A familiar refrain among financial market participants is that the burden of new regulations is becoming more onerous; and the governance, risk and compliance (GRC) space is no exception. As Richard Ma, an IBM director focused on regulatory compliance, says: “The GRC landscape has changed rapidly and dramatically, with the volume and complexity of new regulations rising unabated.”
To address this challenge, technology providers attempting to help firms handle the workload are turning to ever more innovative solutions. As in many industries, machine learning has a much bigger role to play than in the past.
It was IBM’s investment in machine learning technology and cognitive computing that appealed most to judges, and this is why its OpenPages offering is this year’s GRC winner. It was a hotly contested award, with several worthy contenders offering comprehensive risk management products tailored to the regulatory environment.
IBM has introduced its flagship cognitive computing system, Watson, into OpenPages to interpret complex issues and match them automatically to controls and regulatory obligations, as well as analysing internal and external losses and determining emerging risks and failed controls.
“Cognitive technology has the potential to deliver value in resource-strained times by refocusing teams away from manual tasks towards reviewing insights directly presented by the technology. OpenPages is already a competitive industry GRC platform and Watson sets it apart,” said one judge.
Watson’s approach to managing regulatory compliance is centred on the system’s ability to consume vast amounts of content, artificially becoming an ‘expert’ in the relevant field. This level of cognition would not be possible for a human, Ma explains.
“Cognitive computing is a natural fit for the regulatory compliance space because it can be used to accomplish the significant amount of analysis required to read and interpret regulations in a much more efficient manner. It doesn’t replace the need for human intervention and decision-making, but it can handle the more cumbersome upfront review of constantly changing regulatory documents,” he says.
Given the large volume of information that must be digested and acted upon, the application of machine learning to regulation and compliance seems a no-brainer, but IBM is one of the few companies to have already brought it to market. “Most GRC packages are pretty similar,” said one judge. “OpenPages is starting to leverage both its machine learning, using Watson, and analytics on big data – eg, monitoring of Twitter – to move GRC packages forward. This will take it to the next level.”
IBM’s offering even uses weather data to build a detailed picture of the meteorological risks companies might face. The firm draws information from its partnership with the Weather Company to help manage business continuity in OpenPages.
Size helps, of course. OpenPages has benefitted from IBM’s vast research budget to invest in systems development. “Transforming the way GRC teams operate to meet the new reality requires an investment in talent and technology to simplify the interactions and management of a GRC system,” says Ma, adding that existing investments are also maintained so that information in these systems can be leveraged to help reduce risk.
OpenPages has changed significantly in the seven years since IBM acquired the unit, which originally grew out of electronic publishing software developed by American Computer Innovators, a Massachusetts-based technology firm, in the 1990s. Victory in the GRC product category confirms its status as an industry leader in an increasingly crucial sector of the market.
In November 2016, IBM acquired risk management and regulatory compliance consulting firm Promontory Financial Group, which had previously been dubbed the banking industry’s ‘shadow regulator’ by American Banker magazine. The integration will have a positive effect on OpenPages and there will be further trailblazing ahead, Ma promises. “Innovations in cognitive computing and additional risk and compliance expertise will shape the next generation of the OpenPages platform,” he says.
Possible innovation in the future may include the ability to search via concept rather than keyword, says Ma, which means OpenPages would be able to “speak any dialect to facilitate data integration without full system integration”.
As IBM continues to invest in its cognitive capabilities, the regulatory burden on financial institutions does not look likely to shrink any time soon. This means GRC will only grow in importance, giving IBM’s machines – and their human masters – an increasing workload. IBM believes senior managers within many firms are looking for a more holistic view of GRC across the enterprise, which only underlines the scale of the task ahead.
The week on Risk.net, April 7–13, 2018Receive this by email