By Mark Amstrong, VP and MD EMEA at Progress

Regulation is the finance industry’s middle name. At a time when digital transformation has touched virtually every part of the global business landscape, financial services remain a slow moving beast that struggles under the weight of numerous regulatory standards and frameworks. Consumers expect a level of agility from financial institutions that they aren’t equipped for. It’s pretty much like pushing a Marathon runner to win the 100 meters at Rio Olympics. The odds are slim and the medal will most likely remain a distant dream.

However, this is pretty much the day-to-day reality in finance. And although the “embrace change, don’t avoid it” motivational motto has become rather cliché, financial institutions do need to be prepared to deal with the regulatory burden in an already complex financial landscape.

Understand why change ties you down

Take regulatory change as an example. New regulation has a knock-on effect on to the products that companies offer. Premiums may rise or fall; certain products might become obsolete and replaced by new offerings. The problem is that these products are usually managed on lines of code and hinge on complex business rules and processes based on a set of predefined criteria that can only be updated manually.

But at the same time new regulations mean changes need to be made to the code outlining the business rules, with days of intensive editing required from software teams. Not only is this a time intensive task, it often means a slow delivery to market for new services and an inability to act with agility. In fact, many businesses have an IT backlog of change requests that resembles a Gordian knot and that may take months or years to deliver on. That’s no one’s cup of tea and certainly not a financial institution’s where a status of “business as usual” is near mandatory.

At Progress we recently worked with a leading financial services group in Asia and we experienced first-hand the pain points associated with accurate and consistent credit reporting—the intelligence and skills needed to assess risk and creditworthiness for individuals and businesses. At the turn of the 21st century, this was still largely a manual and labour-intensive process that was disconnected from data and wasn’t working well. The institution had to assume higher risk, and was required to hold more capital in reserve for potential bad loans. The process was screaming be changed and so it happened.

Unravel the business rules knot

One way to work around this is by automating the decision making process and separate the business rules from code. This allows business professionals, business analysts and software developers alike to quickly create or modify rules using an intuitive interface. Organisations can do this by implementing a business rules management system (BRMS), allowing IT and business analysts to collaborate, identify and deploy automated business rules, freeing developer teams to focus on innovation. In fact by eliminating the need for classic programming skills, with a spreadsheet metaphor and extending the rule modelling access to everyone in the organisation, rule sets can be analysed and tested independently of any IT system and then saved as executable decision services.

Automating complex decision-intensive business processes such as credit scoring with eight scoring models, each with hundreds of rules, and hundreds of factors that go into a score is far from an easy task. But with the help of BMRS, we’ve seen how financial organisations have managed to respond to market changes quicker, cutting turnaround time by 25%. Another important point to consider is auditability. When an auditor comes in to review an organisation’s compliance with regulation, they want to see evidence of compliance controls.  A BRMS implementation allows organisations to show the auditors a set of processes that smooth their audit.  Firstly, they can show the compliance logic in an executable model that the auditors can read and understand. Secondly, they can show audit trails of every transaction.  When decision services execute against transactions (input data), they provide not only results (output data), but they also provide an audit trail showing the order in which each rule fired.  This is incredibly helpful in passing audit.

Master change by mastering the rules

Change is what makes the world go round and it’s time that the financial industry kept up with the pace. As we live in an age where awareness and demand from Governments, regulatory bodies and customers is only set to grow, financial organisations  should look into making the most of the new parameters that change brings and improve their internal efficiency. Implementing BRMS into their back-end processes will not only be time and cost effective today but can also help financial institutions stay prepared for future changes to the market.