With a double whammy of mounting regulation and the disruption — and interconnected risks — brought about by Covid-19, RegTech investment has risen to the top of regulated firms' agendas.
According to the Covid-19: Compliance Risk Survey 2020, RegTech now makes up the biggest chunk of compliance teams' budgets.
But the road from awareness to adoption isn't a straight line. When firms have long-standing processes and established ways of doing things, implementing tech successfully is harder than you'd think. Which is why it's important to build a strong business case before you pour money and effort into digital transformation.
In our recent webinar, The future of compliance is digital, connected, and automated, our head of partnerships Anastasia Dokuchaeva sat down with governance, risk, and compliance expert Michael Rasmussen to discuss how to make a robust business case for tech adoption.
Here's what we learned.
Why you need to build the business case for digital transformation
Building a business case for digital transformation is important because it increases the odds that the project will succeed.
There are two reasons for this.
Firstly, going through the process of building your business case forces you to think about and identify what you want to get out of your investment. Which processes do you want to change and why? More importantly, what will the long-term benefits be?
Knowing the answers to these questions will help you make a better-informed decision when it's time to choose which platform to adopt. It'll also make it easier to gauge whether the project was successful. Did you reach your goals, or not?
Secondly, a solid business case helps win over the stakeholders on whom you depend to see the project through. This is crucial. When we interviewed Santander CIB's former head of internal control Gonzalo Hurtado, he put it this way:
"If the project goes ahead, several teams across the organisation will have to work on it alongside their usual tasks… Unless people at all levels are convinced that change will be an improvement, a project is unlikely to succeed."
The three steps to building a strong business case
A strong business case will help you crystallise your goals and get all-important stakeholder buy-in.
But how do you build it?
According to Michael Rasmussen, there are three key steps you should take:
- Analyse the current state of the process you want to digitalise
- Visualise how you'd like things to be when digital transformation is complete
- Research what tech is on the market and pick the platform that best fits your requirements and goals
Step 1: Analysing your current state
This step has two objectives:
- Firstly, to describe in detail how the process you'd like to change currently works. What does it entail? How many steps are involved? And which departments and individuals are involved?
- Secondly, to find out what problems the process has
Says Rasmussen:
"I like to break down the stages of the process. How are we doing this today? … And what are the issues? Are things slipping through the cracks and getting missed? Is it accurate? Is it true?"
Looking at each stage of the process and asking these questions helps you understand what it's costing in terms of time and effort, and also how effective it is at doing what you need it to do.
For best results, Rasmussen suggests breaking down the analysis into three components:
- Efficiency, that is how much effort the process requires to be completed
- Effectiveness — does the process deliver good results, or is it prone to error?
- Agility — how easy is it to adapt to changing requirements?
Step 2: Mapping your route
Having established the baseline, it's time to map out how you'd like the process to become. In other words, it's time to set the goals that'll help define what success should look like.
Perhaps you want to switch out a predominantly manual process for something swifter and less prone to human error? Or maybe you want to move from legacy software that's no longer fit for purpose to something more modern, agile, and effective?
The risk, at this stage, is to be overly ambitious. Change takes time and requires adjustment. And a lot depends on your organisation's level of maturity.
With this in mind, it's important to keep your goals realistic. As great as it would be, you can't go from riding a bicycle to sending a rocket to the moon in one single step.
Step 3: Making an informed choice
Alongside showing you what success should look like, setting goals also helps you decide which technology would best suit your needs.
The RegTech market is growing exponentially — it's expected to be worth $55.3 billion by 2025. New platforms are hitting the market all the time. With so many choices, it's important to evaluate carefully and choose wisely.
Says Rasmussen:
"...make sure they have a strong user experience and they're leveraging modern technology. One of the problems we have right now is that people can put a fresh user experience on an application, but under the hood it'll have twenty-year old code. There's a lot of cost and inflexibility in that.
"It's also important to check client references. Do they have good customer experiences? Anybody can demo something and make it look really good, especially if they're just doing a video demo.
"Lastly, kick the tires yourself and see how it actually works. Good technology should adapt to your processes, not vice versa…"
Digital transformation can only succeed if you know what you want to get out of it
In an ever more dynamic environment, the right tech is key to more resilient organisations.
"Technology can help us become more aware of our environment, of regulatory changes, and of the compliance risks we face," says Rasmussen. "This allows us to align our resources so we're more strategically able to focus on where we have the greatest exposure, become more responsive to change, and minimise those risks."
But while digital transformation can help organisations adapt and improve, it won't succeed unless there's a clear plan.
As car racer Bobby Unser once put it, "Success is where preparation and opportunity meet." By building a strong business case for digital transformation, you can help make sure your organisation is prepared to make the most of the benefits RegTech has to offer.
Want to learn more about how RegTech can help firms tackle the compliance challenges of the future and become more agile and resilient?
Watch our FREE webinar The future of compliance is digital, connected, and automated