. Operational resilience will remain a key priority

Although work on operational resilience by regulators and the industry pre-dates the arrival of Covid-19, the pandemic has accelerated its development and implementation. In 2022, firms can expect increased focus on operational resilience, including that of compliance and risk processes for remote and flexible working. The firms that struggled with manual or legacy solutions throughout 2020 or 2021 can expect regulators to become more demanding in 2022.

5. Flexible working will continue to evolve

As the pandemic crisis hopefully subsides throughout the course of 2022, it is likely that flexible working will continue for a lot of companies and teams. However, trading desks and the middle and back-office departments are likely to move back to being office-based gradually. In fact, many trading or dealing desks never left the office. This is because even with robust technology in place, nothing replaces the ability to manage risk or ensure that compliance processes are being met in a controlled office environment.

As we approach the end of yet another turbulent year, it would be foolish to predict smooth sailing for 2022. We simply do not know what is around the corner in this ever-changing environment. What we do know however, is that none of the themes above are new. The migration towards the Cloud has been at play for years. So has the need for holistic compliance capabilities and enhanced operational resilience. However, the speed with which things have changed over the past 24-months has exponentially increased the need for digital transformation within compliance.

The industry must continue to evolve to make compliance departments function better. This is vital not only to ensure that financial firms continue operating within the confines of the law, but also to help ensure stable and secure financial markets.

Companies will continue to face an evolving, unpredictable landscape in 2022. The firms that think strategically about their compliance set up and start their journey to holistic compliance will be the ones that will thrive in 2022 and beyond.

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