RegTech in the cloud; it’s about managing the variables

Dec 9, 2021 by Singh Harpeet

Data privacy and security are inherent risks when you embark on a cloud migration.

Moving RegTech (regulatory technology) to the cloud is no exception. Nuanced, cloud-based solutions invariably take longer than planned for complex organizations with little experience of these types of migrations. Also, you’re left with no choice if your organization’s new RegTech solution is slated to comply with certain regulations by a regulator-imposed date. It has to be ready.

And the number of variables continues to increase. For example, is your new RegTech cloud-based solution aligned with the firm’s strategic IT direction? Or what about the massive challenge (in both risk and level of difficulty) of having to integrate new technology with legacy systems? In a survey of delegates at the recent RegTech Summit, more than a third of those polled admitted they were concerned about the prospect of integration with legacy systems and architecture. You’ll need a framework that can break these considerations down into three areas — your firm and its IT strategy, the potential solution and the regulatory authorities.

How legacy is legacy?

Does your firm have a cloud policy and governance in place? What kind of experience have you amassed? How about the age and nature of your systems? Legacy can mean a 10 year-old Java application or a mainframe warehouse that hasn’t been upgraded in 30 years.

Choosing the right vendor

The vendor — beyond providing the right functionality, security and data privacy — should be aligned with your firm’s regional and cloud-hosting preferences. Plus, they ought to be able to evidence that integration and the data migration process can be managed effectively.

These are pretty fundamental questions

Regulators in other countries will be at different stages of cloud adoption. Also, some are more prescriptive than others in their guidelines. You’ll need to confirm that the regional authorities for the territories you’re working are comfortable with the idea of you moving to a cloud-based solution.

Cloud-based, but at what cost?

Risks — cloud security, data security and so on — can be mitigated by careful planning and implementing the latest solutions. But cost is a much harder variable to pin down because it’s unique to your firm’s situation. If your focus is on regulatory compliance and you're unable to derive any business value, it can be difficult to create a business case to justify the move. But with careful planning and the adoption of standards that enhance reusability, firms can drive business value from RegTech solutions.

Data management is key

Even when you understand the rules around security and the integrity of data on-prem, working in the cloud can be challenging. For instance, when data is managed on-prem you have full control of not only your data, but your tech-stack and performance as well. Consequently, it’s easier to comply with regulations like GDPR because you know where the data is sitting.

Data at rest is stored in the cloud and not necessarily on one of your local drives. What if, for argument’s sake, a new regulation directed you to publish data to the public or the authorities, masking certain sections? You’d need an additional layer of oversight on the data moving across your network. Therefore, you need different data management practices, plus uprated elements for things like data transit.

Choosing the right tech to solve this equation

While assessing your options for RegTech in the cloud, it’s imperative that you look at how your current data management practices will mesh with the new solution. Knowing your data, its type and origin is crucial. Understanding who’s responsible for making sure that data is sound, even more so. You can only achieve this if you have really bombproof data management in place.

Which one thing will ensure a successful RegTech move to the cloud?

Understand your data architecture, including your data-governance processes. Make sure you know where your data is coming from and where it’s going to, and once you’re about to go live with your cloud-based solution, build a control process around it. If you don’t get to grips with these integrations, they’ll always cause problems for testing and compliance.

If you’d like to find out how Zoreza Global can design a roadmap to minimize the risk and help you breeze through your RegTech-in-the-cloud journey, contact one of our specialists at financialservices@luxoft.com or visit luxoft.com/capital-markets

Harpreet is responsible for delivering innovative business and fintech solutions for post-trade functions like regulatory, liquidity management and operational resilience. He has a master’s degree in business and more than 20 years’ experience in data, driving growth and implementing front-to-back change. Harpreet is a much sought-after speaker at industry events and has published several thought-leading articles and papers. He’s committed to working with industry and using the latest technologies to optimize post-trade solutions.