Specialized risk and compliance management technology is now becoming mainstream in mid-sized banks across the country. Most banks, when they look for the right technology to implement, prepare themselves for a significant financial investment. They understand the need for the technology but also know that they will require budget to fund the software and implementation. This is how technology implementations have traditionally worked in enterprises – the licensing and implementation is assumed to increase costs for the business.

That is the same approach most of the banks we talk to take – they communicate to us that they need a better way to manage risk and compliance and are willing to invest – if the solution provides value and delivers results that result in long-term improvements in the way risk and compliance are managed. However, the great thing about modern risk and compliance technology versus legacy models is that it does not necessarily increase costs at all and in many cases may actually lower costs. Any bank that thinks it cannot afford to invest in risk and compliance technology need to take another look at today’s solutions.

The Right Type of Solution

It is important here to note that we are talking about cloud-based risk and compliance management solutions and not solutions that operate on the legacy on-site model. This distinction is important because cloud solutions and legacy solutions have very different models and thus their impact on the bottom line of a business is also very different.

Legacy systems are deployed on-site. They often require a seven-figure investment to purchase and implement the solution. Once the solution has been purchased, the bank will also need to invest in hardware to run the solution and make changes to their network infrastructure to support the software solution running on-site. Banks will also need to either create their own team to manage the technology or pay the vendor to send out a team any time the solution needs to be updated or a problem needs to be fixed. All these costs add up quickly.

Cloud solutions, on the other hand, have minimal financial impact because their payment model and requirements are completely different. There is no million-dollar payment to purchase the solution – the bank licenses the cloud solution through a SaaS (Software-as-a-Service) model. Since the solution is running on the cloud, it does not need any hardware implementations either. All existing employees can simply access the solution through the internet on the computers that they already have. Maintenance is inexpensive too, since the solution is on the cloud it is managed by the vendor. If there is a problem, the vendor will solve it on the cloud – eliminating the need for anyone to travel on-site to fix the problems.

The biggest impact that risk and compliance technology can have is in the reduction of potential fines and penalties levied by regulatory bodies. Share on X

How Risk and Compliance Technology Reduce Costs

Here are 3 different ways that risk and technology help reduce costs:

1 – Reducing fines and penalties

The biggest impact that risk and compliance technology can have is in the reduction of potential fines and penalties levied by regulatory bodies. When regulatory bodies levy fines they do not just look at the offense that was committed – they also look at the infrastructure a bank has to prevent such offenses in the future. If the regulatory bodies find that a bank has no processes or technology in place, the penalty being levied could be severe. Risk and compliance technology thus help reduce penalties on two fronts. 1 – they increase the bank’s efficiency in catching compliance and risk issues, allowing the bank to find and fix the problem before an audit. 2 – they show the regulatory bodies that the bank has the technology in place to prevent further problems, so even if a penalty is levied it is typically smaller.

2 – Reducing labor hours

Risk and compliance experts are swamped with work in almost every bank. Banks rarely get the opportunity to create enterprise-level projects that can improve the bank’s approach to risk and compliance management because their experts are too busy putting out small fires out and creating reports. Risk and compliance technology automate processes and streamlines workflows, freeing up time and allowing the employees to accomplish much more.

3 – Maintaining headcount

Risk and compliance experts have experience and qualifications in a specialty field, which means that adding more employees to the payroll can have a significant impact on the bottom line of the business. Cloud risk and compliance technology costs are comparable to adding one employee to the risk and compliance team yet can enable the existing team members to accomplish much more than the addition of one more employee would. Banks can thus exponentially increase the capabilities of their risk and compliance teams without any significant additions in the number of people working within those teams.

If you are thinking about how your bank can improve its risk and compliance capabilities while keeping the costs in check, get in touch with our experts for a breakdown of costs and the ROI you can expect from our American Bankers Association endorsed compliance solution.