A perfect storm of the pandemic, new environmental, social, and governance (ESG) disclosure requirements, and increased M&A activities have exposed some significant regulatory technology (regtech) challenges for investment management firms. 

According to an in-depth survey of chief operating officers (COO) at 20 leading firms conducted by Clear Path Analysis and sponsored by AxiomSL, some of the biggest challenges firms face as they manage global regulatory reporting involve accessing siloed data, scaling reporting capabilities globally, and addressing increasingly complex requirements.

"There has been no shortage of stressors on the risk and regulatory reporting functions of global asset managers," said Hopeton Lindo, director, Client Relationship, Asset Management at AxiomSL. "We undertook this industry analysis with Clear Path Analysis to further understand the industry pain points and uncover the ways in which leaders are staying one step ahead to future-proof their risk and regulatory reporting programs. We found that change is indeed the only constant in the realm of global regulatory reporting, but the industry is also embracing new regtech solutions to manage that challenge."

Key challenges 

The main findings of the analysis are as follows:

Data silos keep COOs up at night

Integrating disparate internal datasets housed in different departments and external datasets sourced, managed, and held in a variety of different systems is a major regtech challenge confronting investment managers. This challenge is amplified by the need to comply with multiple jurisdictions’ rule complexities and nuances, for example managing intricate share ownership disclosures.

Scaling reporting capabilities without breaking the bank

Growing regulatory reporting requirements in dozens of different jurisdictions have put an increased focus on scalability and efficiency, requiring firms to leverage advanced technologies such as artificial intelligence (AI) and machine learning (ML) just to keep pace with global requirements.

Growing complexity amid diverging market requirements

A host of new regulatory mandates many of which vary significantly by jurisdiction, such as changing short-selling rules and evolving ESG disclosures, have forced a need for hyperlocal domain expertise. Consequently, COOs are relying more on regtech firms to provide this capability.

"To stay compliant in the current regulatory landscape, investment management firms need to source and produce larger amounts of granular data with greater frequency than ever," said Noel Hillmann, chief executive officer at Clear Path Analysis. "Throughout our interviews with industry COOs we consistently found that a combination of globally accessible technology and deep domain expertise is key to keeping pace in this environment."