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Regulatory Reporting: Finding an Edge in an Environment of Constant Change

You already deal with market complexity, multiple asset classes and distinct jurisdictions. Now add in an alphabet soup of regulations plus a growing number of regulatory bodies—and there’s seemingly no end to the demands for data. Trades, client relationships, risk exposure and more. These factors make regulatory reporting an onerous chore for any Capital Markets firm.

Deals before data

In an industry laser-focused on making trades and growing profits, it's tempting to dismiss reporting as a necessary evil, a cost of doing business. And because each new regulation requires different data, many firms choose a fire-drill approach to tackle the job as quickly as possible. The problem: While a short-term fix may provide an affordable band-aid for the immediate challenge, it will also contribute to circumstances that become more difficult, convoluted and costly over time.

Why? The regulatory process never stands still. Short-term fixes can't provide the flexibility to adapt as new regulations emerge and evolve. Manual workarounds and Excel spreadsheets are time-consuming and increase the likelihood of errors. Without a holistic view of all areas of impact, firms may also find that their “fixes” have unexpected consequences—resulting in costly, last-minute setbacks to achieving compliance. For example, there may be disclosures and/or data across the organization that no longer link and update as they should.

Fighting regulatory fatigue

Your trading systems are built to facilitate trades, not to support compliance reporting. They may not capture all the necessary data scattered across multiple legacy systems across the front, middle and back offices. In many cases, data is also held by trading partners and third parties. Aggregating and reconciling all that data becomes a massive task.

Ad hoc, inefficient processes make it hard to ensure the accuracy, timeliness and completeness of your reporting data. It becomes difficult to add new asset classes or scale up to accommodate increased volume or additional jurisdictions. Even worse, the firm is vulnerable to penalties, broken or delayed trades and missed opportunities.

Case in point: SFTR mismatches

Intended to reduce inherent risks of "shadow banking," the Securities Financing Transactions Regulation (SFTR) requires both sides of a trade to report independently. Each report may contain up to 155 data fields, and as many as 80 of them must match. Data is only reconciled after submission to the trade repository. Mismatches, such as inconsistent identifiers, may result in a trade break and will be returned to the counterparties for resolution. The result: delays, rework, frustration and additional expense. But it doesn't have to be this way.

It's time to get off the treadmill

Concerns about intensifying regulatory scrutiny, potential penalties and rising costs are prompting firms to implement a more proactive approach to data management. Starting with a detailed understanding of the organization’s operational framework makes it possible to implement data and reporting solutions at scale.

Firms can then capture, consolidate, harmonize, enrich and map data to support current reporting requirements and become better poised for faster, more efficient adaption to future regulations. Some firms take this on as an enterprise-wide initiative. Others find this can be accomplished in a gradual rollout, one regulation at a time, by maintaining a broad-based focus at every step.

The single, trusted source of data they gain makes reporting more accurate and efficient. Duplication of effort is eliminated. It becomes possible to automate many repetitive and resource-intensive data management processes, such as data cleansing, validation and reconciliation. But that's only part of the story.

Transform data transparency into business value

Ready access to the most current, accurate and complete information about transactions, accounts, client relationships, positions, collateral, valuations and risk exposure can provide a 360-degree view of the enterprise.

Using analytics and data mining techniques, firms can begin to leverage their data in new and innovative ways, gaining insights that drive business value. Long-term benefits include improved decision making, more favorable fee negotiations, greater efficiency, reduced risk and new growth opportunities.

Broadridge can help you stay ahead of regulatory complexity and capitalize on the insights hidden in your reporting data. We see what’s coming because the industry runs through us. Explore the leading technologies, operations and expertise that add transparency and control at every step.

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