Regulatory reporting: deployment options and managed services

This is the third in a series of Point of View articles by Chartis and Regnology that discusses regulatory reporting technology and its benefits and challenges. In the first two PoVs, we discussed a framework that financial institutions can use to assess both the cost of compliance and the cost of upgrading their systems to facilitate it. We also considered the pros and cons of in-house versus outsourced approaches to regulatory reporting. In this, the final article in the series, we discuss the technology deployment options available to institutions, as well as the trends that are encouraging firms to use more managed services.

The first Point of View article can be found here, and the second here.

Jump to: The use of managed services | RRaaS | Conclusion

The cloud context: a variety of options

Compared with traditional on-premise deployment possibilities, the cloud offers several options (see Figure 1) – primarily private, public, hybrid and community clouds. Deploying cloud models is about more than just reducing costs, and each type of deployment offers distinct levels of control, flexibility and security. So it is important to understand what different cloud services offer. Some simply offer remote hosting, while others have built many of their core technical components on high-performance computing (HPC) technologies. Indeed, most commercial clouds have an HPC system within their internal workings, enabling new flexible architectures and hybrid options that include:

• Graphics processing unit (GPU) + central processing unit (CPU) hybrids.
• Multi-paradigm data storage and database support.
• Multi-paradigm internal application messaging.

Cloud environments also enable firms to make discrete and continuous application updates, while also abstracting and creating clear separation of all elements in an application, including middleware, databases, analytics and graphical user interfaces (GUIs).

Table 1 compares the different cloud models and their corresponding ownership structures, and lists the key pros and cons of each option.

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The use of managed services

The level of managed services a firm requires is defined and implemented based on several factors, including:

• The type of institution concerned.
• Its business model.
• Its combination of in-house and third-party systems.
• Its technology infrastructure.
• Its resource strategies (internal vs. external).

Managed services are often wrapped around cloud offerings and can typically be categorized into different types, based on the level of control, responsibility and service offerings provided to financial institutions (see Figure 2):

• Infrastructure as a service (IaaS). Financial institutions can rent such infrastructure as servers, storage and networking on a ‘pay as you go’ basis, while the regulatory reporting platform and software are typically deployed using an on-premise model.
• Platform as a service (PaaS). Provides a regulatory platform that enables financial institutions to develop, run and manage applications without having to deal with the infrastructure. Also provides everything needed for the development of regulatory reporting applications, including development tools, operating systems, databases and infrastructure.
• Software as a service (SaaS). Delivers fully functional end-user regulatory reporting applications, usually via a web browser. The software provider handles all aspects of infrastructure and security, as well as software updates.
• Regulatory reporting as a service (RRaaS). A service model whereby regulatory reporting tasks are outsourced to specialist third-party providers. This enables firms to stay compliant with evolving regulations without having to constantly update their internal systems and skills. This approach is part of a broader trend toward ‘as a service’ regulatory reporting solutions, reflecting a wider reliance on external expertise and technology.

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Regulatory reporting as a service

Faced with ever more requirements for complying with regulatory reporting, financial institutions are considering newer ways to reduce the cost of compliance. Against this background, market participants are responding to firms’ desire for real-time reactivity and granularity, developing technologies that can monitor and report on changes in real time with exceedingly granular information. RRaaS appeals to firms for several reasons, summarized in Figure 3 and explored in more detail below. 

• Greater focus on core business activities. By outsourcing their regulatory reporting, firms can focus on their core business activities, rather than having to divert resources to deal with the complexities of compliance.
• Improved data management and quality. RRaaS providers usually have robust data management systems to ensure the quality and integrity of the data used in reporting.
• Real-time reporting and analytics. Some RRaaS providers offer real-time reporting capabilities and advanced analytics. These can give firms more timely insights into their compliance status.
• Automated processes. A key feature of RRaaS, automation helps to streamline reporting processes and reduce the risk of human error.
• Compliance expertise. Providers of RRaaS offer expertise in the specific regulatory requirements of different jurisdictions. This is particularly beneficial for organizations that operate internationally.
• Cost-effective solutions. By outsourcing regulatory reporting, firms can reduce the costs associated with maintaining in-house expertise and technology.
• More scalability and flexibility. Typically, RRaaS solutions are scalable, allowing firms to adapt to changing reporting requirements without having to make a significant internal investment.
• Advanced technology. These services often employ the latest technologies (such as artificial intelligence [AI] and machine learning [ML]) to enhance the efficiency and accuracy of reporting.
• More customization and integration. RRaaS solutions can often be customized to a firm’s specific needs and integrated easily with existing systems.
• Better risk mitigation. By relying on specialist providers, firms can mitigate the risk of non-compliance and the associated penalties.

RRaaS: use cases and maturity levels

Financial institutions can capitalize on the significantly improved automation processes now available by focusing on the elements of regulatory reporting that are currently manual and repetitive. By addressing the complexity of regulatory reports and leveraging emerging technologies, firms can make progress in generating high-quality, repeatable and accurate data reports efficiently. 

We believe that RRaaS can also help firms gain actionable insights by enabling them to collect the data they require while also managing and monitoring the entire reporting value chain. Since RRaaS is hosted as a service on the cloud, solutions can integrate with an organization’s existing data sources and warehouses. The data is further enriched, transformed and modeled according to business requirements, before being consumed by end users via a customizable, interactive layer that contains the relevant dashboards and reports.

Figure 4 highlights the various use cases of RRaaS across the regulatory reporting cycle, along with the maturity levels for each in a variety of banking segments.

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Conclusion

As regulations continue to proliferate, most firms acknowledge that they must not merely comply with current regulations but also budget for future ones. For financial institutions, much of the answer lies in being able to pinpoint exactly where their compliance costs sit across technology, processes, people and operations. We believe that high-performing firms will be able to implement the right organizational mechanisms to optimize their total cost of compliance and take a vital step toward achieving efficient and cost-effective compliance.

Firms looking to invest in more up-to-date and cost-effective regulatory technologies now can benefit from a market that has expanded across geographies, with specialty products for almost any system type. To help narrow down their choice to the best system, firms must define a regulatory reporting framework to ensure their success, by: 

• Choosing the right regulatory reporting system.
• Determining the elements required.
• Finding the right model that balances platform, product and service options.
• Identifying the right cloud deployment model, along with suitable managed service options.
• Making RRaaS an integral part of the regulatory framework, to achieve efficiency and automation across the regulatory reporting workflow.
• Reconciling complexity and cost, bearing in mind that greater complexity means higher cost.

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