Managing regulatory change has long been a headache for businesses in heavily regulated industries. Managing this change requires quite an investment. The business must hire regulatory experts who can interpret the regulations and tell the business how it will need to change itself to comply with the changes. The problem is that this process can be rather slow and is error prone because it is being handled manually.
The Profound Nature of Regulatory Change
Before we get into the perils of regulatory change, it is important to first understand just how much these regulatory movements can affect businesses. Imagine you are playing in a basketball tournament and your team is going quite well. One day the NBA representatives come to all the teams and say that they are making some rule changes. They say that they are making the quarters longer, are thinking of maybe making the ball smaller, oh and they may be eliminating point guards because they think point guards are having a negative effect on the sports.
Imagine how much chaos this would cause. NBA teams spend years developing a squad and a strategy. They train their players for the full year where they play practice matches so that the strategy works flawlessly. Now the teams realize that their whole strategy will need to change. What is even worst is that the investment the teams made in acquiring and training the point guards will now be wasted. Longer quarters mean that players will get tired more often and are also at a higher risk of injuries, which can derail the whole tournament for many teams.
This is hard to imagine because it is easy to see that the NBA would never make a move like this. Businesses, however, cannot be so sure. The NBA is trying to preserve the spirit of the game, and they can be slow with the changes to make sure all the team have enough time to change themselves and be ready for the new rules. The government, on the other hand, is trying to preserve the global economy. They cannot wait and let something damage the economy just to save a few businesses – they have the economy to worry about.
This is a major problem in heavily regulated industries. Banks and other financial institutions must deal with such regulatory changes all the time. The regulatory changes may redefine eligibility for mortgages, may change the reserves a bank needs to keep, or may make some other change which is incompatible with the current strategy of the bank. The bank must then rethink strategies and then redo the financial modeling they were using to run their business. As you can imagine, this is not an easy process, which is why businesses take regulatory change management so seriously and invest heavily in it.
How businesses manage change
So how do businesses manage when there are regulatory changes? There are many steps which they take which allow them to anticipate the upcoming changes and prepare accordingly. Businesses hire regulatory experts who are dedicated to not just interpreting current regulations but also trying to see where the regulatory framework is moving towards. This is done by keeping a close watch on all the people joining the regulatory authority and going through their previous work.
In the previous few years businesses have a new tool to help them manage regulatory change – regulatory change management software. These software solutions have many tools that automate parts of the process and streamline collaboration across the organization. This allows the regulatory experts to quickly extract the changes present in the new regulations. These solutions also make it easier to detect the domains of the business that will be affected by regulatory changes. Regulatory change management software introduces order into a chaotic process and reduces the amount of time it takes.
Regulatory change management software was first used in the largest banks and financial institutions of the country. These software solutions were provided by legacy vendors and required an investment of millions of dollars. The implementation alone took months and was very expensive, but the large banks could afford to spend millions of dollars due to the sheer regulatory workload they had to deal with across the country.
Things have changed now – new change management solutions are being aimed at mid to small sized banks and financial institutions. Most of these solutions operate in the cloud which significantly reduces implementation and maintenance costs. The best part of these solutions is the ease with which they can be procured while costing a fraction of legacy systems. Businesses can get a subscription to these cloud services and can pay for a year of usage, allowing them to accomplish in a hundred thousand dollars what would have required millions of dollars until only a few years ago.