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15th June 2022
A recent report by Google Cloud on the future of cloud in banking shows that, although levels of cloud adoption vary widely, most firms want to at least double—with many wanting to quadruple—their use of cloud across their technology estates in the next three years.
At First Derivative, we have long understood the transformative capabilities of the cloud for financial services; how it provides a catalyst for change and enables new possibilities in technology adoption.
Equally, we recognise the challenges organisations can face in migrating their data and applications to the cloud. The Google report cites a lack of cloud skills and a lack of understanding of cloud benefits as the main reasons for holding back wider adoption and we’d agree with that. A half-hearted move to the cloud delivers limited value, it can even increase costs.
However, with the right choice of partner, one that approaches cloud migration projects with a “data first” mindset, the rewards can be significant. Business agility and rate of change can increase dramatically; by allowing businesses to experiment more freely, they become more agile and ultimately more competitive and successful.
We’re seeing many clients start their cloud journeys with risk management. Risk platforms tend to be either part of, or built closely to, front office systems and as firms move these to the cloud, it makes sense to look at how risk management can be streamlined and enhanced.
We have been working with a tier one bank on migrating its central credit risk exposure calculation and management platform to Google Cloud Platform (GCP). By removing inherent inefficiencies with the legacy solution, we enabled the bank to significantly reduce its ‘Run The Bank’ costs, while providing the compute elasticity needed to meet upcoming regulatory demands. The expected return on investment to the bank, as a result of migration, is £2m+ in just three years.
With ROI like that it’s no wonder more and more clients are getting serious about instigating cloud migration projects across all parts of their business. We see Regulatory Reporting as being the next key areas of focus.
Cloud is enabling real innovation in the reg reporting space, not just the ‘usual’ benefits of reliability, scalability and cost reduction, though these too can be significant. We’re working with clients who are re-examining and rebuilding their risk and reg reporting frameworks to focus on data driven insights, real-time alerting, advanced analytics and predictive testing using ML/AI etc.
Imagine the scenario, you’re a CEO and you want to know if you are meeting your regulatory obligations. You load up a single dashboard regarding operating risk. Clicking in, you are presented with a series of dashboards options covering the health of reporting at a macro level, including system stability and then a micro level for each region then regulation.
From a single screen you can track and interrogate any program status or incident. Each search can be saved and tagged to a specific client.The cloud enables the instantaneous recall and analysis of distributed data sets. What used to take hours now takes mere seconds saving valuable time and enabling better, faster business decisions.
Virtual reality (VR) is also set to transform regulatory reporting, enabled by the cloud. Imagine being able to don a VR headset and walk through the journey of the trade with a regulator! How it was booked, amended and settled. You can pull up the file of all data points, meetings and the discussions around the executing of a trade. It sounds like the stuff of science fiction but it’s rapidly becoming fact.
In a time of great change, the financial services sector faces an additional data challenge in the shape of environmental, social and governance (ESG) reporting. In less than a decade, investments focused on ESG factors have gone from a small niche to become a priority for financial services companies. The challenge that banks have is how to assimilate vast amounts of unstructured data, everything from weather reports to energy ratings on buildings, to both comply with the expanding list of ESG reporting regulations and understand their exposure to risk.
As always, cloud computing provides a solution. Cost reduction around the storage of these vast datasets and scalable compute so banks only pay for what they need, are two obvious benefits, but equally important is cloud’s role in critical areas such as ensuring data governance, security, and data quality as well as providing an audit trail for regulators.
However, it’s not likely to be plain sailing for banks as ESG data is often fragmented and inconsistent due to a lack of standardised reporting frameworks across markets and regions. While third-party data providers are becoming more prevalent, they still struggle to deliver a fully comprehensive service, which presents significant challenges around the quality and consistency of data.
Handily, these types of projects are right in First Derivative’s’ sweet spot. They require experts with deep domain enterprise, advanced data capabilities and excellence in technical execution. We have a hard won reputation for executional excellence not our PPT skills. Our expertise in Governance and Data sets us apart from the competition. We are regularly recognised by industry associations as being leaders in regtech solutions and consulting (the A-Team Group awarded us Best Regulatory Consultancy Europe last year), and our long-standing relationship with Google Cloud shows that we understand the potential that the cloud offers in the financial services and capital markets space.
We look forward to participating at the upcoming event ‘Reimagining Regulatory Reporting With Google Cloud’ to demonstrate our breadth of solutions and the strength of our partnership.
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Chris Owers Global Head of Regulatory Solutions |
