# Heightened Regulatory Demands to Drive Technology-led Risk Management Initiatives in 2018 Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-12-14 Category: TECHNOLOGY Category URL: https://financedigest.com/category/technology Meta Title: Model Risk Management Trends in Banking & Financial Meta Description: Get valuable perspectives on model risk management, SOX compliance, and data ownership from ClusterSeven CEO Henry Umney. URL: https://financedigest.com/heightened-regulatory-demands-to-drive-technology-led-risk-management-initiatives-in-2018html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd141217-17-1736843158468-compressed.jpg) _Success of risk management initiatives will be underpinned by best practice-led spreadsheet management_ Henry Umney, CEO of ClusterSeven, offers his views on regulatory and risk management trends in the insurance, banking and financial services sectors for 2018: - **Model risk management will become a top priority** With regulators demanding that organizations adopt an all-inclusive model [risk management and governance strategy](https://www.financedigest.com/strategies-banks-use-to-manage-liquidity-risk.html "Strategies Banks Use to Manage Liquidity Risk"), many regulations (e.g. SR11-7, ECB TRIM, OCC 2011-12 and more) are now becoming ‘business as usual’ in the banking and financial [services sectors](https://www.financedigest.com/why-the-financial-services-sector-could-thrive-in-the-subscription-economy.html "Why the Financial Services sector could thrive in the subscription economy"). Such a broad sweeping mandate is demanding a robustness around model governance and therefore calling into question the [integrity of the data sources that feed the models as well as the effectiveness](https://www.financedigest.com/effective-integration-will-improve-mobility-in-the-tl-sector-over-the-next-five-years.html "Effective Integration Will Improve Mobility in the T&L Sector Over the Next Five Years") of controls that currently exist to ensure accuracy.  Organizations will need to pull back the ‘governance lens’ in 2018 to take a more holistic view of their model [risk management](https://www.financedigest.com/improving-risk-management-in-the-insurance-industry.html "Improving risk management in the insurance industry") programme. This will allow them to gain visibility and understand the entire ecosystem of applications that surround each and every governance model – as well as the [data lineages across the landscape](https://www.financedigest.com/shock-data-logger-market-2021-outlook-current-and-future-industry-landscape-analysis-2029.html "Shock Data Logger Market 2021 Outlook, Current and Future Industry Landscape Analysis 2029"). - **Sarbanes Oxley (SOX) will make a comeback** With the introduction of rules on mandatory [audit rotation last year](https://www.financedigest.com/german-regulator-hands-ey-2-year-audit-ban-over-wirecard-scandal-handelsblatt.html "German regulator hands EY 2-year audit ban over Wirecard scandal – Handelsblatt"), which require public entities and listed companies to put their audit out to tender every 10 years, and change the auditor at least every 20 years – the emphasis on SOX compliance will make a comeback. This will be an easy win for external auditors looking to make their mark in new client organizations. Additionally, regulators such as the Public Company Accounting Oversight Board (PCAOB) are coming down hard on auditors for audit failures and violation of the Board’s quality standards to enforce SOX compliance by organizations. Faced with potential fines in the region of millions of dollars, auditors will increase their scrutiny of [organizations’ internal audit controls over financial reporting](https://www.financedigest.com/organic-fertilizer-market-where-should-participant-focus-to-gain-maximum-roi-exclusive-report-by-future-market-insights.html "Organic Fertilizer Market | Where Should Participant Focus To Gain Maximum ROI | Exclusive Report By Future Market Insights"), assessing and responding to risks of material misstatement, and measurements. With many of these processes undertaken in spreadsheets, external auditors will look for ways to deliver against [regulators’ demands](https://www.financedigest.com/strict-regulations-regarding-hygiene-at-industrial-workplaces-to-create-high-demand-for-industrial-dispensers-persistence-market-research.html "Strict Regulations Regarding Hygiene at Industrial Workplaces to Create High Demand for Industrial Dispensers: Persistence Market Research") of more evidence of auditability and control of these applications. Without the adoption of technology-led spreadsheet management of [internal audit controls](https://www.financedigest.com/international-space-station-thrown-out-of-control-by-misfire-of-russian-module-nasa.html "International Space Station thrown out of control by misfire of Russian module -NASA") by organizations, they will find it almost impossible to meet the demands of the auditors and regulators alike. - **Regulation will [drive data](https://www.financedigest.com/how-alternative-data-drives-e-commerce-success.html "How Alternative Data Drives E-commerce Success") ownership, organizations will realize the value of data for competitive advantage** Most regulations, be they General [Data](https://www.financedigest.com/how-to-drive-a-data-culture-in-the-finance-industry.html "How to drive a data culture in the finance industry") Protection Regulation (GDPR), IFRS 