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Why Your Company’s Sustainability Goals Start with Regulatory Compliance

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Rohini Gupta,  the Director and Lead Regulatory Advisor at FinregE.

Sustainability has become an increasingly important point of focus for businesses throughout the last decade. Recently, it has transitioned from a strong brand moral differentiator and value into a point of compliance by which companies have to abide by.

The UK Environmental Act means that businesses are now facing real scrutiny over air and water quality, and resource and waste management. With the UK’s plan for decarbonising all sectors of the UK economy by 2050, there’s a strong likelihood that further legislation will soon come into play.

So, how can businesses best manage these complex new regulatory compliance matters in line with their own sustainability goals?

How to implement and manage the new sustainability regulations

Compliance in any area is always a difficult balancing act and regulations change on a regular basis. When implementing new requirements, you can find yourself facing resistance from employees or even the leadership team and new systems and new processes can seem to hamper productivity. And even where compliance is accepted and adhered to, it can be difficult to demonstrate, lacking an accessible audit trail.

The problem is, where compliance is not observed – and demonstrated – there is the potential for enormous penalties to be levied. But while there are no shortcuts to compliance, there are steps that businesses can take to ease the implementation and management of new compliance protocols.

                    Rohini Gupta

The key to implementing and managing new sustainability regulations is staying up to date with compliance issues and maximising the power of technology.

The importance of staying up to date with compliance issues

Lack of awareness is one of the most common reasons for compliance failings. However, ignorance will never be an acceptable excuse by regulators.

Staying up to date with the compliance expectations of your industry is integral if you wish to avoid unknowingly breaching regulations. But with current rules changing on a regular basis, it can be hard to keep track. That’s why some compliance platforms provide tools designed to enable the easy tracking of regulatory changes. This is to be certain that the platform you work with takes into account the emerging rules and regulations related to climate and environmental risks, rather than simply focusing on financial regulation.

Maximise the power of technology

Regulatory technology (RegTech) has evolved alongside FinTech and InsurTech and provides organisations with an easy solution for the optimisation of regulatory compliance. But it can also be used to help innovate company processes, facilitate growth, and enhance sustainability goals.

With the application of machine learning (ML), natural language processing (NLP), and a deep learning structure, it is possible for businesses to automate many compliance issues. Using tech to structure, label and summarise the data they need to assess their sustainability risk exposures. Gathering data from global resources – publications, research, governmental guidelines – and using it to engage in sound climate-related risk management, scale up their investment in sustainability, and enhance their financial resilience.

To do all of this manually would be an almost impossible task. Taking hundreds of hours of resources on a weekly basis. At present, climate and environmental risks-related information is typically in an unstructured format across multiple global websites. No single provider platform brings all this information together. Through the use of ML, this work can be managed behind the scenes, with relevant action points being flagged only when required. Removing a significant burden of time and money from individual businesses, while providing additional scope for the implementation and management of new sustainability goals that will take a business beyond the bare minimum required.

Using AI to monitor compliance in real-time

For financial institutions (FIs), compliance is nothing new. This is the field where RegTech cut its teeth, using artificial intelligence (AI), ML, and NLP to monitor customer interactions to detect compliance issues. Whether miss-selling or breaches of the Anti-Money Laundering Act. Throughout the last five years, more and more financial compliance products have come onto the market. And sustainability compliance can be handled in much the same way. With emissions and other linked data being tracked by AI, building that audit trail into every process. And for FIs, this is important.

FIs make contributions to environmental change through financing activities. Global FIs greenhouse gas (GHG) emissions through financing are reported <700 times higher than their direct emissions (CPD, 2020). Identifying climate and environmental-related risks in their asset financing decisions and exposures help support the financing of a green agenda which will help tackle climate change.

But the materialisation of physical/transition risks makes FIs vulnerable to value erosion in their corporate/financial commercial status. FIs need to understand their exposures to these risks to act to reduce their vulnerability.

Commercially, FIs are being judged on their green credentials, with pressures mounting to incorporate climate factors into FIs’ capital allocations and loan/asset portfolios.

What’s in the future of sustainability compliance?

Sustainability compliance is still in its infancy. But with the global emphasis on emission reduction and environmental protection, we’re unlikely to see any withdrawal from the sphere. Governments are still learning and developing regulations that can help manage and control businesses’ environmental impacts. Given the complexity and importance of the issue, there is every expectation that regulations will become stricter and heavier repercussions will be implemented. So that businesses that fail to act now, in the early stages of legislation, may well feel the effects of being unable to meet requirements under the changing regulatory expectations.

