All financial services providers must keep track of trends such as business and consumer behaviours, new technology solutions and cybersecurity threats. These patterns are key to staying relevant and competitive — but to stay compliant, financial firms need to track trends in another area: regulatory change.
Regulatory changes in the financial services industry are rapid and numerous. Missing even a single legislative shift can lead to regulatory risk, non-compliance fines and other costly issues. That’s why it’s important for firms in the financial sector to understand key trends and monitor them appropriately.
Here’s a look at regulator trends and why tracking them is only the first step in regulatory change management.
Risk Management: Trends in Regulatory Change
To protect consumers and the Australian Financial Service License (AFSL) holders that serve them, Australian regulators keep a close eye on trends in technology, economics, cybersecurity and more. They make changes and updates based on these patterns — and in the process, regulators develop their own themes, often reflective of what’s happening in the industry overall.
These are the regulatory change behaviours financial services providers should expect to see in 2023 (and why):
Cybersecurity is a growing concern for financial services firms and will almost certainly be a continued focus for all Australian financial regulators. For example, the Australian Stock Exchange (ASX) maintains listing rules regarding ‘continuous disclosure,’ which requires each listed entity to disclose information that may have an impact on their data security — including cybercrime. It’s likely that regulators will continue to evolve the existing rules and release new guidance as cybersecurity grows more complex.
#2: Environmental, Social and Governance (ESG)
ESG policies and processes are becoming commonplace in nearly every industry, but they are perhaps most relevant in financial services, where AFSL holders are uniquely poised to support community and global improvements. Legislation such as the Climate Change Act of 2022 and ongoing changes to the Modern Slavery Act of 2018 indicate that top financial regulators intend to continue emphasising ESG compliance and the related regulatory framework. For example, the Australian Securities and Investments Commission (ASIC) listed greenwashing as one of its areas of focus for 2023.
#3: Misconduct and Consumer Protection
Financial regulators protect consumers, which means they target misconduct in many forms — including deceptive marketing, irresponsible financial advice, poorly designed financial product offerings and more. As these issues become more varied due to new situations and offerings — including higher risk products such as crypto assets — regulators are likely to prioritise the enforcement of accurate, honest conduct in 2023.
To learn more about regulator trends and how these patterns impact regulatory change management, download our whitepaper on The Cost of Falling Behind on Regulatory Change.
Risk Management Trends
In the same way that regulators respond to the financial landscape, AFSL holders respond to regulators. Here are some of the biggest regulatory risk management and compliance trends in the financial sector:
#1: Manual Solutions
Many financial services providers approach regulatory risk with spreadsheets, notes and other manual solutions. These processes, while tedious and time-consuming, are often thought to be more accessible and affordable than implementing modernised risk management. The truth is that manual efforts are simply more familiar, which means their costs may be easier to overlook.
#2: Expanded Hiring Efforts
As regulators continue to follow and develop trends, firms in the financial services sector scramble to keep up with dozens of regulatory changes per week. One response is to hire more people or otherwise expand their teams to get ahead of the regulatory risk associated with missing an update or failing to restructure an affected policy. This can be expensive and challenging, especially in a hiring landscape plagued by worker and talent shortages.
#3: External Support
Some financial firms bring in external specialist consulting firms to help with regulatory change management. This can be a far more effective solution than manual, in-house efforts.
#4: Software Selection
When the fast-changing regulatory environment feels overwhelming, many AFSL holders turn to software that tracks updates and highlights impacted documents or policies.
The Smart Way To Manage Risk
When comparing regulator and AFSL holder behaviours side-by-side, it becomes clear that knee-jerk reactions to large-scale change aren’t enough to navigate today’s regulatory obligations. Just keeping track of these themes would leave a financial firm unprepared for the task of updating policies accordingly, while overlooking patterns and focusing too heavily on actionable information would leave those same firms blindsided by new changes.
The key is to find a balance between tracking and enacting changes. To do that, financial services providers must make regulatory changes and their impacts immediately visible. This requires numerous steps:
- Maintaining access to the many and varied sources of legislation, regulations and related guidance documents.
- Updating and/or revisiting those sources regularly.
- Creating structures to highlight regulatory change and indicate which policies have been impacted.
- Enabling quick, effective updates to avoid non-compliance.
- Simplifying document distribution so all relevant staff can have immediate access to the most up-to-date version of every policy.
- Implementing a way of measuring whether or not relevant staff have read and understood the regulatory change and what it means for their day-to-day job.
While one or two of these things may be possible with spreadsheets, static PDFs and manual effort, the reality is that AFSL holders likely can’t keep up without a digitised solution.
Fortunately, RegsWeb addresses all of these needs and more.
Help From RegsWeb
Our regulatory change management platform links internal files to external regulatory content, creating a powerful intranet dedicated to compliance and risk change management. This makes it easy to see what changed and when, which policies were impacted and what the next steps should be. Once updates have been enacted, RegsWeb also enables users to immediately distribute files across the organisation, ensuring that every stakeholder and department is aligned. In-built analytics provide powerful reporting on staff engagement with the updated content.
Additionally, AFSL holders can receive supplementary support from MIntegrity. We’ll help you understand and navigate the compliance environment, create risk management procedures and decide what each regulation or update means for your business.
Do you need help navigating regulatory change management? Contact us today to learn more about MIntegrity advising solutions and the RegsWeb platform.
*Blog image by Freepik← Back to Blog