London, 2 March 2020
Author: Wim Nelen
The lesson of large regulatory implementation projects: digital knowledge compounds.
MiFID2 went live more than two years ago. For many European practitioners it remains the mother of all implementation projects. Where were you on 3rd January 2018?
Last week the European Commission started its consultation process for overhauling MiFID2. Meanwhile, many firms are still grappling with the original MiFID2 requirements. That ongoing struggle will continue as long as firms are not able to trace evolving business systems and controls back to implementation decisions and relevant snippets of regulatory text. Solving this lineage problem is what digital compliance transformation is all about.
Firms that created systemic lineage across regulatory analysis, business analysis and front office systems and controls ahead of January 2018 are now in a good place to maintain robust compliance programmes. They will find it relatively straightforward to determine the impact of proposed regulatory changes. These are major wins.
Many staff that contributed expertise towards MiFID2 implementation will have moved on by now. Staff turnover always decreases the undocumented knowledge base that we all know exists. The cost and risk of remedying this only increases with time. Firms that implemented robust traceability from day 1 can build on that digitised expertise. Digital knowledge compounds.
Did anyone really go about MiFID2 implementation this way? Maybe... but most did not, including myself. Me and my team worked on the basis of a giant spreadsheet. All project owners completed all work streams right at the end of December. The implementation was robust but the spreadsheet didn't leave the sort of digital footprints that underpin a scalable low-maintenance control framework.
The regulatory change book does not appear to be slowing down. Upcoming implementations include complex firm-wide regulations such as IFR/IFD or CRR2/CRD5. Brexit on-shoring in combination with EU policy developments such as the MiFID2 review will create a level of divergence. It is time to reflect on how implementation resources can reach further, faster and forever. Implementing a system that creates digital traceability is clearly the better model.
On the morning of 3rd of January 2018 I was confident enough to organise a MiFID2 team breakfast in Hawksmoor. After that I began to think about how to ease this burden for everyone.
Wim Nelen is a former regulator and Head of Compliance. He co-founded singlerulebook.com, a regulatory knowledge management platform that pre-indexes and visualises regulatory relationships and allows for comprehensive traceability. Contact Wim now if you want to ease the burden of regulatory implementation programmes: firstname.lastname@example.org