Heightened Regulatory Demands to Drive Technology-led Risk Management Initiatives in 2018, says ClusterSeven
- Model risk management will become a top priority
With regulators demanding that organizations adopt an all-inclusive model risk management and governance strategy, many regulations (e.g. SR11-7, ECB TRIM, OCC 2011-12 and more) are now becoming 'business as usual' in the banking and financial services sectors. Such a broad sweeping mandate is demanding a robustness around model governance and therefore calling into question the integrity of the data sources that feed the models as well as the effectiveness of controls that currently exist to ensure accuracy. Organizations will need to pull back the 'governance lens' in 2018 to take a more holistic view of their model risk management programme. This will allow them to gain visibility and understand the entire ecosystem of applications that surround each and every governance model - as well as the data lineages across the landscape.
- Sarbanes Oxley (SOX) will make a comeback
With the introduction of rules on mandatory audit rotation last year, which require public entities and listed companies to put their audit out to tender every 10 years, and change the auditor at least every 20 years - the emphasis on SOX compliance will make a comeback. This will be an easy win for external auditors looking to make their mark in new client organizations. Additionally, regulators such as the
With many of these processes undertaken in spreadsheets, external auditors will look for ways to deliver against regulators' demands of more evidence of auditability and control of these applications. Without the adoption of technology-led spreadsheet management of internal audit controls by organizations, they will find it almost impossible to meet the demands of the auditors and regulators alike.
- Regulation will drive data ownership, organizations will realize the value of data for competitive advantage
Most regulations, be they General Data Protection Regulation (GDPR), IFRS 9, BCBS 23,9 SOX, SM & CR, Dodd-Frank or any other, ultimately aim to enforce data ownership and governance to ensure accuracy of financial models, minimize financial risk and protect consumers. While simple in concept, due to the widespread types of data sources and complexity of models, it's incredibly difficult to get right. It requires a streamlined approach to people, processes and technology. However, those that make headway, will begin to recognize and realize the value of data for informed decision-making and competitive advantage. Due to the extensive use of spreadsheets for data manipulation-related processes, their control and management will be key to such initiatives.
- Organizations will set up temporary business processes to deal with Brexit
While the uncertainty around Brexit continues, organizations will start preparing to deal with Brexit, regardless of the shape or form it takes. Organizations have enterprise systems of course, but they aren't as flexible and nimble to change, and more so in the current uncertain environment. Spreadsheets will become the default tool that they will resort to quickly respond to changing business requirements for reporting and compliance by setting up temporary business processes/solutions as they plan for every eventuality. An automated approach to spreadsheet management will be essential to ensuring the accuracy and integrity of these critical processes to minimise financial, operational and regulatory risk.
- Major IT-led transformation in the insurance sector is on the cards
As the
- Cloud adoption of risk management solutions will gather momentum
With many regulatory bodies globally, such as FedRAMP, European Union Model Clause, SOC 1 and 2, among others, having recognised Microsoft Azure as a secure platform, the cloud ecosystem for risk management solutions will gather momentum, which will encourage their adoption among organizations. Risk management cloud solution providers will innovatively leverage this ecosystem to expand their offering and delivery options to beyond traditional areas including internal audit, and risk and compliance.
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ClusterSeven was founded in 2003 and established a
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