Posted: 25/10/2024 | Read time: 4 minutes
Data errors aren’t just an inconvenience – they can be eye-wateringly costly. With regulations growing more complex and bringing increased scrutinisation, inaccurate data can expose firms to severe financial penalties, reputational damage, and in worst-case scenarios, even criminal charges. As businesses juggle growing data volumes and heightened regulatory pressure, maintaining data integrity is now non-negotiable.
While end-to-end automation is highly effective in streamlining reconciliation processes, it can also play a crucial role in ensuring data governance and regulatory compliance by helping to improve accuracy and transparency in a firm’s data management practices.
The importance of data governance
Data governance involves putting policies, procedures, and structures in place to maintain data integrity, consistency, and security across a firm. Without these practices, data inconsistencies may begin to creep in across different systems, especially when firms rely on manual processes or disconnected legacy systems.
Legacy systems, in particular, are harder to adapt compared to today’s “low code” platforms. They pose additional risks, such as lack of vendor support or an ever-shrinking pool of staff who remember how to manage these older technologies. Ultimately, these systems struggle to keep pace with innovations, new technologies, and regulatory changes. Many are deployed as point solutions but need to be supplemented by other software applications to automate processes like reconciliation. This can then lead to knowledge silos, fragmented processes, and a higher chance for inaccuracies.
When inaccuracies go unnoticed, they can begin to cascade throughout a firm, leading to flawed financial records, many of which will be overlooked and unresolved. Without clear oversight of its data, there is every chance that a firm could be beset by regulatory fines – a reality that a third of UK financial services firms have already experienced firsthand.
Regulatory fines and operational disruptions are merely the beginning. Firms that fail to maintain accurate and compliant data also risk losing the trust of their customers, investors, and market counterparties.
As the backbone of accurate data in a financial services firm, automated reconciliation can ensure that data sets align throughout various systems and departments. This is critical for maintaining compliance with regulators demanding extreme levels of accuracy in financial reporting.
Without automation, and for firms that rely on the human factor, discrepancies in data sets can easily go unnoticed, leading to inaccurate reports and unreliable analytics. Both of which are key drivers behind breaches in regulatory practices.
The power of automated reconciliation
One of the main ways of ensuring regulatory compliance is with quality data. A firm’s data sets must be accurate, which automated reconciliation solutions can accomplish across complex systems and at scale.
These solutions provide structured, transparent, and auditable workflows, significantly improving data accuracy and security. By storing data in a single unified database, automated systems are far more efficient than those that rely on proprietary systems that must be joined together.
Auditors need to see full data lineage across the entire end-to-end process, from data ingestion through to enrichment, matching, sign offs and journal entries. A unified reconciliation system simplifies auditing because it contains all the data in one place, validating and tracking each data point which lets auditors drill down into every stage of the process. This creates an audit trail that can easily be referenced during regulatory reporting.
Crucially, many financial regulations (such as MiFID, CASS and EMIR) require firms to conduct specific types of reconciliations. But adapting financial control processes to accommodate changing requirements is a challenge. By automating these processes through an automated reconciliation solution, firms can reduce the likelihood of errors while streamlining compliance checks to meet complex regulatory demands with minimal effort.
A launchpad for compliance and growth
By embedding automated reconciliation within your data governance framework, you can ensure that your data remains accurate, secure, and compliant, providing full data confidence. Automated reconciliation software also lets your firm quickly and confidently adapt to new regulatory requirements, supporting compliance today and in the future.
Our solutions are specifically designed by in-house regulatory experts to automate the reconciliations required for compliance, giving you more time to focus on what matters most.