The digital transformation of compliance has begun. The emergence of technologies such as cloud computing, artificial intelligence, crowdsourcing, and blockchain is accelerating the demise of the manual pushing and parsing information. Financial institutions have been at the forefront of adopting these technologies for “front office” functions such as marketing, digital banking, and customer experience yet have been slow to transform the “back office” functions where they are still moving things around. A key step in this process is “Dematerialization” or, the process of using fewer things to create more output.
Compliance is a painful and rapidly growing problem for banks and other financial institutions and it is about to be disrupted and dematerialized. In the fight against ever-changing and increasingly burdensome regulatory obligations, financial institutions have spent a tremendous amount of capital to get ahead of this problem but haven’t achieved any material advances on the problem.
In a prior post, we discussed the cost of moving “atoms” vs. moving bits. Following this theme, one of our predictions for 2021 is that the digital transformation will accelerate in the back office and begin the dematerialization of compliance.
We think that completing the digital transformation and dematerializing the process is one of the key steps that need to be taken in order to solve this problem. Banks can no longer depend on physical reviews, people, or manual processes in order to scale. They MUST adopt a few core strategies in order to right-size cost, maintain future flexibility, and increase compliance readiness. As a company, one key area of focus has been on third party compliance and vendor management. Here are our suggested strategies:
Accelerate Digital Transformation. Moving and storing physical things is not only expensive, but it is also a security liability. Possessing your third-parties’ confidential and sensitive information is risky. Encourage all of your third parties to submit information electronically via secure means.
Embrace the Collaborative Economy. Historically, financial institutions have been hesitant to share information with competitors. However, opportunities abound to collaborate in areas that are non-competitive. For instance, third party diligence isn’t competitive but may be collaborative. The fact that a non-critical vendor completed an audit won’t impact the top line but will reduce your cost. The “Uberization” of third party data can reduce your risk and increase compliance.
Unleash YOUR Smart-Crowd. The professional experts in your organization have a vast amount of latent information that can prove very valuable. Relative to third party compliance, being able to create transparency across the organization and enable rapid sharing and assessments can positively impact your risk stance.
Trust Exchange has been at the forefront of solving these critical problems. We can show you how to save HUNDREDS of THOUSANDS of dollars leveraging a network effect solution. If you’re under pressure to reduce cost and increase compliance, request a DEMO.
