What questions should firms ask when choosing a regulatory solution provider? Sia Partners asked the experts.
As regulators across the globe aim to provide more protection to consumers and maintain a sound and healthy industry, financial and regulatory reporting exercises have become more frequent, more complicated (new methodology, new templates, etc.) and more technology oriented (new submission platform, etc.).
From EMIR to MiFID II, from Brexit to Capital Requirements, with so many reporting obligations going on, many institutions are now looking for a (new) regulatory reporting solution provider. The benefits of using a regulatory reporting solution are obvious: watertight regulatory proof, effective single platform control, bespoke/part-bespoke capabilities, just to name a few.
But which one should you choose? We have worked with experts at leading solution providers, to explain what the key questions are that firms should ask before deciding which solution to go for.
Does the solution provide product flexibility that fits with my firm’s regulatory requirements?
A solution can be hardcoded with less room for self-development or can be a more open platform leaving clients the capacities to implement their own changes and logic (for example, by enabling the clients to drill down the solution to the basic underlying calculation).
There is no better choice between the two. Larger institutions tend to opt for products that offer higher level of flexibility as they have the manpower to maintain the solution and would usually want to develop some non-standard and more complex objects. Other institutions might be leaning towards simplicity and security, managing the exercise through default and standard workflows.
Are we ready to commit to a long-term partnership?
A partnership with a solution provider is usually long-term (5 years minimum) and requires a serious commitment (as the one-off cost can be high). If you are looking to engage in a long-term contract, you should map the values that the solution might bring over this period.
For example, you might be entering into the partnership with Capital Requirements reporting today, yet you might be subject to more regulations such as SFTR (that kick in in 2020) and may want to use the same platform. Often, the client might find themselves expanding the scope and length of the contract as the relationship evolves. Hence it would make sense to check that the provider is capable of handling regulations that are relevant to you and how those products are performing.
Is the solution easy enough for my end-users and compatible with our policies?
This is a generic question over the interface, the design and the underlying technology that the solution deploys. You may want to run a test to see whether most of your users understand how to perform a regulatory validation check in the solution after training.
Some, if not most institutions prefer cloud-based solutions and usually want to store/access their data through different means. Additionally, some financial institutions are restricted by their data security policies which might prohibit them from storing their data on externally hosted servers – it’s best to make sure that the solution is 100% compatible when it comes to such bottom lines.
What kind of support will I get?
Support / solution implementation is a management service that’s usually charged on top the solution license, by the solution provider. The implementation consultants will have the knowledge to locate and resolve the issues during the implementation, ensuring a smooth transition.
Depending on the size and complexity of the implementation, you might have the option between on-site consultants, 24/7 remote support or ad-hoc support available. In practice, clients usually opt for continuous support during the implementation and keep a lighter management service agreement post implementation to address issues such as updating the existing solution to a new version.
It’s worth to clarify different maintenance options the client would be able to have, post-implementation. For example, whether the solution can be managed by a 3rd party or internal resource on a long-term basis.
Can I potentially use the solution for my businesses across the globe?
With most solutions now cloud based, designed with a centralised user interface, and compliant with local regulations, it is becoming more and more common for clients to leverage the same platform for different regions. Essentially, different regulatory reporting products are just different arrangements of the same set of objects.
It’s extremely useful to have such capabilities, as it reduces costs (training, maintenance, license, etc.) and makes it much easier for the client to utilise their own resources from projects to projects.
Finally, who are the users in the market?
This might be the most straightforward way of finding out whether the solution does the job. If a solution is popular amongst many market participants, there must be a reason – find out if that reason is applicable to your business and you can factor that into your decision.
On top of that, it’s important to find out whether other users are in the same business as you are (such as asset management, CIB, etc.) and for which regulations they are using this provider for. When the solution has a lot of clients like your firm, it usually means the solution will have fewer bugs.
Some final words
Building a partnership with regulatory reporting software vendor and maximising the value of it requires a lot of preparation and deep knowledge of the industry. These 6 questions will guide you through the fundamentals in the decision process.
Sia Partners works with leading regulatory solution providers across the globe, on numerous regulations. Our expertise in regulatory affairs and solution implementation continues to help our clients navigate regulatory challenges and ensure effective compliance.