Risk and compliance functions have rarely been at the forefront of technology. Most risk departments would have experienced the challenges of working with siloed solutions, resulting in fragmented and unstructured data. Solutions tended to be reactive and in response to specific requirements, often falling to tactical manual controls due to resource or cost pressures - however, times are changing.
The COVID-19 pandemic and the mass adoption of working from home means supervisory controls and compliance with local rules and regulations are more important than ever. To strengthen market integrity, the UK's Senior Managers Regime (and global equivalents) made individuals accountable for their and their team's conduct and competence - putting risk management controls and reporting into the spotlight.
Significant incidents don't often happen overnight –with most offenders likely to repeat. The employee who has missed mandatory training and who has been provided policy reminders for inappropriate use of technology will be at a higher risk of being involved in a conduct incident than someone who has not. If these trends and risk hotspots can be identified, specific interventions and training can be developed, so it's vital that we can track and monitor this through ultimately connecting dataacross a range of sources.
Firms are creating "risk dashboards"—a single source of truth bringing together risk data and indicators across different departments to identify potential issues for review
In the world of market surveillance, this concept has already proven true. A trade surveillance alert may have no merit in isolation, but combining with related eCommunications (eComms), market and news data, could paint a vastly different picture. Surveillance vendors have hyped "holistic surveillance" as the answer, which monitorstrade, voice and eCommson a single platform. Whilst this technology continues to mature, some firms have started to restructure their surveillance operating models to align analysts by asset class - allowing a more integrated view to support daily operations.
Undoubtedly, further integration and leverage of risk data across diverse and disparate sources follows. Firms are creating "risk dashboards" - a single source of truth bringing together risk data and indicators across different departments to identify potential issues for review. To achieve this, data needs to be centralised and normalised into data lakes and repositories, which is accurate and reliable. Reference data will also need to be consideredto ensureconsistent and varied granularity in reporting. Cloud solutions can be an enabler here, providing high availabilityand big data support at a fraction of the cost of traditional on-premise storage.
Dashboards can then be built on top, creating charts, graphs and visualisations to present the data. Tableau and Power BI have risen in popularity due to the “self-service” nature of these tools – the ability to create attractive and complex visuals, without needing to know how to code.
After data structuring and presentation, alerts and thresholds could be configured to flag whenever certain criteria is met within the consolidated data. Data could be delivered in real time so that potential risks and issues could be flagged and dealt with straightway. The applications and advancements in Artificial Intelligence and Machine Learning will further shape the future strategy.With detection of previously unknown pattern anomalies, reduction in false positives alerts and behavioural predictive analytics–this could potentially transform Risk and Compliance departments from a historically reactive function to a more proactive one.
