You Already Know How to Manage Regulatory Change—Just Ask Mom

By Elaine F. Duffus

When you were a kid, remember when Mom, Dad or other important adult would drop some nuggets of wisdom and make you wonder, “Will I actually ever use that information?” Well, in the rapidly evolving regulatory environment facing banks today, it’s time to dust off those nuggets of wisdom—because the answer is a resounding yes!

In this article, we’ll cover what banks need to consider in building out their regulatory change management, or RCM, programs, especially as it relates to employing technologies to manage that change, by tapping the wisdom of some of yesteryear’s parental pronouncements.

“If all your friends jumped off a bridge, would you?”

When considering regulatory change management technology, this old saying isn’t that far off. Before taking the plunge (pun intended) into exploring so-called “regtech” options, it’s important to look before you leap by first conducting a thorough, regulatory compliance-based needs assessment. The goal of the needs assessment is to determine what elements your bank must have in its RCM regtech solution.

Once you have completed your needs assessment, assemble a team representing all the impacted business units. As a team, consider the following:

  • What is the right-sized regtech solution for us? What is appropriate for a very large bank likely won’t work for a small, community bank with a handful of branches. Don’t buy a Maserati when you only need a Volkswagen—and vice versa.
  • How much regulatory content coverage is enough for us? Focus on the needs of the many rather than the few. Software platforms are not a magic bullet and are unlikely to solve every single content need you have. Don’t waste time looking for perfection. Even the best, most expensive technology will not contemplate every nuance of your bank’s situation.
  • Do we have the appropriate budget resources for initial and ongoing costs? You know that the cheapest option isn’t always the best option. Try not to sacrifice too much to meet budgetary constraints. Consider the reputation of the vendor. Consult with peers. Ask the vendor to work with you on pricing if needed. In other words, consider more than the actual cost of the software. You don’t have to spend a fortune, but don’t sell your bank short.
  • What are the bank’s regulatory compliance priorities? If necessary, consider purchasing software based on a priority list, whether it’s a few quick wins or solving one major issue.

Due diligence and internal assessments are also necessary first steps in the sourcing and acquisition of a new technology platform. Only after these first important steps are completed might you truly be in position to retreat from that bridge ledge!

“If you keep making that face, it’ll freeze that way!”

When replacing an out-of-date or inefficient manual solution with software, don’t try to simply mirror the manual process. Implementing a new program is the perfect time to update procedures and explore new ideas. You are also paying a premium for the advice and guidance of those who have done this before or have seen it done at multiple institutions, so make sure you consider their experience. Remember that regtech solutions are generally multiyear commitments and you don’t want to be “frozen” into something that is not the right fit for your bank.

“Don’t make me turn this car around!”

If you’ve decided that a regtech solution is the right course and assembled a cross-functional team to gain a solid understanding of requirements, what’s next? First, know that you’re on the right course. Keep pointed in a forward direction, you’ve got this.

Consider potential vendors. In this phase, you should consider internal and external recommendations, current vendors for your institution (or institutions you previously worked with), and well-known industry leaders.

A road map for the selection process should be prepared after careful due diligence and includes the project budget, timelines and as fully articulated a list of requirements as you can muster. Consider providing questions to prospective vendors prior to meetings, as this can help them better understand your project scope and make the best use of everyone’s time.

Following these best practices will give you a good idea of which software platforms merit a closer look and eventual adoption.

“As long as you live under my roof…”

Aside from idle threats, how can you obtain user buy-in of your regtech solution? The work of implementation lasts long after the vendor has left the building. Take advantage of all they have to offer while onsite. Make sure everyone who needs it receives the trainings offered by the vendor. Set reasonable goals and timelines for adoption. Plan ways to enlist users’ time to truly learn the new technology, making it a part of their daily processes, while discouraging them from defaulting to former processes. There should only be the new way and plenty of support.

“Because I said so—that’s why!”

It’s tempting to initiate changes within the business without discussion because the Compliance or Legal Department says so, but we all know that approach doesn’t work. Keep the right people informed and partner with the impacted areas because—regardless if the software is cutting-edge, expensive or industry-leading—a successful technology implementation relies, to a very large extent, upon the basic principles of planning, communication and practicality.

There is little magic—but much common sense—embodied in the work of a compliance officer. All you ever really needed to know about implementing a regtech solution to help manage the dizzying pace of regulatory change are things that, deep down, you already knew!

Elaine F. Duffus is a regulatory compliance consultant with Wolters Kluwer.