Getting More Value From Regulatory Reporting Data

Many organisations are required to produce regulatory reporting, but is it a cost or a benefit?


If your regulatory reporting data is locked up in spreadsheets then you’re probably not getting the value from it that you could be

Many industries including banking and financial services, aviation, food and pharmaceuticals have strict mandatory requirements to produce and provide data or reporting to their regulatory bodies. Beyond that, many more organisations have other statutory reporting to shareholders, certification bodies and others.

Typically these reporting requirements will represent a cost to the organisation to produce and frequently they are put together quite manually using tools such as Excel. This holds true even in some quite large organisations (witness the Prudential Regulatory Authority’s “Dear CEO” letter of September 2021, to bank and building society CEOs, which explicitly calls out a need to strengthen controls around Excel based returns).

The underlying problem here is often that they are seen purely as a cost to the organisation – and thus like any cost to be minimised and delivered with the lowest possible effort. But it doesn’t have to be like that…

    The Last Mile

    The very act of compiling a return for a regulator means structuring the data according to strict industry definitions so that it can be compared by an external body, but by doing this the organisation is producing what could be the backbone of a potentially valuable management resource.

    However, getting from regulatory return to a useful management tool requires that a few obstacles are cleared. Although these may be in “the last mile” in the journey of raw data to useful insights, solving them is often seen as adding more cost to an exercise which is already simply a resource drain. By changing that, there is often real value to be found, from a process that has to be done anyway.

    Definitions and Quality

    The first issue we see here is that the regulatory definitions may be eminently sensible for controlling and managing risks across an industry, but they may be subtly, or not so subtly different from the metrics that a board would want to make decisions. When this happens we often see that a parallel set of reporting is built purely to service the regulatory need, utterly unconnected to the reporting that feeds board decisions. Of course in some cases there is a requirement for boards to monitor the regulatory numbers directly, but even then that often consists of reviewing the final return.

    The data itself is generated from the same raw data that is used for other reporting – it must be because ultimately that is the detail of the business operations. So the solution here is clear – build a single reporting platform and define both the internal and external reporting metrics in the same platform, allowing either to be compared in parallel and sliced by the same dimensions. Doing so also generates a significant benefit – the production of the external reporting can now be highly automated – removing the need for manual interventions, which both increases the reliability and reduces the costs.

    At this point you’re probably thinking about all the data quality issues that providing data directly from your systems to a regulator would expose. Which brings me to my next point – by holding it together you get consistency in both your internal and external reporting. If the data is wrong both are wrong. Now this might not sound like much of a win at this point, but it can be. The important thing is to shift the culture away from papering over data quality issues and towards allowing senior management to view the data with all it’s issues. This will generate an initial flurry of work as long masked data quality issues are exposed, but through doing so the root causes of them will be able to be effectively prioritised and solved. Most likely you’ll need to run a programme to work through and remediate the highest priority data quality issues, but this is an opportunity to spread the right culture through the organisation.

    Importantly with both internal and external data aligned, fixing a data quality problem for one will automatically fix for both.

    At this point I’ve seen some senior leaders blink and decide once they see all the issues that it is too risky to expose them all. Realistically of course, there may be some adjustments that are still required for well understood business reasons, whilst the underlying data quality issues are fixed – if only to prevent volatility and trend disruption to data that has long been reporting after some manual manipulation. But this transition phase must not be allowed to linger or no real progress will be made.

    False colour Earth Observation image from Sentinel-2 L2A

    Data Into Insights

    The other aspect that prevents boards from getting real value from their regulatory reporting is the format. Regulatory returns tend to take the form of large spreadsheets or files and these do not lend themselves well to gaining insights.

    Having structured both the internal and external data into a data warehouse, the real value for senior leaders comes when high quality reporting is placed over those datasets – ideally in the form of interactive dashboards. These allow management teams to interactively ask questions of the data before, during and after meetings in order to drill into it and really understand the opportunities and risks in front of them.

    With the advent of cloud computing, building this infrastructure is easier than ever as large datasets and complex business logic can be efficiently encapsulated within a platform such as Azure Synapse and easily display via dashboards that can be securely delivered at scale, automatically.

    Imagine a world where your regulatory reporting data is also driving a dashboard that is just there when you turn your computer on in the morning, updated with the latest data, and tailored to your role. A lot of the hard work on that journey has already been done and turning what is currently a cost in to a valuable business asset is probably a smaller task than you think.

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