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APAC Banks Are Laggards In Regulatory Change Readiness: Study

Technology can transform many of the manual processes banks rely on today, particularly those related to meeting regulatory requests and gaining useful data insights to meet business objectives.

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Less than a third of banking executives in Asia Pacific (APAC) are equipped to handle the changing regulatory landscape compared to 46 percent of their peers in North America and Europe, according to a new research developed by Asia Risk and Oracle. The survey reveals that banks in APAC are behind their counterparts in modernizing their finance and risk processes and their use of data.

Using data and innovation to drive business insights” examines more than 150 banking Chief Financial Officers (CFO), Chief Risk Officers (CRO) and other executives in key data roles and examines the state of integrated finance and how banks use data for business insights and to react to rapid changes in the regulatory environment.

However, the survey also indicates there is tremendous opportunity for forward-looking APAC banks to use data to turn their finance and risk functions into key drivers of added value and competitive advantage.

“For banks, the ability to see, know and balance the way they are performing and complying with regulations is mission-critical to their current operations and to every single decision and action they take to move forward. Our survey highlights how Asia Pacific banks are struggling to overcome the challenges with cost, risk and finance, regulations and the complexity of managing data,” said Sonny Singh, Senior Vice President and General Manager, Oracle Financial Services.

State of Modern Finance and Risk Today

Operational silos and poor communication between finance and risk functions and between different divisions within the bank are hampering performance and the ability to use data to drive profitability. 51 percent say a single view of data to improve predictive power for finance and risk is their greatest priority. There is a need for the CFO, CRO to lead and drive the organisational change sought through data governance and ownership. There is increasing acceptance that response to regulatory change can be accelerated by technology innovation.

The survey highlights if banks are aligned to the right operating model, technology such as cloud computing, artificial intelligence, machine-learning and robotic process automation can help deliver a step-change in efficiency. Technology can transform many of the manual processes banks rely on today, particularly those related to meeting regulatory requests and gaining useful data insights to meet business objectives.

“The presence of a single data source for risk, finance and accounting enables banks to perform timely analysis and reporting based on current and future scenarios,” said Stuart Houston, Banking Innovation Advisor, Agile Finance and Risk, Oracle. “This could bring significant enhancement of current reporting, allowing financial institutions to concurrently perform risk and financial calculations for financial, management, and regulatory reporting from a single, unified source.”

Survey results show CFOs and CROs seek strong ties between digital transformation efforts and delivering the right detail at the right frequency with the right governance and control to meet regulatory requirements. In order to meet complex regulatory requirements banks need an overall data strategy and to incorporate leading technologies to better manipulate the data in a transparent and controlled manner.

”Today, integrated finance and risk involves a fair degree of intervention at the human level; there has to be quite a bit of advancement to enable it to innovate and take advantage of the rapid strides in digital technology,” said Madhivanan Balakrishnan, Chief Technology and Digital Officer, ICICI Bank.

Risk and Finance Alignment Differs in APAC vs. US and EMEA

70 percent of respondents rate better organisational alignment as critical or very important. Twenty percent of APAC respondents say they are siloed, compared with only two percent among banking executives surveyed in US and Europe. Only 25 percent of banks with more than $500B in assets say they are fully aligned. For smaller banks, 50 percent believe they have full alignment between the risk and finance functions. One-third (34 percent) of executives in APAC see the opportunity for improved insight and clarity compared with over half (52 percent) in more developed markets.

While regulation is a burden, it also presents finance and risk teams with the opportunity to improve productivity, turning a cost drain into a potential profit centre by allowing more time to focus on higher value strategic activity.

Future of Agile Risk & Finance

As complex regulatory requirements continue it will be more important than ever for banks to invest in the right risk mitigation tools to meet complex reporting needs and improve data collaboration. Respondents are equally challenged with finding and retaining skilled staff. There is widespread belief that successful adoption of cognitive technology will be needed to overcome this, and to help meet growing demands to deliver regulatory, statutory and management reporting with complete transparency.

As an executive from a large bank said few banks have a system that can easily and automatically generate needed reports for regulators. To address this challenge banks rely more and more on manual intervention, when in fact “what’s needed is a system where a regulation implemented today can be put into effect tomorrow.”

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