Although Regtech is a promising solution for compliance issues, not everything is as smooth as it can appear on the surface. There are challenges that still need to be addressed. Data appears to be the greatest obstacle.
Fremont, CA: Regtech has emerged as a cost-effective way for businesses to comply with the evolving regulations. Regtech's market size is swelling at 23.5 percent and is projected to rise to $12.3 billion by 2023, according to the Markets and Markets survey. According to the study, the main drivers for the growth of the Regtech market include increasing compliance costs, the adoption of regulatory sandboxes and greater accessibility of software-as-a-Service (SaaS)-based offerings.
The Data Issues
Although Regtech is a promising solution for compliance issues, not everything is as smooth as it can appear on the surface. There are challenges that still need to be addressed. Data appears to be the greatest obstacle. Automation will only produce the desired results if the input data is clean and unbiased. Otherwise, the results are likely to be off-track. The same data that makes regtech effective is also its nemesis since not all data is available and must be processed in order to make it useful.
Human Resource Requirements
Intensive human effort is needed to enhance the quality of data, and large companies have employed thousands of heads for this reason. It is estimated that 10-15 percent of the total workforce is currently engaged in risk management and enforcement activities. Intensive human effort is needed to enhance the quality of data, and large companies have employed thousands of heads for this reason. It is estimated that 10-15 percent of the total workforce is currently engaged in risk management and enforcement activities.
Data Standardization
Another obstacle for regtech is data standardization. Data is quickly replacing records. However, while regulators have submitted audit records, the same is not true for results. As a step towards standardization, regulators across the globe should take the lead from Standard Business Reporting (SBR) in Australia. The Australian Government has made considerable efforts to include a list of data fields and taxonomy for reporting to various agencies while also collaborating with the software industry to develop software using these data fields. The effect is increased automation, savings of millions of dollars per year, and a data-centric enforcement model.
See also: Top Enterprise Risk Management Consulting/ Services Companies
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