Meeting the Challenge of Regulatory Reporting

Regulatory Reporting is a constantly shifting landscape that poses specific challenges for any organisation wishing to maintain cost-effective and value add compliance. With the fast pace of change, it’s natural to find the prospect of compliance daunting. Whether it is dealing with new regulations or updates to existing requirements, compliance can quickly become a problem area. In our experience, several common compliance themes consistently emerge:

Data Collection and Accuracy
New regulation usually demands new data collection. Often, this data is held in multiple, disparate systems, making collection and collation costly and time-consuming. Relying on manual interventions and tweaks to get the data into the right place not only jeopardises the veracity of the data but also creates a potential audit minefield. Consistently considering data integration and transformation is key to an effective compliance strategy so always choose reporting solutions that plug seamlessly into your existing IT infrastructure.

Once the data has been collected, strong controls are also vital. Any chain is only as strong as its weakest link and similarly, data integrity is only as good as the worst control. Good controls need to be consistently applied at all points, whether that is automatic checks when loading the data, or restrictions and validations for data entry.

Process Definition
Regular compliance data collection and reporting must become part of regular business activities. Particularly in situations where data collection requires collaboration from multiple users, a clear internal process needs to be established. Using software that helps to reinforce the structure of this process and guides users through their respective activities can help eliminate many of the issues organisations face at an initial compliance reporting go live.

The journey to achieve compliance can take time. Many companies simply aim for compliance at the transition/adoption date and unfortunately don’t leave time for the real value add activities that can make an implementation worthwhile. Some of these activities aren’t necessarily obvious at the outset, so it’s important to make time at key checkpoints to flush out and evaluate any new requirements.

Compliance isn’t a forever state. Modifications to regulatory requirements or changes to an organisation’s circumstances mean that even the best-executed compliance implementation can quickly become outdated. This means that any reporting solution must be future looking -not only to support changes to regulatory requirements but also to offer scalability for business growth.

Over the last few years, IFRS16 is a good example of our work with clients to manage a significant regulatory change. For many organisations this was the first time that they had been required to comprehensively collect and report on lease data – in many cases requiring companies to create a completely new internal process. Creating this process required input from group finance but also a range of other stakeholders such as procurement, operations, treasury and even legal had a part to play. Previously very little data was required, but IFRS16 demanded detailed records and estimates to become part of a company’s month-end data collection processes.

It’s fair to say that many businesses underestimated the amount of time it would take to achieve compliance, let alone gain any additional insight or value from the data. Although the standard has now been applied by most relevant companies, some lease accounting implementations remain problematic. We are consistently talking to organisations struggling with poor IFRS16 software applications or those that chose to build homegrown solutions that have become difficult to maintain. COVID-19 also created further difficulties for companies that rushed to get over the line to meet compliance deadlines without a robust data collection process or system in place. This, combined with the later transition date for the UK public sector, means that there are still many ‘in-flight’ projects.

All of the best practice implementations we have witnessed, both up close and from afar, have treated the introduction of the standard as an opportunity to gain better business insights. These organisations have identified and engaged key stakeholders and users early on, meaning that they are not just meeting basic disclosure requirements, but also gaining additional information for reporting and analysis that is adding real, strategic value.

Of course, our compliance journey with CCH Tagetik goes well beyond lease accounting. From IFRS, iXBRL, Solvency II – CCH Tagetik has designed specific solutions for a number of regulatory frameworks all built upon one unified platform that leverages the latest analytical information hub functionality. These solutions contain the required calculation logic, process workflows and reporting templates for ‘out of the box’ compliance, but remain configurable for each, individual business. In our view, CCH Tagetik solutions not only help organisations to achieve compliance but also remain compliant with regular releases so that any updates to standards (e.g. COVID-19 practical expedients for IFRS16) can be easily applied.

Increasing numbers of future-looking organisations are experiencing the benefits of CCH Tagetik for regulatory reporting. Our journey together will continue, as we help our clients go beyond compliance and use regulatory change as a vehicle to drive real business value.

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