Business discontinuities and regulatory reactions

The COVID-19 pandemic is a crisis unlike any other crisis of this century. It affects every area of the economy, including the financial sector. Financial institutions are essential for the functioning of the economy and financial system. Especially in these unpredictable times, ensuring business continuity is crucial for financial stability, and institutions must maintain essential business operations and services with minimal disruption. In order to navigate through the crisis and to build business resilience, it is important for institutions to react proactively and adapt quickly to current exceptional circumstances. Therefore, the deployment of appropriate business continuity management (BCM) aims at identifying, planning and preparing critical functions and infrastructures on location and off site to ensure operational continuity. In this regard, it is important to understand the importance of regulatory reporting data to prevent and manage crises for society and the economy.

Even though the current COVID-19 crisis is new, all crises are marked by one similar characteristic: the uncertainty about future outcomes increases. During the 2008 financial crisis, it became clear that the view on individual banks and the financial markets overall was incomplete and crucial information was missing. It can be concluded that the Basel reforms and their local implementation strongly improved the coverage of the regulatory overview

  • risk-wise, esp. with regards to liquidity; and
  • instrument-wise, esp. toward complicated instruments like securitizations and derivatives.

However, data quality and availability still do not seem good enough to allow the supervisors to intervene effectively and fast enough. Furthermore, operational challenges posed by the current setup force regulators around the world to soften regulatory guidelines in order to support financial institutions[1]. To prevent and reduce the consequences, timely and granular regulatory reporting data can make an important contribution. With the IT-outsourcing setup of the RegTech Factory as the evolutionary next step to our 15-year-old Managed Service offering, we focus on ensuring business continuity for regulatory reporting by financial institutions.

Business Continuity Management Standards and Regnology´s coverage

In times of disruptions, financial institutions are exposed to risks of data breakdown, data leakage, missed deadlines, and IT and operational outages. In order to prepare organizations for disruptions like COVID-19, the implementation of standards can propose frameworks to assure systematic management and operational continuity.

The ISO 9001 is the globally most adopted quality management system standard by which certified organizations, including Regnology, demonstrate the ability to consistently provide products and services that meet customer and regulatory requirements. In addition, organizations must take appropriate measures to secure confidential information in times of discontinuities. As a thought leader in the regulatory reporting space, Regnology has a strong commitment to data security of sensitive client data and thus, Regnology is certified in accordance with ISO 27001 for the operation of their regulatory reporting solutions.

Due to the outsourcing of non-core business processes, financial institutions are increasingly dependent on third-party providers to deliver critical services. Especially for outsourcing activities, ISAE 3402 has been developed to assess the effectiveness of the internal control system of service organizations. Regnology as Managed Services provider for RegTech solutions received a positive ISAE 3402 report, which assures clients regarding the controls in place that impact their financial reporting. The data centers and infrastructure providers chosen by Regnology also have themselves and their business continuity plan audited and are therefore certified accordingly. Of particular significance is ISO 22301, the Business Continuity Management System Standard (BCMS), designed to protect an organization from the risks associated with discontinuities. Implementing an appropriately documented management system will provide guidance for planning, handling and recovering from disruptive incidents when they arise.

RegTech Factory as outsourcing solution for regulatory reporting and why it ensures business continuity in COVID-19 times and beyond

Regnology has developed a comprehensive, modular and individually configurable outsourcing solution for regulatory reporting, the "RegTech Factory". The RegTech Factory allows market participants to transfer regulatory reporting activities to a reporting factory managed and operated by Regnology. The advantage of the standardized platform is a shared common infrastructure for market participants. By sharing infrastructure services and using Regulatory Reporting-as-a-Service, institutions have the opportunity to reduce the costs and efforts for the operation of the reporting system while ensuring business continuity – also in disruptive situations like COVID-19. Especially during times of crises, financial institutions can thereby focus on their core business and simultaneously fulfil their regulatory obligations. The RegTech Factory outsourcing solution provides a highly skilled work force with advanced technological knowledge and mature management processes, which are needed to ensure business continuity and financial stability.

Moritz Plenk

Moritz Plenk

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