By Tijl Vuyk, CEO and founder of Redwood Software
It’s hard to think of an analogy that hasn’t been used to describe the ever-changing landscape of compliance regulations. However, from shifting ice fields to moving goal posts, the fundamental fact remains that, as a business, corporate governance requires you put effective IT accountability, control, and security measures in place throughout your company – and enforce them.
This means that tracking system changes effectively, reversing flawed changes, and accurately reporting change activity are all critical to support audits and avoid regulatory penalties.
You might think that, faced with what is essentially an increasingly expensive administrative task, businesses would be keen to look for alternative solutions. However, despite this, too many organisations still don’t have a consistent, transparent and repeatable method to manage these processes. Perhaps more concerning still is the number of organisations that rely on manual processes to report on their financial and compliance requirements.
In July last year, an IDG Research Services poll revealed that more than three quarters (76%) of the CIOs and IT managers they surveyed described their current compliance and attestation processes as either completely, or mostly, manual. It’s no wonder that these same respondents also said the slow nature of their current compliance approach is their biggest challenge, and that freeing up IT to focus on higher-value activities was one of their key near-term compliance objectives.
Businesses need comprehensive audit and report capabilities in place to ensure compliance with regulatory standards. However, companies are now discovering that self-built tools or manual processes just don’t scale. They take far too long. Compliance has been a particularly manual, people-intensive process, and companies can’t maintain this level of manpower in the long-term.
For example, when supported by manual tasks alone, it may take six months to complete a single certification process, and then another six to complete the necessary reporting. At that rate, the process becomes a never-ending cycle. It’s neither efficient nor scalable.
Another important factor to consider is human error. Whenever you have a manual process, you inherently introduce a higher rate of errors into the mix. Clearly, time-consuming and repetitive manual processes just don’t work in today’s volatile and competitive business environment.
As a result of such factors, many companies are starting to wake up to the fact that ‘doing it manually’ might not be the only way. Enterprise process automation is increasingly being used to align critical processes, support standardisation throughout organisations and streamline compliance requirements.
Enterprise process automation takes an entirely different view, changing the focus from simple process steps to achieving a goal. By using a flexible automation platform, supported by a powerful automation engine, business are able to deliver measurable value by connecting processes across disparate systems and eliminating manual tasks. It gives organisations the power to link the critical success factors of reliability, speed, efficiency and compliance together. This is especially important in industries where you have to maintain a constant balance between risk and asset management, along with delivering exceptional customer service, such as the insurance and financial services sector.
With automation solutions, organisations can continuously record their business processes for auditing purposes. Information is readily available for auditors in one central location at all times. The auditors also get enhanced oversight of internal processes so that controls can be built-in as task list steps. This way, automated organisations will always be in compliance with their internal and external control structure.
Automated versus manual compliance
If we suppose that compliance is fundamentally an exercise in anomaly detection (which once detected are then flagged upwards in an organisation) then being able to accurately detect those anomalies is of utmost importance. Automated systems can scour huge reams of data for any number of financial anomalies, checking anything from failed foreign exchange trades, to liquidity, or anti-money laundering. With the amount of data in existence now, organisations – and financial institutions in particular – cannot rely on staff to detect inconsistencies amongst hundreds of thousands of transactions. Those institutions that succeed in automating the bulk of these compliance tasks will have a distinct competitive edge.
There are some compelling examples of how automation can improve compliance reporting out in the industry already.
The Robeco Group N.V. is a pure financial asset manager with a broad array of activities, providing a comprehensive range of services to a wide selection of clients all over the world. As one of Europe’s leading investment specialists, Robeco manages assets worth over €100 billion. The company historically relied upon a complex and heterogeneous multinational IT network to provide up-to-date information and service for its partners and customers.
Establishing a single point of control
Nevertheless, Robeco had no single point of control for application processing. The diversity of its numerous software applications meant that each of its home-grown packages had no simple interface to any of their off-the-shelf applications. Having to use different interfaces with little integration between all of its systems was cumbersome to maintain and difficult to control. To coordinate and effectively and provide timely customer service, Robeco opted for a comprehensive process automation solution that crossed platforms, technologies and applications. This enabled Robeco to standardise and manage business processes and compliance requirements across more than 200 applications – all from a single, coordinated point of control. There are other instances, too.
One such example is a global financial services company, operating in more than 40 countries and managing over US$2 trillion in invested assets. Because of the highly complex nature of this company’s financial operations, it experienced significant issues meeting its Basel II compliance reporting requirements. It also faced challenges supporting management with time-critical business information.
Through business and IT process automation, the company reduced its Basel II reporting time from nine days to just five, as well as providing up-to-the-minute business information on-demand to corporate leadership. It also significantly reduced the manual tasks that supported all of its required accounting and reporting functions, integrating processes across 185 applications, including the streamlining of 16 applications that addressed Basel II compliance specifically, which handled 10 million postings per hour. Through automation,the company achieved all of this along with annual cost savings of 30 percent.
Recent years have seen compliance-related costs escalate, catching many organisations on the back foot. Many have been outmanoeuvred into using inefficient manual efforts in order to meet compliance objectives, rather than taking a step back and surveying the long-term consequences of their actions. However, by using the right technologies, organisations can reduce costs associated by compliance dramatically. Automation not only has the effect of helping to eliminate inefficient manual efforts, liberating both valuable time and resources, but also allows large organisations, like Robeco and others in the industry, to transform compliance efforts into a measurable competitive advantage.
About the Author
Tijl Vuyk has had more than 24 years of experience making IT and business processes support measurable and practical success. He founded Redwood Software in 1993. As the Chief Executive Officer, Tijl sets the company's vision and worldwide business strategy. Under his stewardship Redwood has become the world's leader in enterprise business and IT process automation.