IBM RegTech Innovations

Innovative compliance technology is empowering end-to-end GRC

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Regulatory change is growing in size and IBM’s innovative end-to-end GRC solution, powered by Watson, is enabling the financial services industry to meet this challenge. According to some studies, as many as 30,000 to 40,000 regulatory changes can occur in a given year, and they are projected to culminate into 300,000,000 pages of regulation by the end of 2020. Those charged with keeping up with these changes, assessing implications, and incorporating modifications have an overwhelming and daunting task.

The need for GRC is greater than ever before

Whether the change is additional regulations or a rollback of existing regulations (which we are seeing in the US), the impact on financial institutions and their legal and compliance professionals is significant. They must review and keep track of the content changes, assess the applicability and impact to the business, and then, depending on the implications, modify policies, procedures, and controls as part of this process. The change will also affect the ongoing monitoring and testing process based on the modifications to the controls that the institution has in place. These initiatives can be arduous, and for most, it is also manual.

Given these issues, it is critical that governance, risk and compliance (GRC) systems are leveraged to enhance this process. GRC systems can function as the systems of record for policies, procedures, controls, and ongoing monitoring, such as walkthroughs, testing, and assessment processes. Linking GRC to content, regulatory changes, and events can enable transparent, consistent, and even proactive compliance and legal activities. Integrating the content and enabling the assessment of applicability of regulatory changes through technology makes the process more efficient and effective while allowing meaningful changes to be made.

An innovative, end-to-end approach

The complexity and sheer volume of regulatory change calls for a solution that delivers an end-to-end approach to GRC and enables compliance and legal professionals to manage risk more effectively. IBM’s innovative technology, powered by Watson, offers that end-to-end approach. It provides clarity around risk and compliance within a specific business context, provides fuller visibility of accountability across organizations, and improves management decision-making. Most importantly, it efficiently manages risk while executing the compliance and control process for changes from within and outside the firm.

It starts by capturing regulatory changes and defining policies, procedures, and controls. An innovative, overarching GRC system powered by a compliance solution framework and a GRC architecture review introduces innovative artificial intelligence and powerful cognitive risk analytics to compliance. It assesses controls and risks, performs monitoring and testing, and uses cognitive process transformation for Know Your Customer, anti-money laundering, payment fraud, conduct surveillance, financial risk, and security and cyber risk. These process transformations, assessments, and monitoring and testing then inform additional policy, procedure, and control definition.

Adding Watson to GRC

How does this work? As you can see in this graphic, Watson takes regulatory compliance to a different level by powering a unique end-to-end compliance management solution. The Watson Regulatory Compliance solution can integrate all data, facilitate mapping, and perform concept-search across federated platforms, thereby enabling a transparent, actionable regulatory change management process.

Not only are legal and compliance professionals provided with regulatory compliance management, policy and procedure management, monitoring and testing, risk and control assessments, and issue management, but they also benefit from cognitive search and reporting, a regulatory content repository, obligation lifecycle management, and control mapping. This graphic demonstrates how the solution is organized around specific business activities to ensure true end-to-end coverage for an organization’s risk and compliance needs.

A compliance framework helps organize compliance activities and allows users to manage all risk types holistically across an entire organization. Users can send compliance-related requirements (obligations) to the unit responsible to complete activities and can receive compliance-related information (artifacts) to facilitate monitoring and testing activities).

How Watson Powers the Innovative End-to-End GRC Solution

The Watson Regulatory Compliance solution provides a simple, low-footprint service that allows banks to manage obligations and controls—and the links between them. The platform leverages Watson Cognitive during the process to provide additional levels of insight. All-in-all, Watson is being used in the following activities:

  • Regulatory change management: automatic updates and version controls
  • Obligation identification and comparison
  • Control identification and comparison
  • Process Improvement functionality
  • Targeted alerting: Prioritized alerting based on owners, regulations, and subscriptions
  • Flexible reporting: Coverage, change volume

A Portrait of GRC innovation

How does the solution work? Let’s take a look. An Australian financial services group needed a structured and consistent approach to obligation management that could be performed by the First Line of Defense. The goal was to make it possible to measure and provide compliance evidence to the multitude of regulatory obligations they are subject to as a bank and insurance company. They chose IBM’s innovative GRC solution to support these regulatory compliance requirements based on the solution’s ability to enable the setup and maintenance of compliance plans, which eliminates manual processes.

The outcome? The organization’s various entities can now set up and maintain their compliance plans in the system, gain visibility of the current state of obligations, and consistently perform assessments across the obligations and compliance plan. A risk dashboard provides business and strategic leaders with key metrics that affect risk and compliance in their areas, which enables them to reach those responsible directly without having to run multiple queries and reports to collate information. And the whole solution was set up in just three months.

Empowerment and value

The number and complexity of changes to regulations are spiraling almost out of control. If you’re a legal and compliance professional for a bank or financial services enterprise, it is likely you are feeling overwhelmed. IBM’s innovative end-to-end GRC solution, powered by Watson, enables you to manage risk and compliance more effectively and efficiently while preserving stakeholder trust with greater transparency. It offers you clarity of risk and compliance within your business context, fuller visibility of accountability, and improved decision-making. Not only that, but it also efficiently manages risk and change from within and outside your firm while executing the compliance and control process.

Vice President, Global Banking and Financial Markets, IBM Risk & Compliance Cognitive Solutions

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