With sustainability now at the forefront of the world’s minds, it is important for businesses to be setting sustainability goals for their customers. However now with global institutions requiring companies to reach certain green milestones and meet certain sustainable standards, compliance is now necessary so businesses aren’t penalised.

 

Rohini Gupta,  the Director and Lead Regulatory Advisor at FinregE. Rohini has over 15 years of experience in a wealth of areas including asset and wealth management, investment banking and retail banking, capital markets and financial services. Rohini started FinregE in 2018 and is the brains behind FinregE’s regulatory interpretation and compliance workflow solutions, which are designed based on her extensive hands-on experience and domain knowledge in regulation and compliance.

Business

Unlocking the Power of Data: Revolutionising Business Success in the Financial Services Sector

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Suki Dhuphar, Head of EMEA, Tamr

 

The financial services (FS) sector operates within an immensely data-abundant landscape. But it’s well-known that many organisations in the sector struggle to make data-driven decisions because they lack access to the right data to make decisions at the right time.

As the sector strives for a data-driven approach, companies focus on democratising data, granting non-technical users the ability to work with and leverage data for informed decision-making. However, dirty data, riddled with errors and inconsistencies, can lead to flawed analytics and decision-making. Siloed data across departments like Marketing, Sales, Operations, or R&D exacerbates this issue. Breaking down these barriers is essential for effective data democratisation and achieving accurate insights for decision-making.

An antidote to dirty, disconnected data

Overcoming the challenges presented by dirty, disconnected data is not a new problem. But, there are new solutions – such as shifting strategies to focus on data products – which are proven to deliver great results. But, what is a data product?

Data products are high-quality, accessible datasets that organisations use to solve business challenges. Data products are comprehensive, clean, and continuously updated. They make data tangible to serve specific purposes defined by consumers and provide value because they are easy to find and use. For example, an investment firm can benefit from data products to gain insights into market trends and attract more capital. These offer a scalable solution for connecting alternative data sources, providing accurate and continuously updated views of portfolio companies. Using machine learning (ML) based technology enables the data product to adapt to new data sources, giving a firm’s partners confidence in their investment decisions.

Suki Dhuphar

But, before companies can reap the benefits of data products, the development of a robust data product strategy is a must.

Where to begin?

Prior to embarking on a data product strategy, it is imperative to establish clear-cut objectives that align with your organisation’s overarching business goals. Taking an incremental approach enables you to make a real impact against a specific objective – such as streamlining operations to enhance cost efficiency or reshaping business portfolios to drive growth – by starting with a more manageable goal and then building upon it as the use case is proved. For companies that find themselves uncertain about where to begin their move to data products, tackling your customer data is a good place to start for some quick wins to increase the success of the customer experience programmes.

Getting a good grasp on data

Once an objective is in place, it’s time for an organisation to assess its capabilities for executing the data product strategy. To do this, you need to dig into the nitty-gritty details like where the data is, how accurate and complete it is, how often it gets updated, and how well it’s integrated across different departments. This will give a solid grasp of the actual quality of the data and help allocate resources more efficiently. At this stage, you should also think about which stakeholders from across the business from leadership to IT will need to be involved in the process and how.

Once that’s covered, you can start putting together a skilled team and assigning responsibilities to kick-off the creation and management of a comprehensive data platform that spans all relevant departments. This process also helps spot any gaps early on, so you can focus on targeted initiatives.

Identifying the problem you will solve

Now let’s move on to the next step in our data product strategy. Here we need to identify a specific problem or challenge that is commonly faced in your organisation. It’s likely that leaders in different departments, like R&D or procurement, encounter obstacles that hinder their objectives that could be overcome with better insight and information. By defining a clear use case, you will build a real solution to a challenge they are facing rather than a data product for the sake of having data. This will be an impactful case study for your entire organisation to understand the potential benefits of data products and increase appetite for future projects.

Getting buy-in from the business

Once you have identified the problem you want to solve, you need to secure the funding, support, and resources to move the project ahead. To do that, you must present a practical roadmap that shows how you will quickly deliver value. You should also showcase how to improve it over time once the initial use case is proven.

The plan should map how you will measure success effectively with specific indicators (such as KPIs) that are closely tied to business goals. These indicators will give you a benchmark of what success looks like so you can clearly show when you’ve delivered it.

