The Case For (and Against?) Digitizing Compliance Requirements
There is a lot of buzz about using artificial intelligence (AI) to be able to capture, digitize and understand compliance requirements from the morass of regulations, client agreements and firm policies. So far, the effort has stalled out because a) most firms cannot use open source AI that pushes information out of their organizations and b) the key drivers of requirements still contain gray areas that require both expertise and context to determine the intent.
So why haven’t most firms taken the first step, i.e. capturing and digitizing their requirements? Here is what we are hearing:
- It’s not in the budget: The truth is that it can be a big expense to do the initial implementation. Every applicable document must be loaded into a system, all the requirements need to be extracted, and the project may reveal some gaps in coverage that will need to be resolved. Cutting and pasting into spreadsheets, while cumbersome, is built into the daily routines of multiple people, so the cost rarely rises to the level of a budget item, even though the ongoing cost may account for 25% or more of the team’s time.
- If it Ain’t broke: Many firms plan to do annual reviews of their compliance requirements and rule libraries, but as long as no major errors happen, those projects get repeatedly punted into the next fiscal year. Ultimately, it comes down to a calculation of risk—the odds that market changes will not reveal any weaknesses and the confidence that current processes will stand up to scrutiny.
- Waiting for the coolest solution: Talk of AI is everywhere, and the idea of a solution that eliminates nearly all human intervention by ingesting documentation, extracting requirements and automatically coding the rules can be irresistible. Unsurprisingly, some firms are waiting on the sidelines for a solution that will do everything. However, that revolution may not occur for years, and the effort to implement it will likely be enormous.
Who is Digitizing Requirements Now?
- Insurance Companies are leading the way. Investment firms owned by insurance companies are particularly sensitized to risk and cost. Those firms are at the forefront of making the long-term investment to digitize requirements so they can monitor coverage in real-time and keep their staff costs from increasing.
- Consolidators: Firms that grew by acquisition often maintain those businesses in separate silos, so the need for a consistency is the push behind digitizing.
- Firms with Complex Strategies: Complex strategies are often supported outside the commercial OMS, leaving firms without any means to see the big picture in real time. Digitizing requirements and matching those requirements to OMS and spreadsheet constraints means gaps in coverage can be easily spotted and resolved.
What do you think? Digitize now, or wait?