by Steyn Basson
When it comes to regulatory changes, solutions are often haphazardly compiled, leaving dangerous loose ends ready to unravel.
Picture this: For the last few months you have been following reports of new regulatory reporting changes in the pipeline. There has been lots of uncertainty, with the majority of the institutions affected by the change (yours included) taking a “wait and see” stance. As with all these kinds of changes, there are lots of questions around whether it will really affect you, and what the actual impact would be. The scope is quite vague, and nobody fully understands what will be required. Besides, the last few times these kinds of changes have come along they went through a couple of postponements and rounds of change before being enforced anyway. These will most likely either be postponed, or even cancelled, right?
Fast-forward a few months: The regulators are poised to pull the trigger and implement the regulatory reporting changes. The time spent investigating the changes have highlighted that it does impact your organisation after all. And the impact may be more significant than anticipated. Regardless of how you got to this point, there doesn’t appear to be many options left.
The only options now are to:
- Throw people (rather than automated solutions) at the problem.
- Do the bare minimum that is required to get over the line (as opposed to focussing on sustainability).
- Take short-term tactical shortcuts (as opposed to looking at strategic long-term options).
You promise yourself that as soon as things settle down and you get over the initial implementation shock, you will relook at the requirement and redesign the solution in a more strategic way.
But you know that it’s not going to happen.
For now, the proposed solution feels like a ball made up of pieces of string. Loose ends everywhere, but somehow keeping its shape. Even if only just.
Time passes. Despite your best intentions, the last year has not provided you or your team the opportunity to relook at the tactical solution you have in place. From a budget perspective, the view has been that “it’s kind of working, so let’s not spend money on changing it”. The regulator has also just announced more changes that will expand the existing reporting scope, with relatively tight timelines – there’s too much risk to change the existing processes in the timeframe provided. Once again there are few options on the table other than the same ones as before (a people-oriented, minimum scope, tactical solution). Add a few more threads to the ball of string.
More time passes. The above process was repeated for a few years in a row. The ball of string has become large – scarily so. And has somehow kept its shape. But there’s a problem; something has changed. Whether it is a key employee resigning, or a new requirement that just can’t be achieved using the existing process/solution, or sheer volumes becoming too large to manage, one of the threads has started unravelling. And it doesn’t stop there. This one thread is causing a cascade where everything seems to be falling to pieces at once. And soon it is clear that you will have no sustainable solution.
Sun Tzu said that “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat”. Another way of looking at it is that tactics help you win battles, but strategy helps you win wars. Our scenario is one example of a process where pure tactical thinking with a complete disregard for strategy will lead to eventual defeat. The truth is that often a focus on tactics rather than strategy is required for a specific situation – e.g. where timelines are tight and there is a lot of uncertainty – and that’s fine – as long as there is a concerted effort to include strategic thinking at some point in the process.
Indeed, some of the most mature regulatory solutions I have come across are deployed at organisations that focussed on tactical solutions and lost their first battle or two, rather than those who haven’t lost a battle yet – organisations subjected to early defeat were forced to think strategically when the solution domain was still small, and as such they could grow a strategic solution over time, that scales well with time. Conversely, the most difficult meetings we have are at organisations where things are coming apart, and they urgently need to find solutions in record time.
In general, strategic and tactical thinking are both important when it comes to regulatory solutions. Without strategy, penalties, loss of client confidence, trust, etc. is inevitable. Without tactics, the route may be long and slow, with lots of wasted time and effort.
I have been fortunate enough to work at Synthesis for a number of years where there has always been a healthy balance between the tactical and the strategic, not just in our own thinking, but also when we think about our clients and their needs. One of our core focus areas is to understand where various market sectors are moving towards, to ensure that we can anticipate client requirements. This means that where clients are facing a new requirement, or entering a new technological area, whether it is in the regulatory or any other space, we are usually already there and ready to assist with a strategic focus.
As such, at Synthesis, we have a number of products (combined with years of experience) in the regulatory reporting space that assist our clients in implementing strategically focussed regulatory reporting solutions. At some clients, we have been there from day one, and at others, we have assisted when there was a conscious switch from the tactical to the strategic (or their existing solution stopped working).
It is important to take some time to relook at your tactical solutions. Consider strategic solutions that allow for longer-term benefits and peace of mind. Do it now, while things are fine, rather than waiting for the tactical ball of string to unravel and leave you without any real options.
