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Is Vendor Self-Assessment Good Enough For Regulatory Compliance?

Posted 19/05/16

Many schools experiment with student self-exams and peer assessments.  I asked a number of educators whether they implemented self-exams and peer assessments. Not surprisingly, the educators did not favour self-examination but were keen on peer assessment to augment the standard teacher-student evaluation.  One of the primary reasons educators don’t broadly embrace self-exams is the students tend to inflate their own scores.  Peer assessments yield more objective results and along with teacher input gain a true performance measurement.


How does all this translate to monitoring voice trading to manage compliance risk?  Technology vendors offer a mix of element and service managers to support their products, depending on maturity.  Not unlike the self-exam, they report on how they are performing by emitting an alarm if a problem is detected.  If no alarms are generated, they are presumed to be fully operational. The challenge is, the only grades element managers can produce are PASS and FAIL.  Things are working or they are not.  And even when they report a PASS grade, it doesn’t guarantee services are running because point monitoring solutions only provide information about a vendor specific service or application, thereby lacking the end-to-end perspective, providing a limited view and leaving troubleshooting to guesswork, thus leading to finger pointing.


Critical voice trading requires more than a collection of point monitoring solutions providing their self-assessment via the PASS/FAIL alarms to satisfy the numerous regulatory compliance initiatives. Additionally Increasing pressure from the regulators to produce oral transactions on demand results in additional pressures on the operational teams responsible for the communications environment and the compliance officers responsible for oversight.  Traditionally they had two options.  First, to analyze the collection of point monitoring solutions to ascertain recording compliance.  This continually proves to be problematic due to high resource consumption that is both costly and still often inadequate because each vendor monitoring could be reporting good operational health but the services may still be compromised.


The second option was to develop an in house toolset to confirm services are operational and available, which may tactically work but requires retention of in-house knowledge, ongoing maintenance and updates as requirements or technologies change.  Any time-sensitive constraints to implement new compliance functionality could lead to unforeseen operational challenges and additional risk. Additionally, the regulators look more favorably on financial firms adopting standards based technologies rather than implementing Do-It-Yourself internal solutions, specifically for the reasons outlined above.


Now financial firms have a third option which is partnering with an independent RegTech

Specialist to help safeguard against compliance risk. Independent software companies can test user specific services across multiple technology platforms and deliver immediate results that are akin to peer assessment that can then strengthen the compliance program.


The FCA recently put out a communication suggesting there are innovative technology solutions available that deliver regulatory requirements more efficiently and more effectively.  Independent companies who understand the trading business and related regulatory obligations can automate intelligent service analysis, instant compliance checks, speech quality assessment and access to auditable oral transactions more cost efficiently and accurately than options 1 or 2 whilst providing automated evidence and reporting against audit points.  Implementing smart machines can effectively grade the technology, services and applications in real time objectively.


Firms should implement a tiered management structure to report on infrastructure, service and application to align the business to the regulations.  By combining vendor specific monitoring, centralized management and automated compliance testing firms can measure self-examination, independent evaluation and continual assessment to ensure high grades for critical voice trading environments.

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