Getting the most out of your data product

Once you’ve got the green light – and the funds – it’s time to put your plan into action by creating a basic version of your data product, also known as a minimum viable data product (MVDP). By starting small and gradually enhancing with each new release you are putting yourself in the best stead to encourage adoption and also (coming back to our iterative approach) help you secure more resources and funding down the line.

To make the most of your data product, it’s essential to tap into the knowledge and experience of business partners as they know how to make the most of the data product and integrate it into existing workflows. Additionally, collecting feedback and using it to improve future releases will bring even more value to end users in the business and, in turn, your customers.

Unlocking the power of data (products)

It’s crucial for companies in FS to make the most of the huge amount of data they have at their disposal. It simply doesn’t make sense to leave this data tapped and not use it to solve real challenges for end users in the business and, in turn, improve the customer experience! By adopting effective strategies for data products, FS organisations can start to maximise the incredible value of their data.

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Business

Making the Maths Work: Addressing Inflation Challenges through Measuring and Managing Risk

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By

Matt Clementson, Head of Enterprise UK&I

Persistent inflation is highly troublesome for every business – with or without a recession. In addition to causing unexpected expenses, it complicates decision-making around stabilising wages, setting product prices, and investing in new areas for growth. Meanwhile, stock and bond prices plummet when alarming inflation data arrives and interest rates increase. It’s time to run leaner, making the reassessment of the strategic objectives highly urgent.

With a seat in the boardroom, CFOs can guide thoughtful discussions covering everything from procurement, resource allocation, and manufacturing to the alignment of business purpose with operational tactics and goals. CFOs must also rethink how their business measure and mitigate risk. Understanding the business’ vulnerability, they can add considerable value to their business by identifying risks early and making organisations accountable for mitigating them.

When the economy becomes uncomfortable, the mathematics behind business operations no longer work seamlessly. During more comfortable times businesses have the luxury to accept some degree of inefficiency and low productivity – but in times like these that’s no longer the case.

So now it’s more important that ever for CFOs to use the right tools and technology to manage and mitigate risk and build business resilience.

Enhancing visibility to measure and manage risk:

To navigate through periods of high inflation, CFOs need technologies that provide comprehensive visibility, and enable informed decision-making, in order to optimising cash flow, minimise     costs and manage risk in a transparent and efficient way.

1. Simplify confusing processes to gain moments of clarity

Effective risk management starts with integrating data from various sources within the organisation. By consolidating data from finance, operations, procurement, and sales, CFOs can gain a holistic view of the business landscape. This integration enables them to identify potential risks associated with inflation, such as rising costs, supply chain disruptions, or changes in customer demand patterns. With access to comprehensive and real-time data, CFOs can make informed decisions that mitigate the impact of inflation on the organisation.

A good first step is to unify travel, expense, and invoice solutions, so that finance teams can integrate and streamline operations and scale spend processes without adding additional resources.

2. Make spending decisions with data-driven accuracy

Once data is integrated, CFOs can leverage advanced analytics techniques to identify patterns, trends, and potential risks. Predictive analytics can help identify inflationary pressures, allowing businesses to proactively adjust pricing strategies or negotiate favourable terms with suppliers. Additionally, scenario modelling can simulate the impact of different inflation rates on the organisation’s financials, enabling CFOs to devise appropriate strategies for managing risk. By harnessing the power of analytics, CFOs can navigate inflation challenges with greater confidence and precision.

3.Driving business agility through automation

Facing a myriad of disruptors, companies in every industry are making strategic decisions aimed at remaining competitive in the market and with their people. Digitisation, standardisation, and automation will be critical as businesses focus on solving problems for their customers in innovative, lasting ways

AI technologies, such as machine learning algorithms, can analyse vast amounts of data to uncover hidden insights and patterns. And with automated, customisable controls, CFOs can keep their firm agile – re-adjusting spend controls to match the corporate travel and expense (T&E) policy whenever their business needs to adapt or pivot. Only then will spending insights allow them to review how policies impact business performance and continue to optimise cash management.

Making the maths work

In a business environment plagued by persistent inflation, CFOs play a crucial role in addressing the associated challenges. By rethinking how their organisations measure and manage risk, CFOs can enhance their decision-making capabilities and add significant value. The integration of data, advanced analytics, and AI technologies enables CFOs to build resilience, standardise processes, ensure compliance, and deliver insights to the entire enterprise. By making the maths work in the face of inflation, businesses can navigate uncertain economic times with confidence and stay on the path of sustainable growth.

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