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The future of compliance is in cognitive computing

Gene Ludwig | August 14, 2017

The idiom about death and taxes overlooks another constant – change.

And few industries have seen more change in the last 30 years than finance. Whether it’s the explosive growth in the size of our institutions, the proliferation of competitors, the innovation of products and services, or the uptick in regulation, finance has been transformed by change.

It has toppled venerable companies, blind-sided brilliant executives, and doomed profitable products. Underlying all this change is complexity.

Finance today is immeasurably more complex than it was just 15 years ago and positively unrecognizable compared to 50 years ago.

Everything from how we save, invest, transfer funds, and manage liquidity to how we deliver these products has grown increasingly complex.

And that complexity is not going away. Policymakers recognize this and have kept pace with increasingly intricate regulations and guidelines.

So today’s financial leaders need to partner with the sector that has seen even more change than finance – technology.

Technological change, and in particular cognitive computing, holds the key to mastering both change and complexity in finance.

Financial entities can no longer deal with today’s information-driven reality with traditional means, adding ever more staff and relying on legacy technology. It’s not possible to consume the amount and speed of incoming data, much less adhere to regulatory expectations, without technology that can ingest large amounts of data – and analyze it – at lightning speed.

That’s where cognitive computing comes in. Its next-generation analysis will be at the fingertips of a firm’s critically important governance and cultural functions in real time.

Rather than static spreadsheets, executives will be provided with actionable insights, allowing decision makers to manage the flow of information and detect problems before they become crises.

Unlike first-generation robotic products, augmented intelligence solutions learn, reason, and get smarter as they are taught by subject-matter experts. 

This technology puts a floor under the level of mistakes that can be made, and as it improves over time, the floor continues to elevate. This means problems won't be allowed to fester and grow to the point where they threaten an institution's viability.

Combining the benefits of machines and robotics with a flexible and constantly improving technology will help executives stay on top of new and evolving compliance requirements and new and evolving complexity.

What’s more, this augmented intelligence has the potential to provide analytics that can improve risk management by better identifying credit deterioration and even tail events (or risks that are unlikely but could be devastating).

The institutions that manage information best will have a competitive advantage. But just as important, when the information is not managed well from a controls perspective, there can be seriously negative consequences.

Again, this is where cognitive technology comes in. It will help institutions stay ahead of illicit schemes. It will take leverage away from criminals.

The increasing complexity of institutions combined with the information overload they must manage has brought us to a turning point. These emerging technologies will no longer be simply a matter of competitive advantage, but a necessity to keep up with continuing change and complexity.

One day soon it won’t be possible to operate safely or efficiently without the application of cognitive technology solutions. Financial services regulatory compliance professionals will soon wonder how they operated without it. Compliance without cognitive technology will seem as outdated as the abacus.