Over the last year, we have had many conversations with market participants and realised that we needed to make a change to our RegTech taxonomy. We recognise that managing regulation isn’t just about dealing with regulatory changes – ensuring ongoing compliance is equally important. That’s why we have changed the category of Regulatory Change to Regulation and Compliance Management and why we have recently created an updated Market Assessment of this category, based on our latest insights and data.

Even before COVID-19, Compliance Officers were predicting that Regulatory Change was going to be the top compliance challenge for 2020*. Regulatory change creates huge amounts of uncertainty for regulated firms – and if you layer on top of that the enormous uncertainty created by the coronavirus pandemic, there is no doubt that 2020 is already one of the most difficult years there has ever been for regulatory compliance.

As the impact of the coronavirus crisis became clearer in March 2020, financial regulators took immediate action in a number of areas including the postponement of planned stressed tests, delays to rule-making, moving regulatory reporting deadlines out and issuing temporary guidance to lenders across the market. Regulators also raised concerns about firms being able to maintain current levels of compliance given the rapid switch to remote working and the need for continued vigilance around market abuse and other compliance activities.

If keeping track of regulatory changes and monitoring ongoing compliance under normal circumstances is difficult, doing so in a pandemic is even harder. Fortunately, our research shows that there are many technology solutions on the market that can assist regulated firms in these tasks – and do so more efficiently and effectively than the traditional tools of email and spreadsheets.

Regulatory and Compliance Management Market Map
Market Map: Regulation and Compliance Management

Compliance Management has typically been the core focus of Governance, Risk and Compliance (GRC) systems – and there are several very well known incumbent vendors in this space such as Wolters Kluwer, SAI Global, MetricStream and Refinitiv. 

Challengers in this space such as Ascent and Compliance.ai are servicing a need expressed by many regulated firms we have spoken to – the automated mapping of regulatory obligations to policies and controls using technologies such as Natural Language Processing. By having this mapping in place, regulatory changes and their impacts on existing compliance can more easily be determined, enabling the management of the complete regulatory lifecycle in a single platform.

Market participants are also concerned that the tools they are using for horizon scanning have adequate coverage of regulatory sources and content. For products in the Regulatory Change Management and Regulatory Intelligence categories, the number of regulators and jurisdictions covered is becoming a key differentiator and vendors in this category are struggling to compete with some of the incumbent providers, despite the latter using more old-fashioned technology.

Finally, some of the youngest companies in this category are developing tools which allow regulatory rules to be codified in anticipation of the ‘straight-through processing’ of regulatory changes. We may be some way off this becoming a reality, not least because this requires the regulatory requirements to be machine readable in the first place but the Financial Conduct Authority in the UK has already achieved this and other regulators are beginning to follow suit.

In the not too distant future, where all regulatory rules can be automatically mapped to policies and controls and changes to those rules are automatically identified and even implemented, future crises will be easier to deal with and the risks of maintaining regulatory compliance will be much reduced. This is perhaps a cautious speck of light in the current time of adversity.

* Thomson Reuters Cost of Compliance Report 2020

For further insights into the Regulation & Compliance Management category of the RegTech Market, you can download our Market Assessment (registration required).

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