What are Regulatory Monitoring and Horizon Scanning and why are they important to risk management?

Regulatory monitoring incorporates horizon scanning and is a term for analysing how emerging trends and regulatory developments might have the potential to affect current regulatory risk policies and strategies. It allows financial firms to take a more strategic approach to risk and compliance and build in resilience within regulatory operations considering the impact, relevance and timeline of any changes. It is a systematic examination to identify potential risk and emerging issues as well as opportunities.

REGULATORY MONITORING AND POLICY AND STRATEGY  DEVELOPMENT

Risk management is constantly changing due to both internal and external factors and this in turn will cause changes in policies and the strategies to manage that risk.

Knowing what is coming down the line in terms of regulation, whether it’s a trend or a published document such as a consultancy paper, allows greater understanding of what sort of policies and or strategies will need to be put in place to create resilience and adaptability to the changing external regulatory environment.

With the facts in hand, it is easier to get consensus amongst stakeholders across the wider risk group and to action plans with evidence-based decisions. There may be some trade-offs or difficult decisions to be made so being armed with all the regulatory data gives everyone a better understanding of any potential gaps and how to best tackle them or, indeed, how to harness the potential possibilities.

SOURCES OF DATA FOR RISK RATED REGULATORY MONITORING

A regulatory monitoring solution takes data from multiple digital sources from a wide range of regulators and is continually updated. The data is risk rated using algorithms and using an automated digital process the data is classified using a taxonomy that has been developed specifically for this type of data. Prior to this type of automated method, slow manual techniques such as searching multiple websites and noting the information on spreadsheets and other types of desktop applications was the norm. It was (indeed still is) cumbersome and carried manual data entry risk and didn’t have APIs to feed into other internal systems.

Regulatory Monitoring properly executed turns gut instinct into evidence-based risk management and pioneering of opportunities.

If you are interested in learning more about how we are helping our clients innovate their regulatory compliance, please get in touch with us.