Hey… Yes, you!
- Are you responsible for improving the regulatory reporting capability within a financial institution?
- Are you having trouble keeping up with growth and increased requests from regulators and wondered if you could improve and ship reports faster?
- Have you found it time consuming and expensive to improve and get more from your existing regulatory reporting capability that runs on-premises / data centre and wondered if there was a better way?
If you answered yes to any of these questions, you might find this helpful. Don’t worry, you’re not alone. Many financial organisations are feeling the pressure to improve their regulatory reporting capability quickly, without blowing their budget over, while honouring compliance and security aspects at the same time.
The ability to provide high quality regulatory reports such as Dodd Frank Compliance, Trade Reconstruction, Price Feeds, and Order Fulfilment is of paramount importance to a financial institution. Ensuring tight anonymity (e.g. stripping out PII and sensitive details) and maintaining Chinese walls between departments and trade desks is a fundamental organisational requirement and regulators like to see high level of security transcend into reports.
Regulatory reports need to be highly consistent, typically achieved by eliminating human intervention from the process of data acquisition, processing, through to report generation. The entire reporting process is thoroughly audited to abide by compliance laws, which includes secure auditing of all activities at a fine-grained level, to typically answer questions like who did what, at which point and who authorised it.
Acquiring massive amounts of data from several disparate sources within the organisation securely and then performing data wrangling (cleaning, enriching, generalising, aggregating, etc.) demands massive compute and storage power. Ability to generate insightful reports needs fast processing with lots of memory. Applying strong security to data, processes reports and audit involves secure access to different processes such as storage, compute, reports, etc. through advanced cryptographic tools including periodic rotation of security keys, and much more.
This key strategic capability tends to favour consistent high performance through automation and keeps up with growth through scalability.
Most financial institutions carry out their regulatory reporting on-prem or on data centre based infrastructure that is dated or limited in capacity and power. Ageing IT systems may be already operating at their peak capability limited by obsolete hardware. Knowledgeable staff that set it all up have since moved on or retired; often both! On-prem systems are difficult to maintain. Improving or extending them usually involves purchasing new hardware, hiring specialised resources, and lots of configuration and testing.
Faced with significant capital expenditure and long time to market, financial institutions are burdened with technical debt. Lack of elasticity and scalability snowballs a basic need to keep-up with growth into a major IT project!
A Solution in the Cloud
Technology advancements in the fields of advanced distributed and cloud computing solve these problems at scale with a different approach.
A good analogy would be the ease of hiring a taxi as opposed to owning a car. There is no upfront cost because we don’t have to buy the car. There is no capacity planning as a car of suitable type and size, fit for any need can be hailed on demand. Hiring a taxi means a lower upfront outlay than purchasing a car outright, and avoids the overheads of ownership such as parking, insurance & repairs. A professional (as opposed to oneself) ensures the car is well looked after and stays fit for purpose (fully managed). And there are no strings attached. Not happy with service? Is there a cheaper/better provider? Switch to a different taxi company anytime.
And the best part – we only pay for the brief duration when we actually use the car, as opposed to buying it outright only to be parked most of the time!
Similarly, the cloud philosophy is based on fully managed & serverless database, compute, storage, networking, and many more such functionality offered as contract-free, subscription-based services as opposed to buying the hardware upfront.
Advantages of a Cloud based Regulatory Reporting Capability
While most cloud platforms offer several advantages to building a regulatory reporting capability, let’s briefly review a few compelling ones.
- Quicker to production. Since there is no hardware to be purchased & setup, there is no wait time. Focus on regulatory reporting from day one without worrying about capacity planning and infrastructure altogether. Solutions (and reports) get built and delivered faster.
- Fully managed products and services, reducing the need of DBAs and SysAdmins to service, patch, and performance-tune underlying systems. Less resources are needed and the solution stays future-proof as the components stay up to date with latest upgrades automatically.
- Speed. Things run exceptionally fast. Armed with a massive pool of resources, the cloud crunches huge amounts of data – gigabytes to petabytes and executes queries at lightning speeds. Queries that can easily take several hours to days in a traditional data centre, run within minutes or seconds on most cloud platforms, without the need to plan or tune anything to achieve this unparalleled performance.
- Scalability. Cloud platforms naturally embrace growth by automatically scaling out within seconds. Developers focus only on the business (developing regulatory reports) without worrying about performance tuning or optimising infrastructure. The cloud automatically manages any amount of workload thrown at it, and continues to offer high performance and consistency.
- High availability and resilience. Systems are durable and highly available. Working off distributed and redundant geographical regions, regulatory reporting capability no longer has a single point of failure and stays highly available, resilient and fault-tolerant. Backed with high durability SLAs, data loss is a thing of the past.
- Security. Strong support for advanced security. Cloud platforms offer tight physical hardware security and allow modern tools for Financial Institutions to implement strong security that best reflect the organisational structure. Projects, departments, trade-desks, users, roles, access permissions, and much more can be easily setup with to honour Chinese walls and achieve a high degree of compliance.
- Automation. Everything can be automated. Cloud platforms favour automation of everything – resources, code, infrastructure, deployments, releases, upgrades, and much more. With human intervention removed, less specialists are required with outages and downtimes immaterial.
- Cost flexibility. Low setup cost and pay-per-use billing. With no hardware to be purchased, capital expenditure is negligible. Operational costs are flexible as cloud resources are only billed by the duration of use. Cloud platforms also offer sustained-use discounts with no-contracts and lock-in.
The Big Picture
Since cloud platforms take a modular approach to problem solving, we have the flexibility to use as few or as many of its products as needed. There is no need to move entire businesses to the cloud to leverage certain strong features and regulatory reporting is no exception.
Each project is unique and it takes years of expertise working on a diverse portfolio of projects to develop well architected solutions that address the specific problems efficiently. A broad knowledge of different cloud platforms is required to make the most optimum decisions and trade offs to reap maximum performance benefits from the best of the comparable options.
While it is a general belief that moving to the cloud can save costs, it is a mix of science and art, drawing from vast experience with design choices to achieve it.
A specialist cloud partner can design a robust and high performance regulatory reporting capability in the cloud the right way from the ground up and keep a FI at the forefront of technology.