9, BCBS 23,9 SOX, SM & CR, Dodd-Frank or any other, ultimately aim to enforce data ownership and governance to ensure accuracy of financial models, minimize financial risk and protect consumers. While simple in concept, due to the widespread types of data sources and complexity of models, it’s incredibly difficult to get right. It requires a streamlined approach to people, processes and technology. However, those that make headway, will begin to recognize and realize the value of data for informed decision-making and [competitive advantage](https://www.financedigest.com/how-automation-gives-fs-leaders-a-competitive-advantage.html "How automation gives FS leaders a competitive advantage"). Due to the extensive use of spreadsheets for data manipulation-related processes, their control and [management will be key](https://www.financedigest.com/energy-management-system-market-2021-by-global-key-players-types-applications-countries-industry-size-and-forecast-to-2025.html "Energy Management System Market 2021 by Global Key Players, Types, Applications, Countries, Industry Size and Forecast to 2025") to such initiatives. - **Organizations will set up temporary business processes to deal with Brexit** While the uncertainty around Brexit continues, organizations will start [preparing to deal](https://www.financedigest.com/exclusive-naftogaz-ceo-prepared-to-step-down-if-it-would-facilitate-debt-deal.html "Exclusive-Naftogaz CEO prepared to step down if it would facilitate debt deal") with Brexit, regardless of the shape or form it takes. Organizations have enterprise systems of course, but they aren’t as flexible and nimble to change, and more so in the current uncertain environment. Spreadsheets will become the default tool that they will resort to quickly [respond to changing business requirements for reporting and compliance by setting](https://www.financedigest.com/pm-rishi-sunak-sets-out-priorities-for-britain-responds-to-critics.html "PM Rishi Sunak sets out priorities for Britain, responds to critics") up temporary business processes/solutions as they plan for every eventuality. An automated approach to spreadsheet management will be essential to ensuring the accuracy and integrity of these critical processes to minimise financial, [operational and regulatory risk](https://www.financedigest.com/mitigating-operational-risk-through-centralising-reconciliation.html "MITIGATING OPERATIONAL RISK THROUGH CENTRALISING RECONCILIATION"). - **Major IT-led transformation in the insurance sector is on the cards** As the Prudential Regulation Authority (PRA) increases scrutiny on the [insurance sector, insurance firms](https://www.financedigest.com/digital-marketing-for-finance-and-insurance-firms-is-changing-are-you-ready.html "Digital marketing for finance and insurance firms is changing — Are you ready?") will need to continue to ensure their Solvency II compliance is embedded into ‘business as usual’. Simultaneously, the introduction of IFRS 17 represents the biggest accounting change for [insurers](https://www.financedigest.com/different-countries-different-insurance-cultures-how-insurers-can-adapt-their-products.html "insurers") in recent times. Compliance with these regulations will [drive IT-led transformation](https://www.financedigest.com/intelligent-investment-in-digital-transformation-driving-change-from-the-grassroots.html "Intelligent investment in digital transformation: Driving change from the grassroots") of processes and standardization of modelling platforms will become a major focus for insurers in 2018. As firms set up new enterprise systems and data warehouses as part of their [technology transformation](https://www.financedigest.com/how-distributed-ledger-technologies-are-transforming-esg-reporting-for-financial-intermediaries.html "How Distributed Ledger Technologies are transforming ESG reporting for Financial Intermediaries") initiatives – in the interim – spreadsheets will provide the much-needed flexibility to help quickly establish processes and models for compliance, which will ultimately remain in use for the foreseeable future. Consequently, adoption of automated spreadsheet management will form a key part of the IT transformation initiatives. - **Cloud adoption of [risk management](https://www.financedigest.com/early-detection-of-mismatched-trades-is-key-to-managing-risk-and-maximizing-profits-on-the-pl-desk.html "EARLY DETECTION OF MISMATCHED TRADES IS KEY TO MANAGING RISK AND MAXIMIZING PROFITS ON THE P&L DESK") solutions will gather momentum** With many regulatory [bodies globally](https://www.financedigest.com/global-body-urges-eu-to-make-company-life-simpler-by-aligning-climate-reporting.html "Global body urges EU to make company life simpler by aligning climate reporting"), such as FedRAMP, European Union Model Clause, SOC 1 and 2, among others, having recognised Microsoft Azure as a secure platform, the cloud ecosystem for risk management solutions will gather momentum, which will encourage their adoption among organizations. Risk [management cloud solution providers will innovatively leverage this ecosystem to expand](https://www.financedigest.com/document-management-software-market-to-expand-at-a-value-cagr-of-12-3.html "Document Management Software Market to expand at a value CAGR of 12.3%") their offering and delivery options to beyond traditional areas including internal audit, and risk and compliance. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---