It’s clear to me that firms that have adopted a strategic approach in their response to regulation tend to view their regulatory data as an asset.
Firms with a strategic approach view regulation as a common thread impacting all of their peers market-wide, and so look for the opportunity in their response, as opposed to a threat that must be addressed. They are the firms that when faced with new compliance and regulatory changes, take a pause to assess the situation before jumping headlong into yet another tactical response.
With the right attitude, the outcomes improve. Firms that are able to infuse this positive mind-set across their business tend to avoid build-up of regulatory data silos. Silos are one of the biggest impediments to efficient regulatory response; for why place identical data points that can be used for multiple regulations in different locations? However, this requires a top-down strategic watchfulness that’s often hard to put into practice. More often we find firms that aspire to the strategic vision and as a result are able to minimize the number of silos to which they are exposed. These firms automatically seek to engage a vendor that has a unified approach to their regulatory data model, such that each new engagement is a delta to the previous one. Where they have siloed approaches, they seek to address these over time and realign previous tactical approaches back to their strategic vision. Progressively, they are overcoming the data silo snare.
However, once in decade, a rulebook comes along that defies a completely strategic approach – a good example here would be the arrival of the European Union’s MiFID II, which impacts investment managers and distribution firms globally. There are very few businesses that can claim to have a coordinated, consistent and strategic response to all of the various threads that make up MiFID II. The breadth of the directive and related regulation and the multitudinous areas of focus simply prevent a firm with typical resources being able to address it strategically. Similarly the number of vendors with an offering that addresses each of the typical MiFID II program streams can be counted on one hand.
But that’s not a reason to give up – aspirations count. If you approach MiFID II as a rag bag of unconnected demands that can be parceled away to disparate parts of your business, don’t be surprised when your response: 1. doesn’t work, 2. interferes with business continuity, and 3. costs more than you imagined. You should attempt to put coherence into your approach, even in an imperfect manner, and you’ll find it an easier pill to swallow and an endeavor that might already have overlap with lots of other rulebooks across your business, making life considerably easier for your staff and clients. Try it!
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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.